United States names and shames tax dodgers

| 03/08/2010

(Swissinfo): The United States authorities are wasting no time in meting out swift punishments on tax cheats who used Switzerland’s UBS bank to hide their assets. The Internal Revenue Service (IRS) has named and shamed 17 offenders on their website with sentences ranging from tough fines and prison time. The Swiss parliament recently ratified a deal to hand 4,450 UBS client names to the IRS. One watch manufacturer was put behind bars for ten months, a children’s toy dealer will spend six months under house arrest after serving three months in jail while a yacht broker received two months in prison and five months of home confinement.

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  1. ex-pat Eric says:

    I would add though that the US government is often wasteful of its resources, much like Cayman’s own! But that’s why I choose to vote and select representatives that I feel are in line with my beliefs – Libertarian.


  2. The US prosecution of these UBS client tax cheats has been a joke!!

    For example, Paul Zabczuk recently got off with only 1 yr house arrest, despite the prosecution seeking 18 months of prison time!!

    Meanwhile, the UBS Whistleblower who courageously acted to single-handedly bring down the UBS tax fraud scheme and tip the US government off about other similar private banking tax schemes, Bradley Birkenfeld, remains in prison. Birkenfeld is serving a longer prison sentence than all UBS tax cheats who have been prosecuted, combined!!

    What an injustice!!

    Demand that the US recognize Birkenfeld for being the hero that he is!

    Demand Birkenfeld’s sentence to be commuted!

    President Obama should make Birkenfeld the first person to receive a commutation of sentence in his Administration.

    Show your support for Birkenfeld by signing a petition requesting Birkenfeld’s sentence to be commuted!! http://www.whistleblowers.org/index.php?option=com_content&task=view&id=1074

  3. Anonymous says:

    The United States has a wickedly greedy and wasteful government. Therefore, the U.S. IRS wants to gets its money-grubbing hands on every penny it can. So the USA compels its citizens and residents to pay tribute to its wastefulness every year in the form of the Income Tax. Some form of tax and/or reporting obligation may apply to many here in the Cayman Islands without the persons involved even knowing they may be U.S. tax criminals.

    There is a segment of society here who need to be aware of the ramifications of the U.S. move against tax havens and U.S. citizens not filing IRS reports and/or not paying U.S. income tax: This group comprises all "born" and "paper" Caymanians who also possess American citizenship by either being born in the USA or otherwise possessing U.S. citizenship or having held U.S. residency. 

    The Fourteenth Amendment to the United States Constitution defines the basis for United States citizenship, stating that "…persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States…" This is a somewhat circular line or reasoning since the USA has pretty much established that all its citizens are "subject to the jurisdiction of" the United States government for tax purposes.

    U.S. tax law says that all United States citizens and residents are liable to report to the their income to the IRS. They must also file an annual return form reporting their bank accounts and other such holdings and their interest in local corporations. Also included is the obligation to report inheritance and capital gains. This would include inheritance of land located in the Cayman Islands.

    The IRS requires that any person who is a U.S. citizen must file an annual return and pay taxes due on that income:
    I.R.C. 61 and Treasury Reg. 1.1-1(b) provides, …all citizens of the United States, wherever resident, and all resident alien individuals are liable to the income taxes imposed by the Code whether the income is received from sources within or without the United States.  (Note carefully the "wherever resident" part!)

    So, generally speaking, if you are a U.S. citizen ("paper", born or otherwise) and you are living here in the Cayman Islands, your locally earned income and capital gains generally are subject to U.S. income tax, regardless of whether you think it is fair or not. You are subject to the same income tax filing requirements that apply to U.S. citizens or resident aliens living in the United States.

    Some sort of federal tax is due on money you may have earned or received, and from whatever source derived. This would also include includes capital gains on personal property  and investments, interest and dividends in accounts and investments, certain "gifts" and bequests, compensation for services and even the value of certain employee perks and benefits.  

    The good news is that if you meet certain requirements while living abroad, you may qualify to treat up to $91,400 of your earned income as not taxable by the United States.  However, be aware that if you are a U.S. citizen living here in the Cayman Islands (whether also a Caymanian citizen or not) and you have any form of income regardless of its source, or you possess a (local or foreign) bank account, or you have an interest in a (local or foreign) corporate entity or business you still must file a U.S. income tax return. This is true even if all your income is exempt from taxation and whether or not any tax is due! Bloody greedy lot the IRS!

    So even if you are a Caymanian and all your dollars come from Caymanian sources, but you were born in the USA, or you hold a U.S. passport, then you are probably under obligation to file a U.S. IRS  tax return and pay U.S. income tax!

    In addition to reporting normal income, you are required to report your interest in any bank accounts you have any type of fiduciary control over, whether or not you are the principal account holder. And regardless of the actual income tax you may or may not have to actually pay, you must also report and pay Social Security tax. If you are aself-employed U.S. citizen or resident, the rules for paying self-employment tax are generally the same whether you are living in the United States or abroad.  The self-employment tax is asocial security and Medicare tax on net earnings from self- employment. You must pay self-employment tax if your net earnings from self-employment are at $400 or more. 

    I know a LOT of Caymanians living here permanently and who have U.S. passports or U.S. residency, or who were born in the USA . Many, if not most of these do not file U.S. income tax returns and may not be aware that they are unwitting tax criminals subject to penalties for their crimes. The tax treaty that the Caymanian government allows the U.S. government to obtain tax information about you by merely producing an administrative request. Sure, for now the USA will be going after the big tax dodgers. But just as the Cayman Islands government recently began to try to extract every little penny of taxes it can from even the little man. It will not be long before the USA will be seeking every penny it can from even the small tax evader. It is just a matter of time. 

    If you are a Caymanian who is a "paper American" or you have been naturalised in the Cayman Islands, you might consider giving up your U.S. citizenship. However be aware that you might incur a U.S. tax obligation for up to five years after you expatriate from the tangle of U.S.A. taxation! Expatriation tax provisions apply to U.S. citizens. However, once you are a U.S. citizen,  renouncing your citizenship is not only extremely difficult but can also result in your being barred from returning to the US even as a visitor!

    Can you hear the sound of drums beating in the distance? They are coming for us! We had best be ready when they do. I hope the all-too-common Caymanian method of dealing with threats  – denial and sticking heads in the sand – is not the way this treat is tackled.

    Please do not construe this posting as legal advice regarding your tax status or obligations. U.S. tax laws and IRS regulations are exceedingly complex and change like summer clouds. Moreover, penalties for violation of  U.S. tax laws, (whether or not done intentionally) are quite severe and can result in jail time and heavy fines, penalties and interest levies. You could even have a freeze placed on your local assets and/or accounts!

    You may be in violation of U.S. tax and reporting laws and might not be aware of it until it is too late! Those who read this and are concerned they might have an IRS tax or reporting obligation are advise to consult a legal professional specialising in U.S.A. tax law.  For further enlightenment you can obtain information on tax filing requirements from an American embassy or consulate or via the Internet at the IRS website (http://www.irs.gov ).

    If you have, or feel you have,  potentially violated any U.S. tax law, resist the urge to "come clean". with the IRS! Consult a qualified professional first. Never contact or speak with the IRS directly!!  Hire a qualified tax attorney or other qualified representative. You have nothing to gain and everything to lose by talking directly to the IRS. IRS agents are experts at setting traps and getting more $$$ from you! Let your hired legal representative do the talking. Never forget that IRS agents are trained to elicit harmful taxpayer statements that are then used against the taxpayer to exact more tax, interest, and penalties. The IRS is usually willing to settle for far less than the actual obligation, but only those represented by a qualified professional will enjoy such success.

    • ex-pat Eric says:

      Big freakin deal! If you are a US Citizen, it is an obligation to file a tax return. So what! I file my returns every year and never had to pay a cent to the IRS for the income I make while living in Cayman.

      In Israel, you have an obligation to join the armed forces for a period of time.

      All country’s have laws that must be followed, whether you like them or not, deal with it. Or renounce your citizenship! If you don’t agree with them, elect a politician that is willing to change them but certainly don’t complain cause the government is trying to collect monies that are owed to it. The US doesn’t even have that high of a Federal Income tax compared to other jurisdictions.

      Me thinks someone is just being a whiny little baby!

    • Anonymous says:

      Caymanians can not have it both ways! Give up your American citizenship!