Who Hides Money Outside The Country?
Over the past decade, some 39,000 people have come forward voluntarily to tell the IRS about offshore money they haven't been paying taxes on. This group provides a small window into the world of people who are hiding money in offshore havens. (It's a world we've been trying to learn more about, partly by setting up an offshore company in Belize.)
The names of the 39,000 aren't published anywhere, and they're not eager to be interviewed. But I did find Charles Falk, a lawyer who has represented more than 200 of these people.
Sometimes they're business owners, who have earned money abroad and stashed it in Switzerland or on some island. Maybe the account is owned by a trust they secretly control. Sometimes they're hiding money from a spouse. When I asked him if any of his clients would talk to me, he laughed. But he did describe a typical first call with a client.
"A lot of times," Falk says, "the conversation will go like this: 'They can take all the money. I just don't want to go to jail.' And then when you assure them they are not going to go to jail if they come forward, then the next thing they say is, 'Well, how much can I keep?'"
Other people who come forward aren't even sure they've done anything wrong.
Marvin Van Horn and his wife live in New Zealand, where they have a checking account and retirement savings. They weren't intentionally hiding anything from the IRS. But he heard a story on the radio about offshore tax cheats — and realized that the rules might apply to him.
So he decided to go through the IRS's voluntary disclosure program. He learned he would have to pay back taxes for six years, which came to about $20,000. That seemed fair, he said. But then there was the penalty: $172,000.
Van Horn says the penalty would have gutted his retirement savings. So he appealed. And after 851 days (he was counting), the penalty was reduced to $20,000.
There's a spectrum in these cases, attorneys say. There are people who went to great lengths to hide money, people who didn't know they were hiding money, and a lot of people in between.
One other thing about the 39,000 people have come forward so far: They're probably a drop in the bucket. Somewhere between five and seven million U.S. citizens live abroad. Fewer than 1 million of them declare offshore accounts, as required by law.
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