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May 29th, 2017

Your Tax Bracket and What it Essentially Means to You

Overseas tax shelters are the dirty little secret of the tax world. While they are generally inaccessible to us mere mortals, everyone has heard whispers about the super wealthy squirreling their huge wads of cash off in some Cayman Island bank, thereby escaping the need to give Uncle Sam his due. Even some people who don’t have deep pockets sometimes get it in their head that they can beat the system and try to move their money overseas. If you are being lured into believing you can avoid your US taxes, let this be a wake up call to you. The world of overseas tax shelters is a shady one, filled with pitfalls, some of which could make you lose your cash for good, and other which could land you a long jail sentence.

The bottom line is that taking advantage of overseas tax havens is almost always illegal. Even if you discover a loophole in the system that you think you can use, that loophole will be questionable at best. Because it is an illegal business, the people you have to work with to get your money out of the country are often corrupt. They may take your money and run. They may take your money, run, and then blackmail you for more by threatening to turn you in to the IRS. Who is going to stop them? You can’t very well call the police. Scams abound in the world of overseas tax shelters, and if you think it can’t happen to you, ask yourself if the person it did happen to thought it could happen to them.

Additionally, even if the company you are dealing with moves your money offshore and holds up their end of the bargain, what kind of customer service and loyalty do you think you will get from them? If the IRS comes a-knocking - and once a tax shelter becomes popular, they always do - do you think you can count on the company not to sell you out? Think again.

Despite the fact that it is illegal, many people insist on taking their chances with an overseas tax haven, especially if they have a lawsuit pending against them. If that applies to you, another thing you should remember is that a tax shelter that looks foolproof today could collapse at any time. The old favorite Caribbean tax shelters have changed their laws at the urging of the US government, and you can expect new tax shelters to eventually do the same. Tax havens are generally smaller, poorer nations who have much to gain from cooperating with the US government, and a lot more to lose from helping you hide your money. You never know when the banking secrecy laws in your tax shelter are going to change and your deception will become clear to the IRS. Many people have learned this lesson the hard way, and many people have ended up in jail because of it.

In the shady world of overseas tax shelters, you have to weigh up the pros and cons. No one likes paying taxes, and if you are extremely wealthy, the amount of your tax bill is nothing to sneeze at. Overseas tax shelters can save your some money in the short term. But are you prepared to pay the long-term price of breaking federal law? Writing a check to the IRS, as painful as that sometimes may be, is a whole lot less painful than serving a lengthy jail sentence. The benefits of offshore tax shelters are a false economy - in the end they will cost you more than the IRS ever could.