Never Pay U.S. Taxes Again - Legally [Archive]

astro

10-07-2006, 07:36 PM

Interesting article

Never Pay U.S. Taxes Again - Legally - By Robert E. Bauman (http://www.escapeartist.com/efam/59/Taxes_OffshoreHaven.html)

Yes it's that Robert E. Bauman (http://en.wikipedia.org/wiki/Robert_Bauman)

Expatriation: It’s been called “the ultimate estate plan” and it’s a legal, step-by-step process that can lead to the legal right for you to stop paying U.S. or other national income taxes—forever.
In sum, it requires professional consultations, careful planning, movement of assets offshore and acquisition of a second nationality. When all that’s done (and done exactly right), you must leave behind your home country and become a “tax exile” with an established domicile in a low or no-tax jurisdiction. And, for U.S. citizens, this unusual plan requires, as a final step toward tax freedom, the formal relinquishment of citizenship.

A drastic plan? You bet. And in truth, there are many other perfectly suitable offshore strategies that The Sovereign Society recommends that can result in significant tax savings. These include international life insurance policies (TSI 1/02)5 and offshore investments made through retirement plans (TSI 7/03).6 But for U.S. citizens and long-term residents who seek a permanent and completely legal way to stop paying all U.S. taxes, expatriation is the only option.

The Blueprint to Ultimate Tax Avoidance

DiosaBellissima

10-07-2006, 08:16 PM

Oh wonderful, a new way for our clients to justify not paying taxes. My dad runs a tax business for people with several years unfiled, unpaid, etc. etc. and you'd be amazed (or maybe not) some of the wonderful reasons we get.

There's the sect that believes that the Constitution doesn't give anyone taxing authority. The others that believe that there is no "United States" as a nation. The others that believes that they aren't citizens of anything but "The California Republic" (viva la Bear Flag!). And of course the ones that ask: "Well who gave them the authority to tax me anyway?!" (Article 1, Section 8 of the US Constitution, actually).

I suppose the linked idea isn't nearly as bad as the others. The group that promotes the idea that the person is a citizen of just their specific state charges thousands and thousands for fake legal documents that the clients can send in to the IRS. I've read the docs here and there. . . I laughed. They are poorly formatted, full of bad grammar and spelling, and just dumb. And we have some clients that spent all their money on these dumb things. It's sad.

Mama Tiger

10-07-2006, 09:10 PM

Tax-avoidance is a thing of wonder, humor, sadness, and occasionally beauty, isn't it, DiosaBellissima? As a court reporter in U.S. Tax Court for a number of years, especially when the tax protest movement really peaked in the late '80s with the endless succession of phony churches and assorted other weirdness, it was always great fun to see the consternation on peoples' faces when they waltzed into court and, after explaining to the judge why they didn't owe taxes (anything from the odd notion that if their name is written in ALL CAPS it's not a legal identification of them so they don't have to pay the tax bill sent to them with their name in ALL CAPS, to the ever-classic, "But Judge, I read the Constitution and there's no income tax provision in it,"), and, although expecting the judge to say, "By golly, I think you're right! You're so special and unique, of COURSE you don't have to pay taxes like the rest of us!", instead find themselves treated to a lecture on how many ways they're wrong and why they're screwed out the wazoo and owe penalties and more penalties and, oh, by the way, there's a criminal investigation ongoing that has nothing to do with your civil tax trial, so this is only the first step in your torturous downfall at the hands of the taxing authorities.

I did see a few truly creative ways that people came up with to avoid paying taxes, however. The least popular one was the guy who managed to do it by being sent to prison in the Dominican Republic; the guy they dragged out of jail to testify against him was a great witness though, who assured the judge that he was more scared of the IRS than the Colombians, so even though he was convicted of dealing drugs, they couldn't get him on tax evasion since he'd reported his drug income on his tax returns as "selling fruit." That was memorable, obviously.

But my favorite of all time was an elaborate scheme in which a person would make a small initial investment -- to the tune of under $5,000 -- in some form of contracts with companies involved in biomedical research. When the contracts matured, technically the person would owe hundreds of thousands of dollars. But the kicker was that they didn't use the US dollar for the currency the contracts were drawn up in; they used Brazilian currency, which at that time was undergoing incredible inflation, sufficient that by the time the contracts matured, the actual amount owed would be a few thousand dollars more at most. But in the meantime, they'd written off the hundreds of thousands of dollars their investment was allegedly worth. It didn't fly with the Tax Court, needless to say, but at least it was inventive!

Frankly, it's a lot cheaper in the long run to just pay the taxes you owe.

Gorsnak

10-07-2006, 09:28 PM

I haven't paid any US taxes since 2001, myself.

Monty

10-07-2006, 09:54 PM

I expected the ending of that plan to be: "Finally, you must die."

DiosaBellissima

10-07-2006, 11:08 PM

Mama Tiger, we have a rule that if our clients sign on with us for representation, they MUST comply with all tax laws. Naturally, they try every possible way to weasel out of paying taxes ("So. . . how much do I have to make to not pay taxes this year?" "I can't tell you that." "Why not?" "Because you have to report how much you make, THAT'S WHY."). With every new scheme that comes in, I usually just smile and say, "Now honestly- if there REALLY was a way to get out of paying taxes, do you think my dad would be shelling out nearly 50% of his income to the Fed and State each year?" And then they laugh and say I'm right. . . only to come in next week with something dumber.

Guinastasia

10-07-2006, 11:27 PM

China Guy

10-07-2006, 11:35 PM

I didn't bother to read the article, but ya know the IRS got wise to this many years ago. The IRS can go after your ass if they suspect that the change in citizenship was to avoid paying US taxes. You are not free and clear once you get second nationality and renounce US citizenship.

BTW, I've known people who have gone this route.

It's legal and far easier to marry someone from another country, don't get them a green card or citizenship, and in an IRS compliant way put all your assets in the spouses name.

Eva Luna

10-07-2006, 11:36 PM

The linked article sure doesn't disclose all the risks of this approach, such as the possibility of being taxed retroactively (http://www.irs.gov/businesses/small/international/article/0,,id=97245,00.html) by the IRS if they, in their infinite wisdom, determine that you renounced your citizenship for the purpose of avoiding taxation. And the tests for determining that are based on income, by default, looking forward from the date of expatriation over a 10-year period.

I can't find it now, but we had a training session on this issue at my old job, but IIRC if the IRS determines you renounced U.S. citizenship to avoid taxes, you can also be barred from entering the U.S. even temporarily. Not fun if you have family or business interests in the U.S.

Eva Luna, Immigration Paralegal

OttoDaFe

10-08-2006, 12:41 AM

Isn't there one that is based on gold fringed flags-that it somehow means a military court or something? That one was my favorite.

Or that Ohio wasn't really a true state? I think Cecil covered it in one of his books-damned funny stuff.I came across this one in Debunking the Story of the Buck Act (http://www.supremelaw.org/copyrite/netcom.com/debuck.htm) (which is actually more about the "Patriot" movement, but it discusses tax loonies as well):Why you should revoke everything

Lines 96-98 bring up another staple of the Sovereignty Movement:Federal territorial law is evidenced by the Executive Branch's
yellow-fringed U.S. flag flying in schools, offices and all
courtrooms.They claim that any place flying a gold-fringed U.S. flag is showing that it's under Federal territorial law (instead of the laws of the state it's inside of). Other "Patriot" groups claim that the gold-fringed flag means Martial Law, while still others claim it means Maritime or Admiralty Law. You'd hope their stories would at least agree with each other.And then there's the staple of these discussions, The Tax Resister FAQ (http://famguardian.org/Subjects/Taxes/FalseRhetoric/TRFAQ/TRFAQ.htm) — which will not only make your jaw drop, but is good for a hearty chuckle or three as well.

Mama Tiger

10-08-2006, 09:54 AM

Isn't there one that is based on gold fringed flags-that it somehow means a military court or something? That one was my favorite.

Oh, yes. I remember the first guy who came in and claimed that the gold-fringed flag in the courtroom signified that the trial should be under admiralty law, and tax laws don't fall under admiralty law. The judge, having never heard of that one before (and the guy appearing more than a little screwy to begin with), was seriously perplexed but assured the idiot that it was his courtroom and he said what system of law they were using in it.

So there was more than that one idiot doing it? Amazing.

Scuba_Ben

10-08-2006, 08:40 PM

Isn't there one that is based on gold fringed flags-that it somehow means a military court or something? That one was my favorite.Other posters have already chimed in on the tax-avoidance hoax about a gold fringed flag, so I'll cover this point from the other side.

As I recall, gold fringe is used as a decorative effect on a flag intended to be displayed indoors only. (Fringing suffers badly when exposed to the weather.) That's all that the fringe means -- it simply looks pretty on the flag.

For some completeness, and as an interesting digression, the "military law / admiralty law" claims might have had a toe to stand on, if the flag in question was a military flag / military ensign -- some countries use different flags for civilian, government, and military purposes, and some use different flags on land and at sea.

Example 1: Israel uses a flag with a white field and blue devices for civilian and government purposes, but (last I checked, many years ago) it uses a different flag, blue field with white device charged with a blue device, in the military.

Example 2: The UK uses the Union Jack on land, but at sea uses ensigns with a white or red field (depending on purpose) charged with the Union Jack as a canton.

Back to the main point, the USA uses a single flag for all purposes -- civilian, government, and military, on land and sea. Any claim that "such and such American flag shows that such and such law applies" is invalid, because there is only one American flag.

(And even if there were different flags, the judge probably merely has to say, "The defendent is right, that's the military flag, and this is a court on tax law. Baliff, get the correct flag.")

Really Not All That Bright

10-08-2006, 11:50 PM

Uh... perhaps I missed something here.

Wouldn't it be common sense, rather than a book, that tells you that leaving the United States will get you out of paying US taxes?

TJdude825

10-09-2006, 01:42 AM

Uh... perhaps I missed something here.

Wouldn't it be common sense, rather than a book, that tells you that leaving the United States will get you out of paying US taxes? I think the idea was that you stay here, but try to make the IRS believe you left. And the consensus among those in the know in this thread (which I'm not one of) seems to be that the IRS is not easily fooled, so this isn't really a good idea.

Not that laws always conform to common sense either.

slaphead

10-09-2006, 07:16 AM

I'm always sceptical of these cunning schemes, because my inner sceptic suggests to me:

People typically only get out of paying taxes by wriggling through small loopholes in the law
Such loopholes tend to get closed as soon as they become a significant revenue loss to the government
People smart enough to find loopholes are smart enough to know this
Anyone finding a cunning way of dodging taxes will therefore keep it to themselves in the hope of delaying the awful day when someone completes the paperwork to close the loophole

The only guaranteed surefire way of dodging taxes is to become a pauper.

Dangerosa

10-09-2006, 07:22 AM

Dying. The only sure things are death and taxes - but once estate tax is paid off, dying will take care of the second.

You and your money can move to a place where there is not a huge burden and renounce U.S. Citizenship. You shouldn't plan on coming back though.

BobLibDem

10-09-2006, 07:33 AM

The IRS has a few words to say about this. (http://www.irs.gov/businesses/small/article/0,,id=106568,00.html)

Pay your taxes like a good American or you'll wind up being supported by the rest of us in prison.

madmonk28

10-09-2006, 07:35 AM

I've had years where I was exempt for a large chunk of my taxes. I believe the current threshold is 330 days, if you stay out of the US for 330 days you are exempt federal tax on the first 90k of your taxes. I've had years where I met that threshold. I bring my papers to my tax guy, file a return and get a refund. Most of my colleagues do the same.

I do know people who fly to Canada or Mexico and then drive to the US because they don't check passports on those borders. That is just outright fraud.

chela

10-09-2006, 09:15 AM

RealityChuck

10-09-2006, 09:37 AM

Rule number one: Anyone who assures you that what they're doing is legal is doing something illegal.

Your local car dealership doesn't have to tell you that they are selling cars legally. You don't see signs at the grocery story saying, "Buy food from us -- legally!" The power company doesn't say, "Connect to us -- it's all perfectly legal."

Even those who are regulated by law don't belabor the fact: "Come to Martin, Harding, and Hungadunga -- we have the legal right to practice law!"

No, the people who have to insist that that they're doing is legal are usually swindlers, chain letter mailers, or just plain crooks.

Giles

10-09-2006, 09:43 AM

It may be tough to shirk income taxes, but I've been checking my local municipalities online property tax database and Im astonished at the number of people who dont pay property taxes. Some for years and years and still they live in the same house. I know that exemptions can be made, the elderly with no income, veterans etc. But those exceptions cannot account for the pages of delinquent property taxes in one city.

I think our city assessor must be a dope. :dubious:
But, eventually, can't they sell your property to pay for the taxes (plus the compound interest charged on the bill)? In some cases, the taxes may build up to more than the value of the property -- so the municiplaity loses part of the taxes, but the property owner gets nothing at all.

Baldwin

10-09-2006, 09:52 AM

I avoided paying Federal income tax for several years in the 1980s by making almost no money. (I guess I was what the Wall Street Journal editorial board would call a "lucky ducky".) There are some drawbacks to this plan, such as living on ramen noodles.

Nametag

10-09-2006, 10:49 AM

I think the idea was that you stay here, but try to make the IRS believe you left. And the consensus among those in the know in this thread (which I'm not one of) seems to be that the IRS is not easily fooled, so this isn't really a good idea.

Not that laws always conform to common sense either.
No, the idea, pretty plainly stated in the quote, is that you LEAVE.How It Should Be Done

Long before you formally give up your U.S. citizenship, you should reorder your financial affairs in such a way as to remove from possible government control and taxation most, if not all, of your assets.
Here are the steps you must take:
• Move abroad and make your new home in a no-tax foreign nation so you are no longer a “resident” for U.S. income taxes;
• Obtain alternative citizenship and passport;
• Give up U.S. citizenship and change your legal “domicile” to avoid U.S. estate taxes;
• Arrange your affairs so that most or all of your income is derived from non-U.S. sources; and
• Title your property ownership so that any assets that remain in the United States are exempt from U.S. estate and gift taxes.

The following chart provides a planning timetable:

Year Action Plan

0 Decide to expatriate
1-2 Strategize with expert advisors
3-4 Liquidate U.S. assets
5-6 Choose new jurisdiction
7-8 Move to your chosen residency haven
9-10 Give up U.S. citizenship

The plan does allow you to keep some assets in the U.S., but not your self.

JRDelirious

10-09-2006, 07:22 PM

Right... the plan plain and simply stands for bona-fide emigrating, period. I suppose that they figure they'll pump the sucker for some money before s/he realizes what's up and says never-mind.

In any case, as cited above by others, the IRS is wise to this scheme and they will look out for anyone emigrating above a certain net worth or tax liability-- basically our government already suspects that if you're rich and are ditching the USA, you're probably trying to weasel out of taxes.

Uzi

10-10-2006, 12:47 AM

In any case, as cited above by others, the IRS is wise to this scheme and they will look out for anyone emigrating above a certain net worth or tax liability-- basically our government already suspects that if you're rich and are ditching the USA, you're probably trying to weasel out of taxes.

Don't people have to pay taxes every year? Then what taxes would a person be weasling out of by emigrating?
And if you then move to a foreign jurisdiction and the IRS is bent out of shape about it, so what? Obviously, if the taxes you owe are so great that you figure it is better to renounce your citizenship, then you are probably not hard up for money.
If my job here in the ME was long term, I'd move out of Canada to avoid Canadian taxes. Luckily, it is perfectly legal. If you don't work and live in a country then you don't pay taxes in that country no matter what your citizenship. Seems obvious.

Mindfield

10-10-2006, 08:20 AM

Am I the only one picturing that commercial nut in the suit with all the the question marks on it ejaculating about how to get money from the government? Only now he's ejaculating about how to avoid giving money to the government?

Okay, maybe it's just me.

Freddy the Pig

10-10-2006, 09:18 AM

Wouldn't it be common sense, rather than a book, that tells you that leaving the United States will get you out of paying US taxes?No. See post#9.If you don't work and live in a country then you don't pay taxes in that country no matter what your citizenship. Seems obvious.To most of the civilized world, it seems obvious. The United States, however, taxes expatriates and even will attempt to tax people who have left the country and renounced their citizenship. See post #9.

glee

10-10-2006, 09:26 AM

Never pay US taxes - legally ... I've done it! :D

Just because I was born in the UK of UK parents and pay UK tax. :smack:

Hal Briston

10-10-2006, 12:00 PM

Well, I guess it's slightly better than the "I forgot to pay my taxes" strategy (equally useful for an armed robbery charge).

Driver8

10-10-2006, 12:11 PM

No. See post#9.To most of the civilized world, it seems obvious. The United States, however, taxes expatriates and even will attempt to tax people who have left the country and renounced their citizenship. See post #9.

Is this true? If an American citizen moves to say South Africa, earning South African rands which never leave South Africa, will the IRS try to tax them on this income? If so, are they credited for the taxes paid to the South African Revenue Service?

I have done this in the opposite direction, I am a South African who has lived in the United States for two years. There are several provisions in the South African tax code that means my United States income earned while I am not a resident of South Africa is not taxable in South Africa. I am surprised that this is not more universal.

Gary "Wombat" Robson

10-10-2006, 12:26 PM

The United States, however, taxes expatriates and even will attempt to tax people who have left the country and renounced their citizenship. See post #9.Explain this to me. Right now, I live in the U.S., earn money in the U.S., have my assets in the U.S., and pay taxes in the U.S. If I move to Australia next year, take all my stuff with me, get a job there, become an Australian citizen, and renounce my U.S. citizenship (after paying my U.S. taxes current, of course), then all of my income is taxable in Australia, not the U.S. How could the I.R.S. think it had any claim whatsoever to a piece of the Australian income earned by an Australian citizen?

The O.P. is basically saying that one must pay one's taxes somewhere, and if you don't like U.S. taxes, go live and earn money somewhere else and pay their taxes instead.

Gary "Wombat" Robson

10-10-2006, 12:32 PM

I must learn to preview and look for posts where others say the same thing I'm saying. Sorry about that, Driver8.

madmonk28

10-10-2006, 01:08 PM

Explain this to me. Right now, I live in the U.S., earn money in the U.S., have my assets in the U.S., and pay taxes in the U.S. If I move to Australia next year, take all my stuff with me, get a job there, become an Australian citizen, and renounce my U.S. citizenship (after paying my U.S. taxes current, of course), then all of my income is taxable in Australia, not the U.S. How could the I.R.S. think it had any claim whatsoever to a piece of the Australian income earned by an Australian citizen?

The O.P. is basically saying that one must pay one's taxes somewhere, and if you don't like U.S. taxes, go live and earn money somewhere else and pay their taxes instead.

I have legally been exempt from most of my US taxes. I live overseas. If I spend at least 330 days out of the US I am exempt from paying taxes on any income under $90k (I think that is the current threshold). I still file a return, but claim exempt status and submit evidence (a letter from my employer).

Freddy the Pig

10-10-2006, 02:33 PM

Two cases--the simpler case of an American living and working abroad, and the more complicated case of an American attempting to renounce their citizenship:If an American citizen moves to say South Africa, earning South African rands which never leave South Africa, will the IRS try to tax them on this income? If so, are they credited for the taxes paid to the South African Revenue Service?Yes, and in general, yes. From the IRS FAQ (http://www.irs.gov/faqs/faq13.html):
I am a U.S. citizen working abroad. Are my foreign earnings taxable?

A U.S. citizen or resident alien is generally subject to U.S. tax on total worldwide income.To be sure, there are exclusions and exceptions, as per madmonk28. But the mere fact of living and working abroad doesn't exempt you from American taxation.

If I move to Australia next year, take all my stuff with me, get a job there, become an Australian citizen, and renounce my U.S. citizenship (after paying my U.S. taxes current, of course), then all of my income is taxable in Australia, not the U.S. How could the I.R.S. think it had any claim whatsoever to a piece of the Australian income earned by an Australian citizen?You tell me. But they do!

To be sure, they won't come after you unless you have a high enough income to generate a tax liability of $124,000 per year--which is a lot, but by no means Rockefeller territory. Per the IRS: The expatriation tax provisions under Section 877 of the Internal Revenue Code (IRC) apply to US citizens who have renounced their citizenship . . .

Expatriation after June 3, 2004

The American Jobs Creation Act (AJCA) of 2004 amends Section 877 of the Internal Revenue Code (IRC), which provides for an alternative tax regime for certain, expatriated individuals. Amended IRC 877 eliminates the tax avoidance criteria for imposition of the expatriation tax on certain types of income for 10 years following expatriation, and creates objective criteria to impose the tax on individuals with an average income tax liability of $124,000 for the 5 prior years or a net worth of $2,000,000 on the date of expatriation. . . . Further, expatriated individuals will be subject to U.S. tax on their worldwide income for any of the 10 years following expatriation in which they are present in the U.S. for more than 30 days, or 60 days in the case of individuals working in the U.S. for an unrelated employer.

Gary "Wombat" Robson

10-10-2006, 03:51 PM

Reading that, it says that I'd only be subject to U.S. tax on my Australian income in years where I came back to the U.S. for a significant amount of time.

I still don't see, given the exact example I gave, how the U.S. would have any jurisdiction whatsoever.

Freddy the Pig

10-10-2006, 04:13 PM

Reading that, it says that I'd only be subject to U.S. tax on my Australian income in years where I came back to the U.S. for a significant amount of time.No. You have liability if your average tax liability for the previous 5 years was >=$124,000, or if your net worth at the time of expatriation is >=$2 million, or if you spend more than 30 days in the United States in a given year.

Obviously, I don't know if any of those apply to you, and if they don't, then you'd be OK. But your exemption would be due to failure to meet the income and wealth criteria, not the mere fact of renouncing your citizenship and leaving the country.

Sunspace

10-10-2006, 04:24 PM

I'm having a hard time wrapping my mind around this.

If you, a US citizen and resident, moved to Australia as a poor but welcome legal immigrant, acquired Australian citizenship, ended your US citizenship, severed ties, etc (as described in several posts in this thread)... and then the next year struck it rich in the kangaroo mines and became the wealthiest person in Australia... the IRS would still believe that it had a claim on your newfound wealth... even though that wealth was not earned in the US?

Sunspace

10-10-2006, 04:27 PM

Freddy the Pig

10-10-2006, 04:36 PM

If you, a US citizen and resident, moved to Australia as a poor but welcome legal immigrant, acquired Australian citizenship, ended your US citizenship, severed ties, etc (as described in several posts in this thread)... and then the next year struck it rich in the kangaroo mines and became the wealthiest person in Australia... the IRS would still believe that it had a claim on your newfound wealth... even though that wealth was not earned in the US?No, then you'd be OK, unless you were careless enough to spend 30 days in the United States. (Oh my God--29 days! Gotta get back to the mines now!) The income and wealth criteria apply at the time of expatriation (which I believe is when you renounce your citizenship, not when you leave the country).

I should emphasize that I don't have any especial expertise in this; I'm just reading it off of the IRS web site, but it correlates with the posts by Eva Luna and China Guy. (Well, it almost correlates; it appears they were discussing the situation before 6/3/2004, when the IRS would attempt to subjectively determine whether you left to avoid taxes--now, there are objective income and wealth criteria.)

spingears

10-10-2006, 04:47 PM

Interesting article
Never Pay U.S. Taxes Again - Legally - By Robert E. Bauman (http://www.escapeartist.com/efam/59/Taxes_OffshoreHaven.html)
Yes it's that Robert E. Bauman (http://en.wikipedia.org/wiki/Robert_Bauman) I'd suspect that 'Robert' raises the money to live well on and pay HIS taxes, to avoid prosecution, by selling others books on how to avoid paying taxes. :rolleyes:
"Nice work if you can get it."

Derleth

10-10-2006, 06:11 PM

slaphead

10-11-2006, 07:41 AM

How does the IRS intend to collect money from someone who is no longer an American citizen, regardless of any supposed American tax liability and/or net worth and/or time spent in America? Would America provoke an international incident over a few hundred thousand dollars of taxes supposedly owed?
I doubt it. They'd probably just give the person concerned (or any businesses they are involved with) a good shafting if they ever ended up in under US jurisdiction somehow. That can often be enough of a motivator, if you are an internationally mobile person.
This sort of taxation nuttiness isn't just confined to individuals. Barclays Bank is one of the largest UK banks, and a few years ago got clobbered by California demanding that it pay taxes on its total international income in sixty countries, not just locally. Brief summary (http://www.questia.com/PM.qst?a=o&se=gglsc&d=95254854)