September 24, 2013
By: Brian Mahany, Tax Attorney
Ordinarily our blog posts dispense general advice on how to comply with complex IRS offshore reporting rules and avoid large civil and criminal penalties. Unfortunately, we are not living in ordinary times. Today’s story is one that largely escaped the mainstream media. It’s message, however, which should be carefully studied by everyone who still has a few dollars left to protect.
America is running out of money. Technically, one could argue that the nation is already bankrupt. Governments, however, have the ability to print more money. As long as the people have confidence in the economy, the currency retains value. Experts have warned for many years – decades – that the American economy is running on fumes. Government printing presses simply can’t keep up with the promises of politicians and the demands of its people. So what’s next?
We have long worried about confiscation of private wealth. If you think it can’t happen here, it already has. We are not talking some crazy conspiracy theories and we didn’t wake up this morning with a tin foil hat. On April 5th, 1933, President Franklin Roosevelt signed Executive Order 6102, which forbade the “Hoarding of gold coin, gold bullion and gold certificates within the continental United States.” His order criminalized the possession of monetary gold by any individual, partnership, association or corporation.
Obviously, after the Depression, Americans were once again allowed to hold gold but many have privately worried that such an action could happen again. Although we are not in a depression at this writing, the storm clouds have been building on the horizon for quite some time.
And then came the rains.
Last week, major media mostly missed a major story from Poland. Faced with a mounting fiscal crisis, the government of Poland quietly confiscated much of the country’s private pension plans. President Roosevelt’s Executive Order used the word “hoarding” – it prevented individuals from hoarding (owning) gold. Taking a page from Roosevelt’s playbook, Poland didn’t “confiscate” the pension and retirement funds of its citizens, it engaged in “pension overhaul”.
Officially, holders of private pensions now will have their assets transferred into the state “guaranteed” system. While that may sound great to a few folks, the government’s track record on managing money is usually never very good and certainly not as good as the private sector.
More ominously, Poland had run out of money. The only reason it confiscated private wealth was because it had run out of public wealth. Are these the folks you want in charge of your retirement needs?
On some insidious level, the Polish plan was brilliant. By transferring billions of dollars on to the government’s books, the government now has the ability to borrow even more money and go deeper in debt.
Stealing money from those who saved is not the solution. Nor is making promises that rely on tomorrow’s dollars. (Just ask any of the retired firefighters or cops in Detroit about their “guaranteed” pensions.)
The government’s tireless crusade against unreported foreign accounts is aimed at stemming tax evasion. Someday, however, the focus may shift and it may become impossible to move money offshore. Many civilized countries already prohibit or limit the outflows of private wealth.
The lessons here are several:
1) As social security is running out of money (the disability program will run dry in just a few years), don’t expect miracles from Washington. The government’s choices are limited and there is a real threat of similar pension “overhaul” in the U.S.
2) It is perfectly legal to transfer wealth offshore. But be careful how you do so. Being careful means care in choosing what country you place your assets (Poland is probably not on anyone’s short list these days.) It also means care in making sure you follow the law.
Although opening a foreign account is legal, the failure to properly report the account and file an FBAR for even one year could result in a $100,000 fine or a civil penalty of 50% of the highest account balance.
Moving money offshore requires a good accountant with knowledge of FATCA and FBAR reporting rules. It also requires someone with knowledge of foreign banking practices – Bobby Casey’s folks can really help there. If you already have money offshore, however, and have failed to report those accounts, seek help from an experienced FBAR lawyer. There are amnesty and other programs that can get you back in good graces with the IRS and help you hold on to your money.
About the author. Brian Mahany is a tax lawyer and frequenter contributor to Global Wealth Protection. He and his team of FBAR lawyers have helped taxpayers across the world. Brian can be reached through his firm, Mahany & Ertl or directly at (414) 704-6731.
No doubt, Kelly. Private asset confiscation is a standard fiscal practice of ever-bigger governmental weasels since the beggining of time. BUT, here’s the question: for those of us that do NOT have $100k+ in our retirement plans and can’t afford $1,500-$2,000 to transfer off-shore, give us some more affordable options!
If you don’t have assets that warrant paying $1,500-$2,000 at this time, then perhaps precious metals? It’s portable, it deviates away from fiat currency and is a far more stable store of wealth than any money. THEN, when you do eventually get to a good place, and you have amassed some wealth, you circle back and find a way to store THAT offshore.
I appreciate all of the information here.
As the gentleman from the UK mentioned it would be nice to hear things of concern for Canadians as well.
Do you report much on Canadian government legislation or are we Canadians tied closely enough to the USA that the laws are similar?
Love reading and learning here :)
Thanks
Martin in Canada
I will look into it for you as well. Thank you for the feedback! Can’t always tell where the readership is coming from, so thank you!
I second this! :)
Your articles are always interesting, however, I would hazard a guess that outside of North America your largest readership is in the UK, whereas the focus is largely on problems that primarily affect US citizens.
It would be most welcome if the UK could receive some specialist attention, say perhaps on a quarterly or at least half yearly basis. There is no doubt in mind that the UK government is also imbued with kleptomaniac tendencies and is in fact worse than the US as Socialism is more deeply embedded.
In my opinion the root problem of democracy is that the electorate will always vote for a free lunch but very rarely think about who is paying for it. Even those in the Republican Party are loath to trim back benefits to help reduce the budget deficit. In essence “few of the turkeys will vote for Christmas !
You bring up a good point. I will do my level best to find some happenings across the pond! We cover the Eurozone quite a bit, but not the UK in particular. All I hear about with regard to the UK is the bedroom tax and Scotland wanting to secede. But there has to be considerably more than that going on there so I will do some digging. Thank you for reading and for the tip! Kd
The Scots really won’t secede, subsidized education, in fact ( as far as generalizations are facts) Scotland is subsidized by England for many thins. England would be more wealthy without supporting the non working Scots. The subsidisation split is just North of London,
http://www.businessforscotland.co.uk/where-does-scotlands-wealth-go/
ok its more complex than that
trying to get a second passport in panama need legal assistance can you help me
You need to talk to the folks at The Dollar Vigillante. We do offshore assets, they do offshore people. LOL
“Obviously, after the Depression, Americans were once again allowed to hold gold but many have privately worried that such an action could happen again.”
Unfortunately, ‘after’ is such a vague term. It may give the impression that shortly ‘after’ the ’emergency’ of the Depression ended, the ‘privilege’ of private ownership of gold was reinstated.
One might think, therefore, that the official beginning of WWII (1941), which many regard as the end of the Depression, marked the return of private ownership of gold.
Nope.
Or that the ‘real’ end of the Depression (1949, when real estate stopped declining) was the point.
Nah.
Or that when Nixon floated the U$ Dollar internationally against gold (1971) was the date.
Uh, no.
The actual date occurred when President Gerald Ford rescinded Roosevelt’s executive order (but not the law it was based on [Trading With the Enemy Act of 1917]) on August 15, 1974.
That’s a period of 41 years.
Effectively a LIFETIME of earnings.
No small thing.
Were it to happen again, I would expect the American public’s response to be exactly the same as it was in 1933.
That is, they’ll just roll over.
Best Regards,
Fred Scott
FANTASTIC account of facts sir! You are right to point out the disparity in time between the original order and the reversal of that order. The saddest of facts here is your prediction of how such an order would be received today: complacency. Thank you for taking the time to read and post your comment.