Offshore Tax Cheats: The IRS Is Still Coming for You
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With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York. All you offshore tax cheats out there, listen up. The IRS may have changed some of the rules of recouping funds, but they're still coming after you, and they mean business. We'll explain in a moment. First, these money and market stories you should know. The 30-year fixed-rate mortgage averaged 4.65% in the week of September the 20th. That's according to Freddie Mac's weekly survey, and that was up five basis points during the week and marked the fourth consecutive weekly gain. Meanwhile, the 15-year fixed-rate mortgage averaged 4.11%, also up five basis points. And the five-year Treasury-indexed hybrid adjustable rate mortgage averaged 3.92%.
That's down just a hair from last week. We're currently in the ninth year of the longest U.S. bull market, and for each year in which a bull market persists, workers become likelier to retire. Wall Street Journal reporter Ann Tergesen, who covers retirement, says those preparing to retire should be ready for market downturns. To protect against substantial market declines, financial planners suggest setting aside one to five years of living expenses in cash so you won't have to sell stocks at depressed prices. They also recommend you invest in a diversified portfolio, such as 60% in stocks and 40% in bonds, and rebalance it after major market moves. And the third method is to use home equity lines of credit or reverse mortgages, which allow people ages 62 or older to convert their home equity into cash, but be aware of upfront fees.
See the full story at WSJ.com or the WSJ app.
For everyone out there who likes to hide money from the U.S.
What are this episode's headlines on mortgages, retirement and housing loans?
government and offshore accounts, it's time to come up with a plan B. Wall Street Journal tax reporter Laura Saunders joins us with some details. So, Laura, the IRS has had a program where it was seeking money held offshore, and they meant business with this program.
Yes, they absolutely did. For decades, people could hide money offshore and get away with it. And even 10 years ago, you could walk into a Swiss bank, give them $5 million, walk out without a piece of paper in your hand, and know that Uncle Sam would never hear about that money.
Just like in the movies.
Yeah, it was.
Exactly. And together, the IRS and Department of Justice, starting with UBS, they broke the back of Swiss bank secrecy. They have had various programs for 10 years. They've gone after the banks. They've gone after the individuals and prosecuted them very publicly. And they had this amnesty program because they couldn't prosecute everybody. And more than 56, I believe, thousand people have paid more than $11 billion to confess their offshore account sins that would have made them criminally liable. And the deal was, it was not an amnesty like a lovely thing. It was you had to give up a significant chunk of that account. But the promise was that you wouldn't be criminally prosecuted.
So they're getting rid of this particular program, but there are still ways for people running afoul of these laws to sort of atone for their monetary sins.
Yes. And I'm going to explain those in a second. And that's because also the IRS has got better ways of finding things out, but they never quite got to Asia. They dealt with Israel and Switzerland and the Caymans and Caribbean and things like that. But Asia, it didn't have structures and foundations and trusts where people hid their money. They hid it with other people. And so some of the ways that the IRS has of cracking down may be more successful with that in the future.
A significant piece in your story in The Wall Street Journal is that U.S. tax laws result in citizens living overseas to be taxed on money they earn here and abroad. And some people are actually giving up their U.S. citizenship as a result.
Yes, that's the downside, the really major drawback of this whole crackdown, which has been really good at flushing out criminals. is that innocent expats who live abroad are subject to laws that make them look like they might be hiding money abroad, even though they're not.
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