In the five season series Breaking Bad, Walter White earns an untold amount of cash through the production of blue crystal methamphetamine. In order to launder this money, his wife, Skylar, insists that they buy a car wash, through which she produces false invoices for cash sales. But in this scene Skylar shows Walt the cash that he’s brought to the car wash. She has moved it to a storage locker. She says she can’t launder this much money–not in ten years or even a lifetime.
What Skylar could not do through a car wash with less than a million dollars of gross revenue per year, the IRS has made possible through Offshore Voluntary Disclosure Program. First, one transfers the funds to an offshore account. Second, one enters the voluntary disclosure program and pays all back taxes, fines, interest and a in-lieu of FBAR fine of 27.5%. The money is now freshly laundered and can pay for Walter White’s childrens’ education, the legal costs for the defense of Skylar against criminal charges, and his extended family’s escalating health care expenses.
Now this is clearly the implication of the OVDP program of the IRS. The IRS Frequently Asked Questions says this:
What are some of the criminal charges I might face if I don’t come in under OVDP and the IRS examines me?
Possible criminal charges related to tax returns include tax evasion (26 U.S.C. § 7201), filing a false return (26 U.S.C. § 7206(1)) and failure to file an income tax return (26 U.S.C. § 7203). Willfully failing to file an FBAR and willfully filing a false FBAR are both violations that are subject to criminal penalties under 31 U.S.C. § 5322.
A person convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Filing a false return subjects a person to a prison term of up to three years and a fine of up to $250,000. A person who fails to file a tax return is subject to a prison term of up to one year and a fine of up to $100,000. Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000.
However, the New Jersey Law Journal further explains the benefits of OVDP, with an important exception (emphasis mine):
What Advantages Does OVDP Offer?
OVDP must be distinguished from both other formalized, IRS-sanctioned methods of coming into compliance announced on June 18, 2014, i.e. the Streamlined Filing Compliance Procedure (SFCP) and informal ones used by some taxpayers such as “quiet” or “semi-quiet” disclosure.
Only the OVDP offers what amounts to amnesty from criminal prosecution to an entire group of noncompliant taxpayers. The door is closed only to those who are either already under IRS audit, those engaged in illegal activity to produce the unreported income and to the promoters of the use of offshore tax avoidance schemes and others whose names IRS already knew.
The OVDP incorporates elements of the prior civil settlement initiatives IRS had used effectively to resolve abusive tax shelter cases and caps the taxpayer’s civil tax exposure. This gives the taxpayer a predictable financial cost for “fessing up” and avoiding criminal prosecution.
Oh really. Colour me skeptical.
I know someone who about seven years ago purchased a building in the US but had to prove that his money wasn’t laundered. So he provided bank statements to demonstrate the money had been in his possession for three months.
In Breaking Bad, Skylar wanted to give $600,000 to her former boss and lover, Ted, who had been cooking the books with her help. The IRS had assessed him back taxes and penalties of $600,000 and she just wanted him to pay it to avoid further scrutiny, which she could not afford, since she was laundering money at her car wash. So her lawyer concocted a story about how Ted’s long lost aunt had died in Lichtenstein and he was the only living relative, and all he had to do was sign the dotted line and the money was his.
What is a crystal meth chemist supposed to do? I propose that Walter transfer his funds to an offshore account, leave it there for at least three months (the longer the better), and then enter the OVDP. He then concocts a story of how it came from a dead uncle and provides forged documents to prove it. The IRS then accepts the story, mesmerized by the millions of dollars of revenue in back taxes, fines and interest, in addition to the in-lieu of FBAR fine of 27.5%.
In the criminal world, profits are to be made and everyone involved gets a piece of the action. By skimming profits from ill-gotten gain the IRS has become indistinguishable from the scoundrels who hide dirty money in foreign accounts. Or are we to believe that the billions of dollars that the IRS has made from OVDP has all come from hard-working successful crystal-clean Americans (pun intended), whose only crime is that they wanted to hide their otherwise completely legal investments from the IRS? But we know nothing about these people or where they obtained their money. There has been no transparency. And where there is no transparency there is no accountability either.
We know that “benign actors” have felt the brunt of the OVDP. These are people with innocent accounts in their country of residence who unwittingly entered an IRS program designed to launder the money of criminals. The punishment of benign actors renders the IRS a criminal in and of itself. To punish the innocent is no less a crime than to let the guilty go free.
Finally, the OVDP is a program created out of whole cloth by the IRS. There is neither legislative authority nor judicial oversight. It is the rogue action of the executive branch of government. Where there are no checks, there are no balances either.
Excellent explanation. very visually explained. I worked in a corporation and saw fraud and saw the high up guys glaze over what was being done because of the stats the fraud created. It always seems money,, lots of it, can buy one out of any situations, even buy the government.
I think you have hit upon why the oVDP program was created. The media should know that OVDP was created for selected individuals to launder money—legally.
Yup, the Offshore Voluntary Disclosure program is really a “professional courtesy” that the IRS offers to criminals. To your point that:
This is absolutely correct. This is also true of “Streamlined” and even traditional voluntary disclosure. I have the impression that many people think that “they have to enter these programs” because they are the law. They are NOT the law. The law is that people have to pay taxes (Title 26) and file FBARs (Title 31).
In fairness to the IRS, I don’t think that they say that people MUST enter these IRS programs. But, the tax laws of the United States are really enforced by the lawyers and accountants. Why the lawyers and accountants encourage these programs, without informing people that they are NOT the law, is a mystery to me.
If you are a criminal “OVDP” can be your ticket to a peaceful retirement.
If you are a hard working American abroad – stay away from this.
then he FORCES innocent people into OVDP in the period 2009-2014, prior to Streamlined, giving no other options.
It is difficult to understand why this hasn’t been understood. Great example Petros!
Perhaps our mistake has been focusing on what OVDI et al, has done to minnows because all we ever hear is how “ignorance of the law is no excuse”, we need to “pay our share” and everyone’s all-time favourite, “don’t let the door hit you on the way out.” Instead, we should make a template/scale of how much money the government loses on that “professional courtesy,” and compare it with what they get from us. Perhaps they would then order a proper cost analysis be done. In the meantime, as many lawsuits as possible need to be launched and the Republicans need to be voted in. (Sorry, I can’t help with the last item).
You close one door and another opens. You ‘solve’ one problem and create another.
The US is so broke it needs revenue from the drugs trade. One has to only look at Colorado.
Cut it out, Petros! I don’t think my keyboard can take another mouthful of coffee!
Another FATCA related article from the UK’s Telegraph about the banks waiving customer’s rights via changed Terms & Conditions.
In the online poll, about 60% of the British readers were ‘angry’ about the Lloyds Bank’s clause, another 30% were ‘slightly disturbed.’.
Only 10% of the readers were ‘undisturbed.’.
It seems the UK may be a good battleground to start knocking out FATCA’s legs.
To know how much they like being denied their piece of the action, you only have to look at how the IRS has been instructed to treat quiet disclosures.
Tax Scam: IRS Pays Out Billions in Fraudulent Refunds
Is this sort of thing even possible without people on the inside? I watched the Sopranos too.
I agree with maz57. Please stop!!!! 😛
Yeah, this one’s a home run for sure! (Keys are getting sticky).
@Maz57, Tricia: I am not sure what you’re saying. You provide no arguments to counter my suggestion.
Indeed, even on the surface the purpose of OVDP is to launder unreported funds in foreign banks of major tax evaders, which makes the funds dirty by definition. So it is in fact a money laundering program that washes the funds for a price (27.5%). The IRS is providing a service to these folks.
Secondly, the IRS has punished the innocent benign actors–which shows that their motives are impure: i.e., they are not interested in the rule of law and Congressional content, but in revenue. So we must work from the known to the unknown. If they are willing to commit heinous crime to create revenue from benign actors, how much more would they be willing to accept a piece of the action from the holders of dirty money? It is a simple a fortiori argument.
@Maz57, Tricia: Are you suggesting I stop writing what seems to be the case?
@Petros. I think you have misunderstood our comments. I (and I expect Tricia, but I’ll let her speak for herself) agree with you wholeheartedly. It just struck me as funny that you were able to logically conclude that OVDI was really nothing more than a government sanctioned money laundering program. I can think of no countering argument nor would I even try. (It might be fun to hear some IRS shill respond, however.)
This was a brilliant and surprising conclusion to your usual painstaking analysis. Using Walter White and Breaking Bad for your example was a stroke of genius. I look forward to your next idea; they not only frame the ridiculousness of the US and it’s CBT, they are often entertaining as well. Fortunately new keyboards (and coffee) are pretty cheap. Please DON’T stop!
Your online musings over the last few years have clarified my thinking and strengthened my resolve. I thank you for that.
Not sure where to post this – but I was “educating” a friend of mine about FATCA and got the usual “no way!” “you’re not serious!” “can they do that!!” response and I told her to go ahead and google FATCA. She did and of course got tons of stuff but what caught my eye was this ad on the left:
Jackson Hold Trust Co.
WYOMING onshore asset protection is better than offshore.
@Maz57, thank you. I am relieved and gratified.
The fact of the matter was my painstaking research consisted of watching all five seasons of Breaking Bad–but I did so with the conviction that I’d probably get at least one post out of it.
When Maz57 mentioned the coffee, I pictured him spitting it all out, laughing because I could just imagine the reaction of the IRS, etc. Your ingenuity hit the mark again. No, it was soooooooooooo funny. Because it was so right on. Thought the smiley would make you realize the gist of what I meant.
Pingback: The Isaac Brock Society | What are the benefits of the coming into U.S. tax compliance through the Streamlined program?
On most computers, the sarcasm indicator is under the left front battery cover–it’s right next to the facetious button.
Best to buy a remote keyboard–or to refrain from drinking or eating while writing.
@Tricia, I can’t be mad at you. You are a TV personality. So no need to apologize!
Cicero said in 33 BC,”an honest man will pay more taxes on the same income a dishonest man pays less on”. The Income tax is a tax that makes criminals out of most of those who take in their incomes in cash. i won’t mention certain businesses, but you know who they are and how they spend so freely on luxary items.
I along with several million others want a National sales tax called the FairTax. If anyone is interested in equality then they should become paid members of Americans for fair taxation at 5 dollars a year.
Read the bill on line (HB25) and become a member supporter.
Don’t get carried away! Perhaps we should form a comedy duo- we ARE always laughing when together!!
Yeah, its an amusing story; but so far fetched, I don’t see where the humor connects with reality. Far from being “so right on”; …transferring 600’000 cash offshore, letting it sit for a while, then entering the OVDI is so impossible and far fetched these days, that one might as well have included aliens in the story too.