Current Weather
The Spy FM

The Downside Of Tax Havens? Paperwork.

Filed by KOSU News in World News.
September 21, 2012

We were curious how hard it would be to set up an offshore company so this summer we bought two. We at Planet Money are now the proud owners of “Unbelizable, Inc” in Belize, and “Delawho? LLC,” in Delaware. The whole process was quick and easy. At least that is how it seemed at first.

Until we got an email from David Buckley, a tax lawyer at Rogin Nassau, telling us we had just walked into an IRS sinkhole.

Buckley described it as “a minefield of US tax obligations,” and he said he was worried about me. (The companies are in my name.)

His email made me nervous so David Kestenbaum and I drove up to Buckley’s firm in Connecticut to ask him one important question: How do we make sure I don’t break the law?

His answer:

Step 1 – Tell the IRS that I own a company offshore.

It turns out that despite all the big red letters advertising absolute confidentiality. I am legally required to declare these companies to the IRS. Even if, as is true in my case, the company has done absolutely nothing. Just exists in some papers.

Step 2 – Do your paperwork. (All of it.)

According to Buckley’s colleague, Daniel Gottfried, filling out the right IRS forms is going be time consuming.

“The record keeping estimated burden is 82 hours 45 minutes, ” says Gottfried.

And that’s not all, Buckley and Gottfried say learning about the law is expected to take “16 hours and 14 minutes and preparing and sending the form to the IRS is 24 hours and 17 minutes.”

Even worse, Gottfried tells me, the IRS is notorious for underestimating times like these.

You hear about the Cayman Islands, Bermuda, and British Virgin Islands being called tax havens. That term makes it sound like if you can figure out how to get your money there, you suddenly don’t have to pay taxes. But of course that is not true. If you are an American earning income, you do have to pay taxes. And in fact the IRS wants you to report a lot about what exactly it is you are doing offshore.

So what’s the benefit of doing things offshore? Well, if you are determined to evade taxes, if that’s your goal, then creating a complex financial structure in a tax haven, will certainly make it harder for the government to catch you.

Harder, but not according to Buckley and Gottfried, impossible. An audit could trip you up they say and then of course there are the IRS’s usual informants:

“Scorned lovers and disgruntled employees are great source of information for the IRS, ” says Buckley. [Copyright 2012 National Public Radio]

Leave a Reply

5AM to 9AM Morning Edition

Morning Edition

For more than two decades, NPR's Morning Edition has prepared listeners for the day ahead with two hours of up-to-the-minute news, background analysis, commentary, and coverage of arts and sports.

Listen Live Now!

9AM to 10AM The Takeaway

The Takeaway

A fresh alternative in morning news, "The Takeaway" provides a breadth and depth of world, national and regional news coverage that is unprecedented in public media.

View the program guide!

10AM to 11PM On Point

On Point

On Point unites distinct and provocative voices with passionate discussion as it confronts the stories that are at the center of what is important in the world today. Leaving no perspective unchallenged, On Point digs past the surface and into the core of a subject, exposing each of its real world implications.

View the program guide!

Upcoming Events in your area (Submit your event today!)

Streaming audio and podcasts

Stream KOSU on your smartphone

Phone Streaming

SmartPhone listening options on this page are intended for many iPhones, Blackberries, etc. with low-cost software applications available to listen to our full-time web streams, both News on KOSU-1 and Classical on KOSU-2.

Learn more about our complete range of streaming services

We're perfecting the patient experience - Stillwater Medical Center