As featured in The Wall Street Journal, Money Magazine, and more!

Hundreds Hired at the IRS to Find Cheaters

This article was written by in Economy. 15 comments.

In a continuation of my favorite story of the year, the IRS announced a few days ago that they are ramping up a new investigative unit to find more offshore tax cheats, with an emphasis on those that are using dummy corporations with multiple layers to hide their wealth. They’ve named it the “Global High Wealth Industry Group”.

With new offices in various countries, it appears the IRS is also acknowledging that high finance is a global game for many people. And my government isn’t alone. According to Reuters, “tax authorities in Japan, Germany and the UK have also created similar units.”

From IRS Commissioner Shulman in a recent speech:

At least initially, we will be looking at individuals with tens of millions of dollars of assets or income. Going forward, we will take a unified look at the entire web of business entities controlled by a high wealth individual, which will enable us to better assess the risk such arrangements pose to tax compliance and the integrity of our tax system.

Shulman acknowledged that there are plenty of valid reasons to have complicated overseas business entities, but we’ve all seen enough TV dramas to know that if you’re going to hide the money you owe, that’s how you go about it.

I imagine a lot of people are going to be losing sleep over this new tactic, but there’s an easy way to resume a good night’s sleep: stop cheating. And if you’ve been cheating without realizing it (“it was all that crooked accountant’s fault!”) then not to worry, you still make more than ten million dollars a year, and you can afford to pay what you owe.

IRS hires “hundreds” for new wealth unit, Kim Dixon, Reuters, 11 Dec 2009

Published or updated December 14, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

Email Email Print Print
About the author

Smithee formerly lived primarily on credit cards and the good will of his friends. He is a newbie to personal finance but quickly learning from his past mistakes. You can follow him on Twitter, where his user name is @SmitheeConsumer. View all articles by .

{ 15 comments… read them below or add one }

avatar Investor Junkie

I’m all for them going after people who knowing avoid taxes. It’s an easy target for our government to do without any flack from it’s constituents. Do as I as I say, not as I do. They should also tax cheats all around the government, but something tells me that will never happen.

Reply to this comment

avatar Smithee

Do you mean tax cheats who are also federal employees, who “earn” more than ten million a year, and hide that money in complicated businesses around the world?

Sure, I think they’d be eligible for an audit.

Reply to this comment

avatar Investor Junkie

Yes, put Charlie Rangel, Turbo Timmy, and the other names that currently escape me at the top of that list! Do as I say, not as I do. If people of our own government don’t comply, what makes them think the public will do also? I suspect tax cheating will increase because of this reason.

The issue I have is legit businesses and individuals are starting to get hounded by our state and federal governments for taxes they don’t even owe! I got a NY state tax bill for $50, for something I don’t owe, and my accountant suggested to just pay it because of the time involved by his firm to just protest it. Sad, it’s becoming like mafia I say.. There will come a time where people say FU and either move out of state or out of country. There are places becoming much more friendly to entrepreneurs.

Reply to this comment

avatar Apex

Now Smithee, I think you know what he was talking about. You have to admit all the Obama appointees who have been found to have cheated on their taxes doesn’t look good and for an administration that has constantly talked about things like “spreading the wealth”, “taxing the rich”, and people paying “their fair share”, it doesn’t look good when you have people like Geithner and Daschle and a number of others who all fit the definition of the rich he is talking about who are cheating to get out of paying taxes.

I think your whole comment and tone in response to Junkie’s point just makes you look like you want to dismiss the comment like it’s rediculous. But it’s not rediculous. These are the people who want certain people to pay more in taxes and yet they don’t want to live by those same rules. That is hypocrisy and it really makes people angry. Just like the bankers getting bail out money and then paying big bonuses. Surely you can see that and not make such a silly comment as if to suggest the only way a federal employee can cheat is to make 10 million dollars and then hide it in phony offshore accounts.

As to the increased scrutiny efforts to ensure compliance with the law by the IRS, I am all for it. I do not agree with Junkie that stepping up enforcement means witch hunts on normal people to pay taxes. Sure it might mean extra audits but if you do your taxes properly and pay what you owe you should be fine. I am irritated by all the business people who play very fast and loose with the rules and cheat on their taxes all over the place.

I only wish there was enough discoverable cheating to impact the budget, alas, its just small peanuts around the margins. I still am absolutely in favor of them going after it, but the budget won’t be helped much by it. We have tough choices to make in the coming years to deal with the budget that can’t be solved by better enforcement.

Reply to this comment

avatar Investor Junkie

Thanks for the comment. I couldn’t have said it better myself.

Reply to this comment

avatar Smithee

I don’t think the current administration’s appointees frequency of tax problems is an anomaly. I think as time goes on, it gets easier to find these problems, which is good. I am against cheating no matter who does it. Across the board, cheaters should be found out and made to pay what they owe.

Should we have politicians who lead by example? That’d be great. But as far as I know, there isn’t a single member of Congress who ignores all lobbyist influence or even comes close to leading a saintly life. And I think they get paid way too much and have too many benefits to be considered truly representative. I often daydream of a truly democratic lawmaking process, but my design hinges on a foolproof identification system, which nobody has invented yet.

I also think that Obama’s opponents are more driven, focused and ruthless than, say, Bush’s opponents were.

At the same time, I don’t think that cheating on your taxes makes you incompetent at your job. Each case should be weighed on its own merits.

My tone was flippant, I’ll admit that, but I was trying to bring the point back to the intent of my original article, which had nothing to do with Obama, Democrats, or any other politician.

For what it’s worth, I’ll again give credit to the Bush administration for starting this program in the first place. I only wish it could have been enacted sooner.

Reply to this comment

avatar Investor Junkie

Nowhere do I mention it’s the Democrat’s OR Republican’s fault. Just because I’m disagree with the hypocrisy I must be a Republican? FYI, I’m neither and prefer Libertarian. I believe both parties are corrupt.

My point is whoever works within our government should also be held to the same rules they create and enforce. It’s not like that now, nor was it like that when Bush was in office (I know everything is Bush’s fault).

Last time I checked tax evasion is not a minor issue (than being less “saintly”), but ah most people either get heavily fined and/or go to jail. Ask Wesley Snipes how’s that working out for him? By nothing happening to these members of government, while then stating they are expanding going after the “common man” is absurd!

Like health care, members of congress won’t be getting the same health care they propose we should get. So like taxes, I’m all for them going after tax cheats as long as it also applies to them! Otherwise it’s all hot air.

avatar Apex

Agreed that cheaters, crooks, lairs, sellouts, unethical pigs are well represented across the board in Congress in all parties.

However it does bother me more when one party preaches about tax fairness and everyone paying their fair share and then has so many people who are advocating for exactly that who are found to be cheating the system to get out of paying their fair share.

So I will pose this to you. Does it bother you worse when the Governor of SC preaches family values and fidelity and then flies to Argentina incognito to meet with his secret lover. Or what did he call her, his “soul mate”. Does that not bother you more than when someone who doesn’t preach those values cheats on his wife? I don’t advocate anyone cheating on their wife. But if you promote a certain choice as best for others while violating it yourself most people find that particularily upsetting. That’s why we have a special word for it, hypocrisy. Which is also rampant in Congress, I know.

Anyway, I think it’s relevant who did it in this case. I expect people who advocate for something to at least do it themselves. If you don’t want to do it then don’t advocate for it. I am fine with that.

Also concerning opponents. It’s common for each side to think the other side is unfairly attacking their guy. When clinton was in repubs said he was horrible and some believed he wouldn’t leave office when his term was done. When bush got in there was the constant refrain of the worst president ever and the same claims that he would not leave office when his term was done. Repubs felt there was a witch hunt on him, attempts to mock him and make him look stupid at every turn, etc. Now that Obama is in office the repubs again think he is horrible and the dems feel it is unjust attacking (references to every disagreement being racist or socialist fear mongering, etc.)

I think part of the problem is these President’s come into office talking about everyone getting along. Bush promised to “change the tone in Washington.” He did, it got more devisive. Obama promised to “Unite people” around a common purpose. Well he sort of did. He united repubs around the common purpose of being against him.

This is politics. There is no changing the tone or uniting people in Washington. There are two parties who have very different views, goals, and agendas. When people talk about changing tones and uniting people, they mean as long as you agree with them and they are hoping to convince you to agree to parts of their view.

So there is no unity in Washington. There is no nice tone in Washington. It’s a fight.

So I don’t think Obama’s opponents are any more driven or focused or ruthless than any other opponents in the modern era of politics. It’s hard to argue that Bush wasn’t hated and vilified by the left just as much as Obama is from the right. And as proof I will offer that I have not heard one person on the right refer to Obama as the worst president ever as Bush was regularily referred to from some of those on the left. I know it’s still early and they may eventually call Obama the worst ever, but as of yet, I haven’t heard it. The most left, or the most socialist President yes, I have heard that. But not the worst president ever.

avatar Investor Junkie

“So I will pose this to you. Does it bother you worse when the Governor of SC preaches family values and fidelity and then flies to Argentina incognito to meet with his secret lover.”

I personally disagree with cheating and it’s immoral, and shows their true character (I had a biz partner that cheated and that majorly turned me off)

While it’s immoral, it’s not illegal like tax evasion is. Morals are usually a higher standard than legal. So their is no question from a legal standpoint. Forget about morals though, we can’t even get the members of our government to do things legally.

avatar John DeFlumeri Jr

That’s enough to make the average taxpayer smile.

John DeFlumeri Jr

Reply to this comment

avatar neal@wealthpilgrim

I recently heard that Fed employees are among the biggest tax cheats. They owe billions in overdue tax.

Maybe the IRS can start in its own back yard.

Reply to this comment

avatar Investor Junkie

Here’s the link

Reply to this comment

avatar Apex

And the numbers are that federal workers owe the IRS 3 Billion dollars. With stepped up enforcement what percent of that do you think is possible to collect? 10%, 20%, 50%. I suspect it’s difficult to get at most of it. But even if you could get 100% of it, its a drop in the nearly 4 Trillion dollar US Budget. Less than 1/10 of 1% even if you could get every single dollar. I hate tax cheats. I say go get em all. But it won’t impact the budget.

Reply to this comment

avatar Smithee

I’m thrilled about any amount collected, even if it affects less than 1% of the budget. It’s a) the right thing to do, and b) a great return on the investment of paying IRS workers to do their jobs.

Reply to this comment

avatar MBAbriefs

After reading the Reuters article it sounds like a good idea, especially since a number of other countries have already implemented similar programs. But for $387M I hope they collect a lot of back taxes from legitimate cheats to pay for the program.

Reply to this comment

Leave a Comment

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and conditions.

Notify me of followup comments via e-mail. You can also subscribe without commenting.