Demystified Blog Archive #43 - What is Your Tax Strategy?

About two and a half years ago, President Obama quietly signed into law a piece of legislation towards the end of his administration.

They called it the “FAST Act,” which stood for Fixing America’s Surface Transportation.

Section 32101 of the FAST Act required the US State Department to revoke or deny the passport of any taxpayer that the IRS deems to have “seriously delinquent tax debt.”

They define seriously delinquent tax debt as owing $50,000 or more.

Well, it took them a couple of years, but the IRS has finally started enforcing this law.

Earlier this month the IRS acknowledged that they had sent at least 362,000 names to the State Department to start revoking or denying passports.

And that’s just the beginning.

The IRS is sending these names out ‘in batches’, so there will be many more to follow.

It seems clear there’s no due process here. It’s purely an administrative matter, which means there’s limited oversight.

Your name could accidentally end up on some list because the IRS couldn’t keep its own records straight. Or there was a problem with the data integrity. Or someone simply mismatched one John Smith for another.

The IRS literally has billions of records being managed by outdated technology that’s prone to data breaches.

The idea that they could come up with a list of hundreds of thousands of people without making a single mistake is overly optimistic.

The larger point, though, is what this really means about citizenship.

Think about it, a passport is the most common document to evidence an individual’s citizenship.

And now they can take it away from you with the click of a button.

To me, if they can take something away so easily, then it wasn’t really yours to begin with.

It’s like real estate.

Even if you have your mortgage fully paid off, you still have to pay property tax.

This means that it’s ultimately the government who really owns your property. You’re just renting it from them.

And if they believe that you owe them property tax, they’ll take the property away from you.

And, now, if the US Government believes that you owe them income tax, they can take away your US citizenship from you.

So I ask the question, what is your tax strategy?

Are you considering permanent tax reductions and elimination vs. tax deferral?

Are you changing your facts to produce different types of income?

Are you using entities to move personal deductions to business deductions?

Are you shifting income to lower tax brackets?

Are you considering shifting income to different states and countries?

Are you utilizing self-directed accounts to maximize your investment returns?

These are just a few ideas to consider. There are many more.

Of course, there is always additional information you should consider when setting up a taxation strategy plan. And, you should always be working with a team of professionals to help mitigate the risk of any investment.

To your investment freedom