why: so the government won’t be able to use your money for whatever the fuck they’re planning for the next 4 years.
as a traveler, none of my money has been funding Israel, for example.
one-step method: you basically fill out one extra tax form called FEIE while you’re doing your taxes, write down the dates you were outside of the country, and then since you aren’t in the country and are not receiving any services from the US, you don’t have to pay income tax up to a certain amount (it’s a little over 125k this year).
Ok, but realistically, the people who would actually attempt tax evasion here wouldn’t be susceptible to any of the above.
Let’s assume a scenario where you have a dual citizen of the US and a South American country that has less than stellar relations with the US government.
Let’s say they obtained their US citizenship by being born in the country during a temporary period of time that the parents resided there. The family decided to move back after a year or two, another 40 years passed, and the kid has grown to be a successful plastic surgeon who runs a self owned clinic and earns $200k income annually. Being aware of their dual citizenship they keep their wealth invested in entities with no US presence and never self-report anything to the IRS.
This is where I am not seeing any way for the IRS to enforce or do anything about this type of tax evasion.
“Ok, but realistically…”
The family is more susceptible than you suspect, as well as being under constant and significant duress.
I’m not sure why they would stay dual citizens if their entire purpose is to live in a different country permanently, but:
If, in your situation, the family kept all their money abroad, never reports, uses or transfers a significant amount of that money, waits 40 years, filling falsified us taxes and legitimate South African taxes the entire time, their son also never uses or transfers that money until he begins to launder it through a personal corporation that he has to keep consistent business records for, maintaining fake employees and fake patients false receipts and false invoices, a falsified or real office and equipment that either way he has to pay real rent on, and slowly reintroduces that money back into his “legitimate” accounts, then after half a century and a never-ending amount of effort at maintaining a comprehensive deception while they all continue to fill out their falsified US tax forms and legitimate South African tax forms consistently every year and never using the extranational or laundered money irresponsibly, never make a regular everyday mistake on any tax forms so that the IRS or South Africa performs an audit, and everything else goes right, apparently never live in the US but continue to file US taxes for their entire lives, tax evasion could work for that family and they could “get away with it”.
is it worth it?
I don’t think so. I can’t see any upside to that sort of tax evasion.
“Let’s assume… let’s say…”
Yes, hypothetical and real situations occur because tax evasion seems much easier than it is, the risk seems lower than it is, the effort seems lower than it is, and the reward seems greater than it usually is.
that’s why so many people attempt it. that’s why you don’t report selling a desk on Craigslist.
nobody’s saying that self-reporting is a perfect, foolproof taxation model. it’s a model that does what it’s supposed to. it allows the IRS to function as efficiently and effectively as it currently knows how to.