I think this is a concept that should be applied with a broad stroke across society. When someone who is empowered by the people (afforded special privileges or abilities by a government that is democratically elected) commits a crime, that crime is inherently twofold. Liability needs to increase in proportion to the amount of power that has been granted.
His penalty did exceed $140,000 though, they didn't make this up to punish him. That's what happens when you just ignore federal laws.
After meeting with the IRS, the penalty was reduced to $25k.[1] A New Zealand savings account would have averaged ~4%/year over that time period, so subtracting the gains from his owed $20k leaves about $20k in penalties.
What's an appropriate amount to discourage tax cheats? They're called penalties for a reason... are we just supposed to trust everyone who, when caught, claim they 'didn't know' about the law?
[1] - http://www.reuters.com/article/2011/12/08/us-usa-taxes-forei...
Van Horn contacted the IRS's Taxpayer Advocate Service, which agreed to
work on his case. After a series of offers and counter-offers, he says,
the result was a single "non-willful" FBAR penalty of $5,000 per year,
or $25,000 total.Not filing taxes for 5 years is fraud.
Filing and paying taxes while working for the IMF -- but not realizing you should've been paying the 'employer' half of payroll taxes as well -- is negligence.
On top of that you have huge accountant costs to file these complicated penalty prone returns even if you end up not owing any taxes year over year.
It's still 'negligence', your IMF example is just in part instead of in full.
And from American citizens by birthright, born outside of the US, and who have never set toe inside the country nor made a penny of US income.
Perhaps my snark should've more explicitly called out Charlie Rangel. Nothing like misreporting your income while also being chairman of the Ways & Means Committee.
But really, all of the examples just underscore how insane the tax code has become.
His excuse for not claiming the income is plausible too since the payments went straight against the mortgage through the resort it was attached to, so the money never hit his savings account. If you owned a home, rented a room on AirBnB, and then AirBnB paid off a small part of your mortgage, would most people know to claim that money as income?
That being said, the Nabors tax shelter mess, the unreported checking accounts, the multiple rent-controlled apartments, etc. all add up to show Rangel as a typical corrupt politician.
But really, all of the examples just underscore how insane the tax code has become.
Unfortunately the US tax system is a very adversarial one.
A programmer earning around $100k could easily accrue that kind of tax liability over a few years, even after deducting payment of foreign taxes. (But not penalties and interest for the delayed payments)
My rough estimate is he could have earned $60k a year for 3 years and owe approximately that much.
There are several more requirements not related to income, or even if the citizen ever lived in the US (many people have US citizenship and have never stepped foot here), each of which can carry a substantial penalty if violated.
There are many people living in fear -- and many in substantial debt -- not about income tax problems, but about IRS filing requirements. The system is a monstrosity.
Last night I heard on NPR the story of a New Zealand expatriate that did not file US taxes for several years as is required by every US citizen no matter where they live or how long they've lived outside the US. He voluntarily notified the IRS of his oversight and paid the $20,000 in back taxes. The IRS then told him his penalty exceeded $140,000.