People Money Tax Wealthy Bank U.S Irs Regulations

"Affluent" (rich; wealthy) Americans often try to find tax loopholes, or ways to avoid paying taxes on some of their money. Many of the things they do are illegal, but they think that saving thousands of dollars - or more - is "worth the risk" (it is a good idea to do something even though something bad might happen as a result).

Many wealthy people open "offshore accounts," or bank accounts in foreign countries. If they keep their money in U.S. bank accounts or investment accounts, the "interest" (money earned when one has money in a bank account) and "dividends" (money earned when one has investments in companies) are reported to the IRS (Internal Revenue Service; the U.S. tax agency) and they have to pay taxes on it. If the money is "hidden" (cannot be seen) in an offshore account, the IRS doesn't know about it and doesn't know that they aren't paying taxes on it.

Another way that wealthy people try to reduce their "tax burden" (the amount of money that people have to pay in taxes) is to "transfer "(move) their "assets" (money and things that one owns and can be sold for money) into other people's names. A wealthy man might put some of his assets into his children's names, so that it looks like a child owns a home or another investment. Because the child has less money, he or she will have a lower "tax rate" (the percentage of one's income that is paid as taxes) than the parent.

Many people take advantage of these loopholes, but whenever the IRS "becomes aware" (learns; knows) of them, it tries to change the U.S. tax laws so that the loophole no longer exists.