An ominous rumor is circulating online: July 1 will see the complete collapse of the United States dollar, because of a bill called H.R. 2847.
Should you be worried?
While you should be prepared for emergencies and gold and silver are excellent hedges in the event of economic collapse, this bill probably won’t be the cause.
Much of the frenzy over H.R. 2847, also known as the Hiring Incentives to Restore Employment Act (HIRE Act), is way overblown.
What is H.R. 2847?
The HIRE Act was passed on March 18, 2010, amidst the push to improve the economy. It is considered a “jobs bill” and has several components, such as:
- Employers earned a payroll tax credit for hiring long-term unemployed people between February 2010 and January 2011.
- Employers didn’t have to pay the employer portion of Social Security taxes on eligible new hires.
- Employers got a tax break if they maintained those new employees for at least a year.
- The tax deduction limit was set at $250,000.
- $20 billion was set aside for highway and transport projects.
- Reforms were made to municipal bonds.
- Modifies and enact part of the Internal Revenue Code of 1986.
So What’s the Big Deal?
The last portion of the bill closes a tax loophole for U.S. investors holding their money abroad in an effort to hide their money from the IRS. The provision going into effect July 1, 2014, will require that any foreign bank find their American account holders and report the balances, receipts, and withdrawals to the IRS or be subject to a 30-percent withholding tax on any U.S. assets held in those banks.
Basically, that means that foreign banks either have to report on their customers or pay a heavy penalty.
The idea is that wealthy investors will not be able to avoid paying their share of taxes, because foreign banks will dutifully report on their clients.
Will There Be Problems?
The rumor, which fact-finding website Snopes claims was started by a predatory investment company, plays on a lot of fears and is fairly out-of-touch with reality. However, it is possible that H.R. 2847 will cause some problems. Some Americans living abroad have claimed they have been turned away from banking internationally, and there are fears that those (presumably wealthy) individuals will give up their U.S. citizenship entirely rather than pay their taxes.
It’s also possible that the HIRE Act will be too costly to make the tax evasion efforts worth it.
All that could be true, but it isn’t expected to have a big impact. A few tax-dodgers may decide it is better to remain abroad, but most international banks seem ready to comply with the regulations. NPR quoted a former high-ranking Treasury official as saying, “Countries are almost universally agreeing to exchange tax information.”
Additionally, one Swiss bank has already admitted to helping Americans hide $1.2 billion from the IRS over a decade, so the bill is creating waves.
What Should I Do?
Unless you are keeping money in a foreign bank account, the law probably won’t affect you. (And if you are, the bank will do most of the work). However, if you’re looking for a long-term investment that the IRS won’t be able to pry into, your best bet is still precious metals. You may consider storing your gold, silver, and other metals at home or opening a Precious Metals IRA for extra stability.
The enactment of H.R. 2847 may trigger some turbulence in the market, but it will only benefit precious metals investors.
What U.S. laws are you most worried about? How do you prepare?
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