Filing US tax returns over bank account-related interests I do know that in the US, bank-account interests are taxable as passive incomes, but what I don't understand is the point of filing tax returns on bank account interests, since the government (or the IRS), or whatever, has access to bank accounts and can directly deduct taxes (not seizing, I'm not talking about unpaid taxes or fraud istances), without henceforth requiring a tax return filing, since they could deduct the money themselves.
The "point" of including bank-interest income on your tax return rather than having the government automatically deduct what it feels that you would owe is that the government is not legally empowered to take money away from you in that fashion. The government is legal empowered to compel you to pay your taxes, and there are numerous rules enacted as law or as a consequence of laws passed. You can read the various relevant laws here. There simply is no general law that says that banks must withhold taxes on interest. There might be a specific case when an entity is subject to backup withholding (as a response to a taxpayer not following certain rules). There are also special rules regarding non-resident alien withholding, which could require interest withholding. Apart from the intrinsic political unpopularity of imposing new withholding requirements on people, it is difficult to compute the correct amount to withhold, since not all interest is taxable. In theory, a set of rules could be constructed to require withholding of interest income, if Congress were to pass a law similar to 26 USC 3402.
The main tax law is that you have to pay income taxes on your income even when you're in a foreign country. You may also be subject to income tax requirements in the foreign country, so that depends on local law and the existence of tax treaties between the US and that country (which will also involve details of the employer, employment and why you are in that country). For example, if you're working for a solely-US company (not e.g. Amazon) and go to Norway for 3 months &quot;working holiday&quot;, just doing your job online in a different country while skiing, you almost certainly would not have any Norwegian tax liability. It just depends on the specifics.
There might be some relevant state law. Michigan has a Social Security Number Privacy Act, which limits use of SS numbers, such as publically displaying an amount of a number, use it as an account number, require it to be transmitted insecurely over the internet, mail it etc. However, it is allowed under 3(a) to mail a number in a document if the purpose is to identify an individual, especially 3(a)(iv), to Lawfully pursue or enforce a person's legal rights, including, but not limited to, an audit, collection, investigation, or transfer of a tax, employee benefit, debt, claim, receivable, or account or an interest in a receivable or account. It would depends on your state, but it is highly likely that debt collection is an allowed purpose (even if it not a real debt, just a good-faith mistake). This gives a brief overview of state laws.
Neither of those clauses has anything to do with whether a tax on the use of Whatsapp is legal: The first clause tells users that they are responsible for any taxes that may be owed. It says nothing about whether such a tax is or is not legal. The second clause says that users may not charge for Whatsapp services. It says nothing about whether the government may impose a tax for the use of the services. That is all beside the point, though. Even if the TOS explicitly said, "No one may tax the use of our services," that would have no legal effect. Saying that you're exempt from taxation does not make you exempt from taxation.
In most cases, there is no direct legal recourse for such a withdrawal. Money in a joint account is co-owned, and any account holder may withdraw any of it for any lawful purpose. As the article &quot;What is a joint bank account?&quot; from Bankrate.com states: The money in joint accounts belongs to both owners. Either person can withdraw or spend the money at will — even if they weren’t the one to deposit the funds. The bank makes no distinction between money deposited by one person or the other, making a joint account useful for handling shared expenses. But a joint bank account should only be opened with someone whom you trust, since that person has equal control over the account’s funds. If the account holders have a contract or legal agreement that controls what money can be withdrawn and for what purposes, then a violation of such an agreement might be a cause for legal action. But merely opening a joint account does not create such an agreement nor imply it.
Direct taxes were understood at that time as taxes directly on individuals such as a flat-per-person head tax (poll tax,aka a capitation) or an ad valorem (by value) property tax. Taxes on imports and exports, and excise or &quot;use&quot; taxes, such as a tax on the manufacture and sale of whiskey, were not considered to be direct taxes. In 2007 a US Court of Appeals said, in Murphy v. Internal Revenue Service and United States, (case no. 05-5139, United States Court of Appeals for the District of Columbia Circuit) that: &quot;Only three taxes are definitely known to be direct: (1) a capitation [ . . . ], (2) a tax upon real property, and (3) a tax upon personal property.&quot; In section 17 of Pollock v. Farmers’ Loan and Trust Company (link below) the Supreme Court wrote: Ordinarily, all taxes paid primarily by persons who can shift the burden upon some one else, or who are under no legal compulsion to pay them, are considered indirect taxes; but a tax upon property holders in respect of their estates, whether real or personal, or of the income yielded by such estates, and the payment of which cannot be avoided, are direct taxes. This opinion goes into great detail on the history of the apportionment clause, and of direct and indirect taxes. See also The Wikipedia article on Direct Tax. After a na6tional income tax was imposed in 1894, it was held (in 1895) to be unconstitutional under this provision. This was in Pollock v. Farmers’ Loan and Trust Company, 157 US 429 (1895). An earlier income tax was passed in 1861, and repealed about 10 years later without challenge. The 16th amendment was passed (ratified in 1913) to declare income taxes not to be subject to this provision. See History of the US Income Tax and the LII page on Income Tax. To the best of my understanding, no current federal tax is considered a direct tax subject to apportionment under this provision. Indeed the apportionment requirement, which was copied from the previous articles of Confederation, was so awkward that taxes which would be subject to it were never or almost never imposed, but ways were found to make any desired taxes not &quot;direct&quot;. This provision is, accordingly, obsolete as far as taxes go.
Likely not, unless A finds a jurisdiction with sufficiently lax accounting and taxation standards. As described in the question, A, B, and C are distinct legal entitites. For each entity, the tax office would want to know what the revenue, expenses, and net income are. By providing a service (use of the house) free of charge between two entites of the shell construct, profits are moved from C to A. This is usually illegal. The required paperwork might not have to look like a normal rental contract between a tenant and a landlord, since many questions are resolved by the ownership, but it would have to specify payments. The tax office should complain if they differ too much from the going market rate. Consider that C might be a LLC, and that C might be a civil judgement against C. Someone would look at the assets owned by C, and that includes the house D.
Money Laundering The primary crime that you have described is called money laundering. Note that money laundering includes: &quot;structuring financial transactions in order to evade reporting requirements.&quot; Unlike some other forms of money laundering, this does not require that the source of the funds be criminal, or that the actual transfer be criminal, so long as it is intended to avoid reporting requirements. Along the same lines is the even less obvious offense of smurfing. So, this does not cease to be money laundering because: &quot;A legally possesses the money and has a perfectly legal (and very private) reason to pay it to B.&quot; The transfer would typically have had to be reported on a Form W-2 (wage and salary income), a Form 1099 (most transfers that are usually taxable income), a Form 709 (gift tax return), a Form 1098 (mortgage interest), or 1040 Schedule A (deductible payments), or on a cash transaction form if conducted in that manner. The fact that you are reporting it as income, and that there would have been some disclosure requirement if paid to person B, implies that there is some reporting requirement that is avoided. Tax Crimes There are also multiple tax related crimes that could be implicated, not all of which require that taxes due by the person charged by reduced. See, e.g., Conspiracy to Defraud the United States (18 U.S.C. § 371); Attempts To Interfere With Administration of Internal Revenue Laws (I.R.C. § 7212); Fraudulent Returns, Statements or Other Documents (I.R.C. § 7207); Identity Theft (18 U.S.C. § 1028(a)(7)), etc. Conspiracy to Defraud the United States, for example, is defined as follows: If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both. If, however, the offense, the commission of which is the object of the conspiracy, is a misdemeanor only, the punishment for such conspiracy shall not exceed the maximum punishment provided for such misdemeanor.f &quot;Conspiracy to defraud the government is a very broad concept.&quot; Tax Crimes Handbook at 132. Conspiracy to defraud the government is not limited to efforts to obtain money or property, but includes conspiracies where the object of the conspiracy is to obstruct, impair, interfere, impede or defeat the legitimate functioning of the government through fraudulent or dishonest means. Thus, conspiracy to defraud is not confined by reference to common law definitions of fraud. It is a separate crime to interfere with the lawful functions of the government without regard to the monetary consequences. Thus, § 371 involves both efforts to defraud the government of funds as well as interference with the lawful function of the government. The conspiracy to defraud prong of § 371 includes conspiracies to impede, impair, obstruct or defeat the lawful functions of the Treasury Department in the collection of income taxes. United States v. Klein, 247 F.2d 908, 915 (2d Cir. 1957), cert. denied, 355 U.S. 924 (1958). Arguments have been presented that § 371 was not intended to encompass conspiracies to violate the internal revenue laws or conspiracies to defraud the Service but these arguments have been rejected. Although decided in 1957, Klein is the leading case regarding conspiracies to impede and impair the Service and such conspiracies are commonly referred to as &quot;Klein conspiracies.&quot; In Klein the defendants were acquitted of the tax evasion charges but were convicted on the conspiracy count. The wording of the conspiracy count read, in part, as follows: &quot;... to defraud the United States by impeding, impairing, obstructing and defeating the lawful functions of the Department of the Treasury in the collection of the revenue; to wit, income taxes.&quot; In part, it was alleged in Klein that as &quot;part of said conspiracy that the defendants would conceal and continue to conceal the nature of their business activities and the source and nature of their income.&quot; The defendants concealed the source and nature of their income by altering and making false entries in their books, filing false income tax returns, and providing false answers to interrogatories. Thus, a money laundering plan may result in a conspiracy to obstruct the Treasury. United States v. Sanzo, 673 F.2d 64, 69 (2d Cir.), cert. denied, 459 U.S. 858 (1982). In Sanzo, one defendant argued that there was no direct evidence that the other party to the plan would not report the laundered money or claim deductions. The court felt there was enough circumstantial evidence from which the jury could find that the defendant knew his accomplice would not report large sums of laundered money as income and that he would have to falsify business records to hide the laundering activities. Sanzo, 673 F.2d at 69. Note, it is not necessary to prove that the Service was actually impeded in its efforts to assess and collect the revenue. Tax Crimes Handbook at 132-136 (in the pertinent parts, with most citations omitted). Caveat Regarding Legal Alternatives It is also worth noting that there are legal ways for person A to transfer money to person B without making it apparent, for example, in his check book or on his tax return that the funds were transferred to person B (exactly how is beyond the scope of this answer). Generally speaking, they are distinguishable because the IRS is fully and accurately informed of what is going on in a way that the IRS is not allowed to disclose publicly. But, the crude method used here does not achieve that end.