by Brian Mahany
For three years we have warned that the IRS is coming. From criminal indictments of private bankers to John Doe subpoenas and even through looking at offshore debit card use in the US, the IRS has been relentless in its pursuit of unreported offshore bank and brokerage accounts. This week, Credit Suisse began telling account holders that it is disclosing names to the IRS.
In a letter sent to US account holders, the bank said it is complying with an order of the Swiss Federal Tax Administration (SFTA). The IRS had asked Swiss authorities to compel Credit Suisse to turn over the identities of account holders.
The IRS is seeking the names of anyone with an account at the bank between January 2002 and December of last year. Account holders are given the option of contesting the release of the information by filing an appeal with the Swiss government. The bank, however, won’t be fighting against release on behalf of its account holders.
There is a certainly a story behind the story. The head of the North American Offshore Banking Unit of Credit Suisse was indicted earlier this year in the U.S. and charged with conspiracy to defraud the government. Prosecutors say that Credit Suisse bankers actively helped US account holders open secret accounts in Switzerland.
With Swiss bankers now facing US prison cells, the question is whether Credit Suisse is hiding behind the SFTA order. Until this year, Swiss banks and the Swiss government only paid lip service to tax exchange agreements with the US and other foreign governments. Prison, however, can be a powerful motivation for some.
Whether or not federal prosecutors are overstepping their bounds with the current round of indictments is certainly subject to debate. What is certain, however, is that the IRS and Department of Justice are not backing down in their hunt for unreported foreign source income and accounts.
Earlier this year, an IRS sponsored tax amnesty – the offshore voluntary disclosure initiative or “OVDI” – offered taxpayers a chance to come into compliance and avoid prosecution. Although the amnesty program is over, taxpayers can still generally avoid prosecution by coming forward before the IRS makes first contact. All bets are off, however, once the IRS knocks on the door.
With no amnesty in place, penalties will become the big issue. The civil penalty for having an unreported foreign account is up to 50% of the high balance of the account for each year in which the account was unreported! Foreign account holders who close their accounts are still subject to an audit and assessment.
If you have an unreported account, contact a tax attorney well versed in foreign reporting requirements. Do so immediately and don’t wait until you receive an IRS notice. Waiting to see what happens is like a dangerous game of “Russian Roulette” except this time, the IRS is holding more bullets.
The tax lawyers at Mahany & Ertl have helped people across the US with a wide variety of foreign reporting issues. Criminal investigations, Reports of Foreign Bank and Financial Accounts (FBARs) and tax compliance; we can help. For a confidential consultation, contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at
Mahany & Ertl, LLC – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine and San Francisco, California. Tax services available anywhere.