by Brian Mahany
The US government’s deadline for 11 Swiss banks to turn over names came and went on Tuesday. Although Credit Suisse has apparently agreed to comply, Swiss news source Swiss Info says the banks are remaining “tight lipped.”
The IRS is seeking not only the names of US account holders but correspondence between the bank and their customers. That correspondence could be key in building criminal tax evasion cases against both the clients and bankers.
During the most recent amnesty program (the 2011 Offshore Voluntary Disclosure Initiative), the IRS interviewed many participants that maintained high account balances in overseas banks. Those interviews provide a road map of which banks may have actively assisted clients hide money from Uncle Sam.
Many believe that some Swiss bankers helped former UBS clients move money from UBS to other offshore banks after the IRS began investigating UBS in 2008.
Swiss Info says that the Swiss banks were hoping to negotiate a global settlement in which all Swiss banks would participate. It appears, however, that U.S. justice officials may wish to criminally prosecute the 11 worst offenders.
Caught in the middle are the American account holders who still have unreported Swiss accounts. Although the amnesty program is over, the IRS maintains an informal “first contact” policy. If you come to them first, criminal prosecution will almost always be avoided. But if the IRS finds you first, all bets are off.
We believe that those taxpayers who come forward before the banks begin disclosing names will avoid prosecution, assuming their unreported accounts and income are legal source. (All bets are off if the money is the proceeds from some sort of criminal enterprise.) In many cases, excessive penalties can also be avoided if the failure to disclose the foreign accounts wasn’t willful.
People with unreported accounts fall into two broad categories. Those who opened the foreign accounts to evade taxes and those who did so for legitimate business or personal reasons. It isn’t against the law to have a foreign account but failing to tell the IRS about the account can be a felony. Generally foreign accounts are reported on a Report of Foreign Bank and Financial Account form (often called an FBAR) which is filed separately from one’s tax return.
Although the big show down involves Swiss banks, the U.S. continues to investigate banks in many other foreign countries including Bermuda, India, Israel, Singapore and others.
If you have an unreported foreign account, contact us immediately. The call is completely confidential, even if you do not hire us. We are happy to discuss your options while you still have them! In many cases, our services can be handled on a flat fee.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan & Portland, Maine. Satellite tax office in San Francisco, California. Services available anywhere in the United States.