by Brian Mahany
Weeks and weeks after the IRS’ foreign bank account amnesty program (“OVDI” or the Offshore Voluntary Disclosure Initiative) has ended, people still call our office wondering what they should do. A few did not know of the amnesty program or the filing requirements and are just learning now. Others are still deciding if its worth the risk of getting caught. The headline in yesterdays’ Swiss newspaper Handelszeitung may help answer that question.
The German language Swiss paper reports that 17 Swiss banks are now the subject of investigations by US prosecutors and the IRS. The probe, which started a few years ago with UBS bank, soon spread to Julius Baer and Credit Suisse. Now it encompasses many, many Swiss banks. The paper and the U.S. Justice Department have not disclosed the names of the newest bank targets.
While the Swiss still try to walk the fine line between international cooperation and their history of bank secrecy, recent criminal indictments by US prosecutors of two former Credit Suisse bankers have scared many banks into cooperating.
What does this mean for US taxpayers with accounts in Switzerland and other countries? If you haven’t reported those accounts and any income from those accounts, the chances of getting caught increase daily. It is a felony to fail to file an FBAR form annually – the FBAR or Report of Foreign Bank and Financial Accounts is the document the IRS says must be filed each year listing all foreign accounts.
It is also a felony to not report income from foreign accounts – frequently interest, dividends and capital gains. Even if taxes were paid in another country, Uncle Sam still wants to know what you have and what you made outside the U.S.
Although few people have been prosecuted to date, the IRS can and will levy huge penalties – penalties that equal 50% of the account balance for each the account was not reported. Do the math, if you had an unreported account for any period of time you run the risk of losing everything.
While many criticize the onerous penalties, the government has collected hundreds of millions in penalties over the last several years. Two amnesty programs offered over the last couple years provided an incentive for many people to come forward. Unfortunately, there are still hundreds of thousands of U.S. taxpayers including Americans living abroad, U.S. green card holders and dual nationals that haven’t properly filed.
Although the amnesty program is over, the IRS still offers a voluntary disclosure process which can eliminate the fear of criminal prosecution and may result in significant abatement of penalties, particularly for those who genuinely were not aware of the reporting requirements.
Going through the voluntary disclosure process should not be done alone – a good tax lawyer or CPA familiar with offshore experience should be first retained. If there is any chance of criminal prosecution then hire a lawyer and not an accountant.
The tax attorneys at Mahany & Ertl have helped many taxpayers navigate the complex regulatory environment and avoid prosecution. We can help with FBAR filings, voluntary disclosures and many other tax problems.
For more information, contact attorney Brian Mahany at (414) 704-6731 or by email at
Mahany & Ertl, LLC – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & San Francisco, California. Services available most anywhere.