by Brian Mahany
I am amazed at the number of people who are sitting on the fence when it comes to deciding how to handle unreported foreign bank accounts. Although most of our clients never had any criminal intent to defraud the government, the prospect of paying the IRS a 27.5% amnesty penalty or electing to fight and hope for a lower penalty is like going to the dentist. Many will procrastinate. Yesterday’s action by the Swiss Parliament may change everything.
Many people that call us know that sooner or later they must make a decision. Until forced, however, they continue to “think” about their options. That’s okay unless the IRS finds them first. Under the current tax amnesty rules (2012 IRS Offshore Voluntary Disclosure Program or “OVDI” as it is sometimes called), there is no deal to be made if the IRS finds you first. Amnesty is only available for people not under criminal investigation or audit.
The Swiss Parliament bowed to intense international pressure yesterday and voted to amend Switzerland’s tax treaty with the IRS. The vote paves the way for increased access to secret Swiss account data by the IRS. It is a devastating blow for the once vaunted Swiss bank secrecy rules.
It’s also bad news for those U.S. taxpayers with unreported foreign accounts. This may be there last opportunity to come forward and come clean.
In recent months, the IRS and Justice Department have been pursuing criminal charges against individuals with unreported foreign accounts. The feds have also targeted Swiss bankers and Swiss banks for criminal charges. What started with UBS several years ago now includes as many as 17 Swiss banks including Credit Suisse and Wegelin. Swiss authorities hope that the amended treaty will end the waive of criminal charges against the banks.
Taxpayers with unreported Swiss or other financial accounts have several options. For many, the best option is the offshore amnesty program that allows taxpayers to file missing FBARs (Reports of Foreign Bank and Financial Accounts) and pay a fixed penalty based on just 1 year of unreported account balances. The benefits include a pass on criminal prosecution and in most cases, no audit. For those that believe they can demonstrate their failure to file FBARs and report foreign bank accounts and income was not willful, voluntary disclosure may be the best solution. (If you are already in the process of going through amnesty you can always opt out.)
The most dangerous option is to simply do nothing and hope the IRS doesn’t come knocking. Penalties for willful failure to report offshore income and accounts includes up to 5 years in prison and a civil penalty of 50% of the highest account balance for each year the accounts were unreported!
As was said earlier, amnesty is no longer an option if the IRS finds you first.
If you have unreported foreign bank or brokerage accounts, contact an experienced tax attorney immediately. The tax lawyers at Mahany & Ertl concentrate in offshore tax reporting and have helped many taxpayers with amnesty, opt outs, voluntary disclosure, criminal investigations, OVDP / OVDI, FBARs and the new FATCA compliance requirements.
For more information, contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at All inquiries are kept in strict confidence and are protected by the attorney client privilege.
Mahany & Ertl – America’s Tax Lawyers. From our offices in Milwaukee, Detroit, Portland & Minneapolis, we strive to give taxpayers a voice. IRS tax compliance services available worldwide.