by Brian Mahany
Sooner or later the pendulum always swings in the opposite direction. Unfortunately for those with unreported offshore bank and financial accounts, that shift is nowhere in sight. On October 18th, the chief of the IRS’ Criminal Investigation Division, Richard Weber, repeated that his 4000 special agents will continue to focus on unreported foreign bank accounts.
The requirement to file FBARs (Report of Foreign Bank and Financial Accounts) dates back to the Bank Secrecy Act in the 1970’s. Efforts to enforce the reporting requirements began much more recently, however. Deliberate failure to report a foreign account is a felony punishable by up to 5 years in prison. Civil penalties can include the greater of $100,000 or 50% of the high account balance for each year an account is unreported. Even “innocent” violations can result in penalties of up to $10,000 per year.
Beginning in 2007/2008, the IRS focused primarily on Americans with Swiss accounts. Several Swiss banks are either cooperating with the IRS or have been prosecuted. Those banks include or are suspected to include UBS, Credit Suisse, Wegelin & Co., Kantonbank, Clariden Leu, Basler and Julius Baer.
Recently, the IRS has been looking at banks in other countries as well. The list includes several Israeli banks as well as financial institutions in the Bahamas, India, China, Hong Kong, Liechtenstein and more.
During remarks to a New York CPA group, Weber said that the IRS and Department of Justice would soon be announcing a new round of indictments involving unreported accounts. These prosecutions will involve banks outside of Switzerland.
As part of its efforts to identify offshore assets, the IRS has posted CID special agents around the world. Some of the more popular hangouts for tax defiers (to use the IRS term) such as Panama now have an IRS field office. In fact, the IRS has posted agents around the world.
The world is becoming smaller by the day. The new Foreign Account Tax Compliance Act (FATCA) will soon force foreign financial institutions to begin reporting the identity of American account holders or those with ties to the U.S. There are fewer and fewer places to hide money and many of the few that do remain are not the safest place to hide money. (Does anyone want to open an account in North Korea?)
Weber’s statement about banks in other countries is a warning to Americans who think they can just transfer money from Switzerland to another country.
There is presently an amnesty program to help taxpayers with unreported accounts. This includes those with foreign hedge funds, investments, bank accounts, CD’s and the like. The program, called the Offshore Voluntary Disclosure Program or “OVDI”, offers greatly reduced penalties and a “get out of jail free” card too.
Amnesty is not for everyone, however. Many taxpayers may do better opting out and negotiating directly with the IRS. There are many ways to come into compliance and sometimes all penalties can be waived.
The rules are complex and still being rolled out. Speak with a tax lawyer right away if you are one of the estimated millions with unreported accounts.
The tax lawyers at Mahany & Ertl have helped many taxpayers with a wide variety of offshore reporting issues. Our clients include dual nationals, Americans with offshore accounts, foreign born professionals working in the United States and expats who retired overseas.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine, Minneapolis, Minnesota and coming soon, San Francisco, California. Services available worldwide.