by Brian Mahany
The IRS and U.S. Department of Justice show no sign of letting up in their quest to ferret out U.S. taxpayers with unreported offshore accounts. Earlier this week Justice officials unsealed an indictment against a former San Diego tax attorney and two of his clients for alleging hiding millions in unreported Swiss bank accounts.
According to the indictment, Christopher Rusch was charged with conspiracy to defraud the United States treasury. His crime? Prosecutors say he helped clients open unreported accounts at UBS bank in Switzerland. To facilitate the tax fraud and avoid detection, they say Rusch created numerous nominee entities in Switzerland, Panama and St. Kitts & Nevis; entities that he also controlled. Nominee entities are often used to disguise the true ownership of assets.
In addition to the conspiracy charges, the prosecutors also accused Rusch of filing false tax returns and failing to file Reports of Foreign Bank and Financial Accounts, also known as FBARs.
According to a government press release, Rusch was arrested in Miami after being deported from Panama. Although Panama does not have an extradition treaty with the U.S. for tax crimes, the IRS frequently seeks an indictment for conspiracy to defraud the government which is grounds for extradition in most countries.
How did Rusch get caught? A careful reading of the indictment suggests that the government had help from Swiss bankers involved with the accounts, one of whom was a long term friend of Rusch.
In the last 3 years, over 30,000 taxpayers have come forward and reported owning offshore bank and financial accounts. In many of those cases, IRS auditors and criminal investigators interviewed the taxpayers to learn the names of anyone involved in the transactions including Swiss bankers, accountants and lawyers. When faced with possible indictment, many of the foreign intermediaries disclose the names of their former and present U.S. clients in exchange for immunity or a promise of leniency. We suspect that is how Rusch was discovered.
Obviously, an indictment is only an accusation. Rusch and his codefendants are innocent until proven guilty. As of this writing, Rusch has not yet had a bail hearing. Prior to his deportation from Panama and subsequent arrest in Miami, Rusch practiced civil and criminal tax law.
Opening a bank account in a foreign country is not illegal. The IRS requires taxpayers to report those accounts yearly, however, and to pay tax on any income derived from the accounts such as dividends or interest. Experts believe there are hundreds of thousands of U.S. taxpayers with unreported accounts. Many people such as foreign born Americans, dual nationals and Americans living overseas simply do not know of the law. Others such as Rusch are charged with intentionally trying to hide money.
Innocent or not, failure to report an offshore account carries huge penalties – up to 50% of the high balance each year the account remains unreported. Willful violation are also criminal.
If you have an unreported foreign bank account, contact a tax attorney immediately. The IRS is presently offering an amnesty program that will allow most people to avoid any risk of jail and could save tens of thousands of dollars in penalties. Conventional voluntary disclosure remedies are also available. Time is limited however as amnesty is only available if you get to the IRS first.
The tax lawyers at Mahany & Ertl have helped many people with a wide variety of offshore tax reporting matters. FBARs, voluntary disclosures, the Offshore Voluntary Disclosure Program (tax amnesty) and the new Foreign Account Tax Compliance Act (FATCA) – we can help.
Mahany & Ertl – America’s Tax Lawyers. Offices in Wisconsin, Michigan, Maine & Minnesota. Tax services available in most locations.