by Brian Mahany
UBS is old news. In recent months we have reported on investigations by the IRS and the U.S. Department of Justice into Credit Suisse, Wegelin, Kantonbank, Clariden Leu, Basler and Julius Baer. In November a former Justice Department official said the list was up to 17 banks. According to a new article by Reuters, there may be as many as 300 Swiss banks being looked at by the U.S.
The IRS is interested in learning of the identities of U.S. taxpayers with unreported foreign bank accounts. Because of its strict bank secrecy laws, Switzerland was long a favorite destination of people looking to hide money from Uncle Sam.
The government is interested in both the unreported accounts and in prosecuting taxpayers and bankers who conspired to defraud the government. The threat of criminal prosecution against individual bankers has been a powerful tool in getting banks to turn over the names of their U.S. customers.
Depositing money into Swiss or other foreign accounts is not illegal. The IRS wants to know where you put your money, however, and says you must pay tax on any income generated from foreign accounts. Dividends, interest and capital gains are common forms of income from foreign bank and investment accounts.
While some people deliberately deposited money in Swiss accounts to avoid taxes, many Americans do so for valid business reasons. Some, for example, believe that the Swiss banking system is more stable than the U.S. banking system. Other foreign born Americans, Americans living abroad and dual nationals simply open accounts in their “home” country because it is convenient. Unfortunately, many of these people unknowingly run afoul of the offshore reporting rules.
The U.S. requires all taxpayers to annually report their foreign bank accounts. (There are exceptions, of course, including very small accounts.) Reporting is done in June on a Report of Foreign Bank and Financial Account or “FBAR.” If one files a long form 1040 return with a schedule B, it is also reported on the tax return.
This year, the new Foreign Account Tax Compliance Act (FATCA) requires additional reporting of certain foreign financial “assets.” The rules between the programs are not the same and the penalties for not complying with both programs can include jail or civil penalties that exceed the value of the account.
Recently the IRS announced an amnesty program for people who have not been in compliance and have either failed to report their foreign accounts and / or any income from those accounts. This year’s amnesty is called the Offshore Voluntary Disclosure Program (OVDP).
If you have questions about the new FATCA requirements, have compliance problems or have failed to file FBARs in past years, consult with a tax lawyer with foreign reporting experience. This is one time when you shouldn’t rely on a tax preparer or tax preparation software.
The tax attorneys at Mahany & Ertl have helped people across the U.S. and the world with a wide variety of offshore tax problems. For more information, contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at Even if you do not retain us, the call is completely confidential.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; San Francisco, California and now Minneapolis, Minnesota. IRS services available anywhere in the world.