by Brian Mahany
Recent court proceedings suggest a former Credit Suisse banker may be cooperating with the IRS. Christos Bagios was charged last year with felony conspiracy to defraud the government. Bagios was employed by UBS and later by Credit Suisse Private Advisors. Prosecutors say that he helped American clients hide their money in Swiss banks.
Last month, Bagios waived his right to indictment. That’s often a signal that one is cooperating and planning to change their plea to guilty. Assuming he does, Credit Suisse will be further pressured to cut their own deal with prosecutors.
None of this is surprising. Most foreign bankers facing prison have cooperated and agreed to turn over names of clients in return for a reduced sentence. All of this bad news for those with unreported Swiss accounts.
IRS and Department of Justice officials have announced that their inquiries are on-going and that more indictments are likely; indictments of U.S. taxpayers with unreported foreign accounts.
Although many of the prosecutions have related to Swiss bank accounts, prosecutors have also been looking at banks in Israel, India, Liechtenstein and the Caribbean. Although tight lipped about their investigations, prosecutors have said they are looking worldwide.
Americans with foreign financial accounts are required to report those accounts annually to the IRS. This is done through a Report of Foreign Bank and Financial Account or “FBAR” form. Penalties for failure to report an offshore account can be as low as $10,000 per account for negligent violations to 5 years in jail AND the greater of $100,000 per account per year or 50% of the high account balance for each year an account was unreported if the violation was intentional.
Beginning in 2012, foreign account holders may also be subject to FATCA reporting as well. FATCA stands for the Foreign Account Tax Compliance Act.
Many taxpayers have no idea that their foreign accounts must be reported. Those impacted by the law include Americans with offshore accounts, Americans living overseas, foreigners living or working in the U.S., dual nationals and American students living abroad.
Tens of thousands of taxpayers have come forward in the last few years. That makes sense. The IRS is offering an offshore amnesty program called the Offshore Voluntary Disclosure Program (often called “OVDI” or “OVDP”) which allows participants to avoid criminal prosecution and most penalties. For those that can prove their failure to report was an innocent mistake, a traditional disclosure may be more appropriate.
Either option requires you to come forward first. The amnesty programs are available on a first contact basis meaning that you have to contact the IRS before they find you.
The continuing Swiss prosecutions and on-going investigations makes it more likely that most foreign account holders will be identified.
The offshore tax reporting lawyers at Mahany & Ertl specialize in helping taxpayers come into full compliance and avoid prosecution or loss of their foreign accounts. We have helped many people with FBARs, FATCA compliance, foreign gift reporting, foreign corporations and Foreign Investment in Real Property Tax Act (FIRPTA) compliance. In most instances, cases can be handled on a flat fee basis and we stand behind our work… all the way through U.S. Tax Court if necessary.
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.