There has been an awful lot of news recently about the looming FATCA deadlines (Foreign Account Tax Compliance Act ) and the need for Americans with offshore accounts to report their holdings by filing FBARs. (An FBAR is a Report of Foreign Bank and Financial Accounts.) There has been so much “noise” that it has become difficult to figure out what is important and what isn’t. What started the controversy were the billions of dollars hidden in Swiss banks.
Although U.S. taxpayers have been required to file FBARs since the 1970’s, the law was widely ignored. That all changed in 2008 when the IRS’ investigation of Swiss bank UBS became public. A year later the bank would pay a record $780 million fine and enter into a deferred prosecution agreement. Over 30,000 Americans would subsequently come forward and declare their offshore accounts. That meant millions were still sitting on the fence or didn’t know they were required to file.
In 2010, Congress passed FATCA to make foreign banks investigate their account base and report accounts with ties to the United States. That law is just now being implemented but it still faces problems. For many countries, including Switzerland, bank secrecy laws prevent the release of key information to the IRS.
On some level, Switzerland’s banks want to cooperate. After securing a fine and deferred prosecution with UBS, the Justice Department set its sights on Wegelin, then the world’s oldest private bank. The feds won and secured a conviction and another record fine. Wegelin shuttered its doors and went out of business. Foreign banks – and the bankers working in those banks – don’t want to be next.
The Swiss government worked out a method for banks to disclose information but required legislation failed earlier this summer. While Swiss privacy advocates cheered, bankers worried. The IRS and Justice Department have several on-going investigations of Swiss banks including Credit Suisse. Other banks believed to be under investigation include Clariden Leu, Basler Kantonbank, Pictet, Zuercher and Julius Baer (part of HSBC).
It looked like things were at impasse. Although Credit Suisse had agreed to turn over names to the IRS, a lower Swiss court blocked that move. Last Friday, however, the Swiss Federal Supreme Court approved the release of names. While the ruling is only binding on Credit Suisse, it paves the way for other banks to cooperate with the IRS.
By now, we hope that most folks with Swiss accounts have come into compliance and filed FBARs. Unfortunately, we know that isn’t the case. Some taxpayers simply do not know of their offshore reporting obligations while others attempted to “outsmart” the feds by moving their money on advance of the impending Swiss disclosures. Unfortunately, that tactic is not likely to work.
Recently the feds have begun indicting taxpayers that moved their money from Switzerland to some other jurisdiction. While there are many dual nationals, foreign born Americans and others who can legitimately plead ignorance, the IRS says that the moving of money from one privacy jurisdiction to another to avoid filing FBARs is an “affirmative act of evasion.”
The new FATCA law requires banks to look back in their records and determine others who may have tried the same trick.
If you haven’t filed FBARs and have an unreported account in Switzerland, Israel, India, Luxembourg or anywhere else, you do have options. The IRS is running an amnesty program called the Offshore Voluntary Disclosure Program (often called OVDI or OVDP). It’s a great deal for those who were intentionally hiding money and now want to come clean and avoid jail. There may be better options for those who can prove their failure to file an FBAR was accidental and not willful.
Whatever you decide, do so immediately. Many of the amnesty options are not available if the IRS finds you first or once the banks turn over your name to the feds. The penalties for unreported accounts can be as high as $100,000 per account per year or 50% of the highest account balance per year. If you want to save whatever money you have, speak to a lawyer well versed in FBARs, FATCA and foreign reporting requirements. Simply moving your money around or trying to quietly bring it back to the U.S. doesn’t get you off the hook.
The tax lawyers at Mahany & Ertl help businesses and individual taxpayers with a wide variety offshore reporting concerns including FBARs, FATCA, offshore voluntary disclosure initiatives and foreign real estate reporting. Have questions? Give us a call. All inquiries are protected by the attorney – client privilege and kept in strict confidence.
For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct).
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Minneapolis, Minnesota; Portland, Maine and San Francisco, California. IRS services available in all jurisdictions.
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Posted by Brian Mahany, Esq.