We have been warning people for 2 years that the day of reckoning was coming. Sure, there were some false starts and last minute political moves, but the waiting is over. Switzerland and the United States have reached an agreement that will result in the names of tens of thousands of U.S. taxpayers holding Swiss accounts to be disclosed to the IRS. For those taxpayers that haven’t filed an FBAR form, it will soon be too late to come into compliance and avoid huge penalties.
The Bank Secrecy Act has long required most Americans with offshore accounts to report those accounts to the government on a Report of Foreign Bank and Financial Accounts or FBAR form. (The law was passed in the 1970’s.) Compliance has been spotty and many Americans have elected to take their chances and not report their accounts.
Many recently learned of the FBAR requirement after reading stories about the prosecution of UBS and Wegelin banks. Some of those folks are afraid to come forward for fear of having to pay penalties. Others haven’t made FBAR filings on the mistaken belief that Switzerland’s strong bank secrecy laws would keep their identities secret.
Those secrets are about to be revealed.
Under the terms of the deal between both nations, Swiss banks not already under investigation will be able to avoid criminal prosecution and turn over records. More ominously, the deal requires banks to look back in their records for accounts that were transferred or repatriated before the deal becomes final. If you think you can stay one step ahead of Uncle Sam by simply moving your account to another country, think again.
Many Swiss banks are eager to get out from under the specter of a criminal prosecution. (The Justice Department’s prosecution of Wegelin effectively shuttered one of the oldest private banks in Switzerland.) The Swiss banking association and Swiss government is on board. The Parliament may oppose the deal but it has been written in such a way that parliamentary approval is no longer necessary.
Once the information begins to flow, it is too late to take advantage of amnesty or certain other penalty reduction programs. The IRS says that if they contact you first or get your name from a cooperating bank (even if they have yet to contact you), all bets are off. Earlier this year several taxpayers with accounts at Bank Leumi in Israel learned that lesson the hard way.
At the risk of overkill, if you have an unreported Swiss account and haven’t made an FBAR filing, the waiting is over. Come clean immediately or risk possible criminal prosecution and probable civil penalties of $100,000 / 50% of the highest account balance over the last 8 years.
Think you are safe because you closed the account or moved it? Think again. The same rules and penalties apply.
The GAO says that thousands of attempted to avoid penalties by making FBAR quiet disclosure. The IRS says it will go after those folks as well. (And once you quiet file an FBAR, the government knows who you are and where your money is!)
IRS FBAR Amnesty
If your actions were deliberate, the IRS’ amnesty program (Offshore Voluntary Disclosure Program or OVDI) can prevent prosecution, avoid an audit and save you substantial penalties. If your actions were unintentional or based on ignorance, you might be able to opt out and avoid all penalties.
The waiting is over. Act now are start watching over your shoulder. It’s that simple.
If you need more information about FBAR reporting issues, we offer free consultations. All inquiries are protected by the attorney – client privilege too. For more information, contact attorney Bethany Kroes at 414-223-0464 or by email at . You may also contact the author at (414) 704-6731 or by email at .
Post by Brian Mahany, Esq.