by Brian Mahany
Earlier today we published a story on the new bilateral agreement between the United States and Switzerland regarding the framework to institute FATCA (the Foreign Account Tax Compliance Act). That article was general in nature and was posted to alert folks with unreported Swiss accounts that the day of reckoning will soon be here. Unlike many of the agreements negotiated with other countries, the Swiss agreement contains some important exemptions.
[At this point it bears repeating – we cannot give legal advice by blog post. This and all of our articles are written to share general information and stimulate discussion. There is no substitute for consulting directly with a qualified tax lawyer, CPA or tax professional.]
One of the most important distinctions about this week’s agreement with Switzerland is how preexisting individual accounts are treated. U.S. law requires anyone with aggregate foreign accounts worth over $10,000 to report those accounts annually on a Report of Foreign Bank and Financial Accounts or FBAR form. The Swiss agreement, however, requires banks to “review, identify and report” accounts that have a balance of $50,000 as of December 31st, 2013.
That suggests that U.S. taxpayers with small accounts can simply move their money or close their accounts without fear of getting caught. No! Although the agreement won’t require banks to review these old accounts, Swiss banks have been cooperating with the IRS and we are aware of several criminal prosecutions in which the IRS went after folks who simply tried to move their money in advance of the new FATCA requirements. Included in that category is a 92 year old woman recently convicted of moving money from Switzerland. Whether the IRS will prosecute small account holders is still unknown but the risks certainly outweigh any potential reward.
Also exempted from the preexisting account category are life insurance and annuity products with a cash component worth less than $250,000 as of December 31st of this year. (Many people think that FATCA and the FBAR requirements only apply to bank accounts. Unfortunately, that is only part of the story. The disclosure requirements also apply to brokerage accounts, annuities, CDs and some insurance policies with an investment component.)
There are many more anomalies and exceptions in the new Swiss agreement. Keep visiting our blog for more details, or better yet, give us a call.
For more information, contact attorney Bethany Kroes at or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept in strict confidence.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. IRS tax services available worldwide.
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