Post by Veronica Pamoukaghlian, Senior Tax Writer
Only one week after the Department of Justice announced that PKB Privatbank AG, Falcon Private Bank AG, and Credito Privato Commerciale in Liquidazione SA had reached resolutions under the Swiss bank program, a new official press release revealed that Privatbank Reichmuth & Co., Banque Cantonale du Jura SA, and Banca Intermobiliare di Investimenti e Gestioni (Suisse) SA have joined the growing list of Swiss banks that have agreed to disclose information about US taxpayer accounts to the IRS.
Under the program, the banks will pay reduced fines, and they will have to freeze all non-compliant US taxpayer accounts. Meanwhile, US taxpayers who have undeclared accounts at those banks will now have to pay a 50% penalty if they wish to enter into the IRS Offshore Voluntary Disclosure Program, instead of the standard 27.5%. The higher penalty applies whenever the financial institution where the offshore accounts are held has been “publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement,” as the Department of Justice stated in a recent press release.
The agreed fines to be paid by the new compliant banks are $2.592 million for Privatbankiers Reichmuth & Co. and $970,000 for Banque Cantonale du Jura SA. The agreement with Banca Intermobiliare di Investimenti e Gestioni (Suisse) SA does not include monetary penalties.
The IRS Chief of Criminal Investigation was very optimistic about the new foreign bank resolutions, stating that it “emphasizes the strength and stamina of the Swiss Bank Program.” As new banks join the program every month, and sometimes every week, the IRS is confident that this will encourage undisclosed offshore account holders to come forward in the hopes of reducing penalties. The IRS official added that through “the tremendous volume of information these banks are providing, the IRS will continue to identify and bring to justice those who would evade U.S. tax laws.”
FATCA and The Long Arm of the IRS
As the case of Reichmut proves, having the accounts in the name of non-US organizations is no guarantee that undeclared assets are safe at an offshore bank. Prior to the agreement, several accounts at Reichmut had been under investigation by the IRS. According to the Department of Justice, Reichmut was aware that at least 18 accounts in the name of non-U.S. entities were owned by American taxpayers. Between declared and undeclared accounts, Reichmut was home to a total of 103 accounts with US taxpayer connections for a total value of $281 million.
In the case of Banque Cantonale du Jura, just like Reichmut, they assisted their US clients in hiding their assets from the IRS, even allowing them to register an account under a pseudonym. (Nominee accounts or shell companies with no legitimate business purpose are a huge red flag for the IRS.)
A Safe Way to Disclose Your Offshore Assets
If you have or had an account at one of the banks that have reached an agreement with the IRS, you can still join the voluntary disclosure program. In fact, if you are unable to pay the 50% penalty, an experienced tax lawyer can help you negotiate to improve your standing.
For taxpayers that can demonstrate their innocence, an opt-out may be the better strategy. Opting out isn’t without risks, however, and should only be done in consultation with a lawyer. The IRS also has a streamlined program that may work for certain taxpayers.
It is important to remember that the voluntary disclosure program (amnesty) and streamlined program are off the table once the IRS obtains your name or once your foreign bank agrees to cooperate. Now that FATCA has been implemented in most countries, banks worldwide will soon be turning over account records to the IRS. That is why we urge everyone to not delay.
The IRS FATCA regulations pertaining to offshore accounts are complex. There are many variables, and it is important to have access to professional advice to make sure you are following the best path to disclose information about your assets while incurring the lowest possible penalties.
Our tax lawyers have many years of experience. We have assisted numerous clients in joining the IRS compliance programs for holders of offshore assets. We can help you best consider your options and responsibilities. Our initial consultations are always confidential and without charge.
Need more information about FATCA, FBAR, or other offshore reporting issues? Contact attorney Bethany Canfield at or by telephone at (414) 223-0464.
MahanyLaw – America’s Tax and FATCA Lawyers