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. In this post we will discuss the Swiss Bank FATCA regulatory regime and how IRS FATCA whistleblowers can qualify for awards.
FATCA Swiss Bank Program
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.
IRS FATCA Whistleblowers
[Updated May 2018 to include FATCA whistleblowers content. Posted by Brian Mahany]
With so many banks now cooperating with the IRS, can anyone still hide from Uncle Sam? The answer is yes! Just take a look at the millions of pages of records recently posted in the ICIJ’s Paradise Papers to see how many wealthy individuals and companies still think it is okay to cheat on their taxes.
While no one likes paying taxes, everyone hates tax cheats even more. Why should we pay while some fat cat gets away with paying nothing.
Offshore accounts are the mostly commonly used tool to avoid taxes. The scheme works like this.
Taxpayers either open up a bank account in a so-called secrecy jurisdiction beyond the subpoena power of the IRS or creates a dummy shell corporation with phony or undisclosed owners. The latter is what we found in the Paradise Papers.
How do these people get caught? Sometimes they get caught when a bank turns over account holder information. That is what happened with Privatbank Reichmuth & Co., Banque Cantonale du Jura SA, and Banca Intermobiliare di Investimenti e Gestioni (Suisse) SA as noted in the story above.
If you are a bank officer and have access to client lists, you may be able to become an IRS whistleblower. If you know your bank is helping US taxpayers avoid taxes, we want to speak with you.
Sophisticated tax evaders, however, use dummy or shell companies to hide their ill-gotten gains. How do they get caught? The answer is the same — FATCA whistleblowers, people with inside information about unreported accounts.
Simply because the account is in a shell company name doesn’t protect the real owners of the account. Under US law, the beneficial owner and anyone having signature authority over an account can be held responsible for unreported or unpaid taxes if the account was never reported.
Why would anyone want to become an IRS whistleblower?
The answer is easy, no one likes tax cheats. The IRS also pays large cash awards for information too. Up to 30% of whatever the government collects from the wrongdoers. And the IRS can go after both the actual taxpayer and third parties such as banks that helped facilitate the evasion.
MahanyLaw – America’s Tax and FATCA Lawyers