In Unique Case, IRS Charges Swiss Private Bank Instead of Individuals
Just down the street from our Norwalk, Conn. office, the Wall Street Journal reports that the IRS has just seized $16 million from private Swiss Banker Wegelin & Co. out of a bank account they held at UBS AG in Stamford, Conn.
This is hardly a surprise to those familiar with the IRS’ new powerful collection tools. One of those tools was the previous 2009 Offshore Voluntary Disclosure Program (OVDI), along with the 2011 OVDI and current 2012 OVDI. In every disclosure submitted by a taxpayer, they MUST disclose anyone connected to their offshore banking. So, the IRS is sitting on a treasure trove of information; scary, powerful information on those who have allegedly hidden money in offshore accounts.
This case is unique because:
The indictment of Swiss private bank Wegelin & Co., founded in 1741, marks the first time U.S. authorities have charged a bank rather than individuals with helping Americans evade taxes.
Of course, these are only allegations (yet the IRS still has the power to seize assets without a court order- far before any legal adjudication on the matter, or even a pre-judgment remedy). Even if criminal charges against the company are dropped, criminal charges against individuals are certainly still possible, and these will require substantial payments to the US Treasury before they can be forgotten.
There may still be time for those with undisclosed assets to come clean. However, the bad new comes if there was an intent to defraud the United States Treasury, as 27.5% FBAR penalty (calculated by multiplying .275 times the highest account value in the last 8 years) will apply, along with unpaid taxes, interest and a few additional penalties. But the good news is if you are accepted into the OVDI program, you will not need to worry about headlines like this involving your name.
The truth is there are very few decent alternatives to the the 2012 OVDI. Leaving the country won’t work as proper renunciation requires complete compliance with the tax code, nor does it negate the Universal Tax Jurisdiction of the IRS.
The other option often discussed is that of “soft,” or “quiet,” disclosures. (We blogged about quiet disclosures here.) This simply means filing old returns with unreported income, paying it and hoping no one is notices. The IRS has made it known to us offshore tax attorneys that this technique will only anger them more. If caught, the IRS will certainly make headlines out of someone who tries to sneak under the radar by quietly amended returns and paying back taxes (and the CPA or attorney who advised them).
So essentially, the only real option is to utilize the Voluntary Disclosure Program under the OVDI 2012 terms. If getting sleep at night and not worrying about going to prison is your chief concern, then there is no question that this is the best option. And, there are only two requirements. First, the taxpayer can not be under examination. Second, the source of the funds in the foreign bank accounts can not be from an illegal source, like drug trafficking or money laundering. The possibility for lower FBAR penalties is possible based on facts of your case.
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