Who Is Next, Now That Swiss Banks Will Turn Over Account Data?


What do you do if your offshore account is at one of 14 Swiss banks currently under criminal investigation?  What do you do if your offshore account is at one of the 106 Swiss banks that have entered into non-prosecution agreement with the U.S. Department of Justice (DOJ).  And what do you do if your offshore account is at another bank that has yet to enter into a non-prosecution agreement because it is a non-Swiss bank.

The answers to each of these questions are generally the same, come forward before the DOJ or IRS contact you. Why, come forward, well the lesson in part comes from the following:

“Some 106 Swiss banks not under individual probes applied for amnesty in the U.S. for helping tax evaders under a program negotiated by the two governments, a U.S. federal prosecutor said last month. The program requires participants to disclose how they helped Americans hide assets, hand over data on undeclared accounts and pay penalties.”

The emphasis is on “cooperation” by the banks.  The cooperation requirements is not limited to the 106 banks, rather the it is at the core of the Financial Account Tax Compliance Act (FATCA) which is being phased into effect now. Under FATCA, offshore banks must disclose U.S taxpayer account information to the IRS, directly or through an inter-governmental agreement with the U.S.   The take away here is that while non-Swiss account holders may feel safe, they are not safe , rather  if and when discovered these non-compliant taxpayers will face the risk of criminal prosecution, and at a minimum willful failure to file a Report of Foreign Bank Account (FBAR) and income tax Fraud penalties.

The penalty for failure to file an FBAR is the greater of $100,000 or 50 %of the highest account balance per year for each unfiled year.  The income tax Fraud penalty is 75% of the income tax due on the unreported income.

These penalties and some others can be avoided by coming forward and entering the Offshore Voluntary Disclosure Program (OVDP).  A single civil miscellaneous penalty of 27.5% of the highest account balance replaces the FBAR penalties and a 20% negligence penalty applies to the tax on the unreported income.

Now is not the time to choose to run and hide.  The consequences of aversion are likely to be terrible.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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