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Are YOU A U.S. Person With A Swiss Bank Account?

IRS Sends Signal Out That It Is Ready To Enforce The Tax Disclosure Laws For Foreign Accounts And Foreign Income Of U.S. Taxpayers With Swiss Bank Accounts.

If you have non-declared bank accounts with Swiss banks, or if you acted as signatory on such accounts, you should start to qualify for the 2014 Offshore Voluntary Disclosure Program (OVDP) as soon as possible, otherwise you risk that your own Swiss bank will report you to the IRS before you can file your own self-­declaration with the IRS. It can be too late to benefit from OVDP if you remain passive.

The 2014 Offshore Voluntary Disclosure Program (OVDP) is a voluntary disclosure program specifically designed for taxpayers with exposure to potential criminal liability and/or substantial civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets. OVDP is designed to provide to taxpayers with such exposure (1) protection from criminal liability and (2) terms for resolving their civil tax and penalty obligations.

OVDP requires that taxpayers:

  • File 8 years of back tax returns reflecting unreported foreign source income;

  • File 8 years of back FBAR’s reporting the foreign financial accounts;

  • Calculate interest each year on unpaid tax;

  • Apply a 20% accuracy-related penalty under Code Sec. 6662 or a 25% delinquency penalty under Code Sec. 6651; and

  • Apply up to a 27.5% penalty based upon the highest balance of the account in the past eight years. This is referred to as the “OVDP Penalty”.

In return for entering the offshore voluntary disclosure program, the IRS has agreed not to pursue:

  • Charges of criminal tax evasion which would have resulted in jail time or a felony on your record; and

  • Other fraud and filing penalties including IRC Sec. 6663 fraud penalties (75% of the unpaid tax) and failure to file a TD F 90-22.1 (now known as FinCEN 114), Report of Foreign Bank and Financial Accounts Report, (FBAR) (the greater of $100,000 or 50% of the foreign account balance).

Important Change to Offshore Program Announced By IRS on June 18, 2014 setting Important deadline of August 3, 2014.

Beware of the August 3rd deadline, if your undisclosed foreign bank account is with any of the following institutions:


2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.

3. Wegelin & Co.

4. Liechtensteinische Landesbank AG

5. Zurcher Kantonalbank

6. Swisspartners Investment Network AG, Swisspartners Wealth Management AG, Swisspartners Insurance Company SPC Ltd., and Swisspartners Versicherung AG

7. CIBC First Caribbean International Bank Limited, its predecessors, subsidiaries, and affiliates

8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.

9. The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)

10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates

These institutions are under investigation by the IRS or Department of Justice and therefore on the IRS’ “Bank And Promoter List”. For anyone who submits OVDP pre-clearance request after August 3, 2014, the OVDP penalty for their case shall be increased from 27.5% to 50%. It is key that to avoid this increase you must submit your OVDP pre-clearance request no later than August 3, 2014.

Important Signal From IRS That Enforcement Is Imminent.

The IRS has been receiving information from these institutions that go beyond just the names of U.S. taxpayers and their account information but also what communications occurred between these taxpayers and officials at these institutions. These communications could likely support the IRS taking a position that non-compliant taxpayers it catches acted willfully and should now be subject to the maximum civil penalties and perhaps referred for criminal prosecution. If the IRS was not in this position, they would have never announced on June 18, 2014 of an increase in the OVDP penalty rate to 50% for all new OVDP submissions made after August 3, 2014 that involve the banks listed above.

What Should You Do?

In case you are a U.S. person and you have such an account you should contact your Swiss bank and clarify what the Swiss bank plans are. Some Swiss banks are freezing bank accounts in order to have enough assets from their clients to cover and compensate a hard financial punishment from the IRS. This is illegal but the Swiss banks know that a U.S. client having undisclosed funds will never initiate a legal procedure against his bank if that U.S. client is to remain non-compliant with the IRS. That U.S. client knows the risk to be discovered in case of a claim before court is simply too high.

If you want to qualify for OVDP it is in your best interest to speed up the procedure and disclose the account to the IRS before the Swiss bank will report your account to the IRS. If you are slow to act, you risk notbeing accepted for OVDP. In such a situation you cannot benefit anymore from the advantage of having disclosed yourself to the IRS. You risk a criminal prosecution and by then, it will be too late to avoid the new higher penalties under OVDP of 50% percent – nearly double the regular maximum rate of 27.5%.

Recent closure and liquidation of foreign accounts will not remove your exposure for non-disclosure as the IRS will be securing bank information for the last eight years. Additionally, as a result of the account closure and distribution of funds being reported in normal banking channels, this will elevate your chances of being selected for investigation by the IRS. For those taxpayers who have submitted delinquent FBAR’s and amended tax returns without applying for amnesty (referred to as a “quiet disclosure”), the IRS has blocked the processing of these returns and flagged these taxpayers for further investigation. You should also expect that the IRS will use such conduct to show willfulness by the taxpayer to justify the maximum punishment.

Don’t let another deadline slip by. If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed or in 2012 OVDI, you should seriously consider participating in the IRS’s 2014 Offshore Voluntary Disclosure Program (“OVDP”). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California qualify you for OVDP.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

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