Here at the Tax Law Offices of David W. Klasing, we make it a point to keep our readers up to date with all of the important tax news and developments that come across our desks. One of the big issues that we have been covering has been the quickly expanding “known banks list”. It is a list that taxpayers would prefer didn’t exist. The worst part about it: it is growing rapidly and the chance that taxpayers with undeclared foreign bank accounts will be affected by the list also continues to grow. As you will read below, another week has brought another addition to the known banks list and more worry to taxpayers around the nation.
The known banks list use is two-fold. First, the list, established by the IRS, denotes the banks that have agreed to terms with the Department of Justice. Under the agreements, foreign banks agree to fully cooperate in any United States investigation that involves matters related to that particular financial institution. Furthermore, the banks agree to fully divulge their cross-border activities and provide a full and detailed accounting of all of their U.S. based clients. This should alarm taxpayers that have a foreign bank account that has not yet been disclosed to the IRS as your name and account information will be sent to the feds under the agreement. Finally, participating banks agree to pay any fines or penalties associated with their activity.
In exchange for their cooperation and payment of penalties, the Department of Justice will agree to not levy a criminal prosecution against the bank. In the last few years, the DOJ has not been afraid to threaten or actually follow through with the prosecution of foreign banks. Because of the show of force by the U.S., Swiss banks have been much more willing to do whatever it takes, including handing over your personal information, to keep their doors open and their executives out of prison.
The second use of the known banks list is to establish willfulness on the part of the taxpayer. When a taxpayer is being investigated for potentially violating the Foreign Bank Account Reporting laws, which require taxpayers that own accounts with more than $10,000 report such account to the IRS, the investigator will make a determination as to whether the taxpayer’s nondisclosure was willful or not. If the action was willful, the taxpayer will face a penalty of 50 percent of the highest balance in the account for the tax year being investigated and will also be subject to criminal charges that can carry federal prison sentences.
A willfulness determination is generally made by analyzing all of the facts and circumstances surrounding the taxpayer’s situation. There are several factors that go into a determination of willfulness but if the taxpayer being investigated has used one of the banks that appear on the known banks list, willfulness is imputed on the taxpayer. In those circumstances the IRS and DOJ take the position that a taxpayer has willfully failed to disclose their foreign account if they failed to disclose a foreign account that has come forward and entered into a non-prosecution agreement with the DOJ and have admitted to helping taxpayers keep their money hidden.
According to a Department of Justice press release, Privatbank Von Graffenried AG entered into a non-prosecution agreement last week and their name was quickly added to the IRS known banks list. The addition signifies that any taxpayer that U.S. taxpayers with undeclared accounts at Privatbank Von Graffenried are at risk and should seek the counsel of an experienced tax attorney. At this point, it is only a matter of time until the Swiss bank’s listing of U.S. account holders is sent to the Department of Justice and the IRS for investigation. The addition increases the number of financial institutions on the known banks list to 27.
Many taxpayers have heard of the Offshore Voluntary Disclosure Program (OVDP) and believe that if they just wait until they are audited by the IRS, that they can enter the OVDP and pay any necessary penalties or fees. But that is simply not the case. As soon as a taxpayer is under audit or investigation for any tax issue, the OVDP is not available and the taxpayer is left open to criminal prosecution. Because of timing restrictions placed on the disclosure program, it is vital that a taxpayer consult with a tax attorney as soon as they can to ensure that they still qualify for admittance into the program.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have years of experienced assisting taxpayers make sense of their obligations, rights, and options under the FBAR laws as well as providing a myriad of other tax and accounting services. When the IRS and Department of Justices comes knocking, they do so with highly trained lawyers and investigators. Meet them with your own team of lawyers and accountants who have a plethora of experience in defending and protecting the rights of taxpayers and their best interests. Contact the Tax Law Offices of David W. Klasing today for a reduced rate consultation.