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Department of Justice Announces It has Reached Final Resolutions in the Swiss Bank Program

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    According to a Department of Justice press release, the United States has wrapped up negotiations and drafted agreements with the last participants in the Swiss Bank Program. The Department of Justice announced that they will now shift their focus to gathering evidence from participating banks to use against U.S. taxpayers who have failed to meet their obligations under domestic law to disclose the existence of foreign bank accounts. If you have a foreign bank account that has not yet been disclosed to the federal government, it is in your best interest to consult with an experienced tax attorney as soon as possible.

    FBAR: An Overview

    Foreign Bank Account Reporting (FBAR) laws require U.S. taxpayers to disclose the existence of any foreign bank account that has had a high-balance of at least $10,000 at any point in the year. Although many generations of Americans have believed that stashing money away in overseas bank account is an effective wealth-planning strategy, they aren’t aware that it is illegal or the severe consequences of noncompliance. Taxpayers who are found guilty of willfully failing to declare their foreign bank account under the FBAR requirements can be sentenced to several years in a federal prison and required to pay a penalty equal to 50 percent of the high-balance in the foreign bank account in any year that such account was not disclosed.

    Requirements to report the existence of a foreign bank account have been around for decades. But until recently, the government had a difficult time enforcing the laws. The lack of communication between nations and U.S. oversight of foreign banks made it nearly impossible for the U.S. to gather enough evidence to convict a U.S. taxpayer for FBAR noncompliance.

    A New Focus: The Swiss Bank Program

    When the Obama administration took office in 2008, they shifted their focus and began going after the banks, in Switzerland particularly. The Swiss Bank Program was developed and implemented by the Department of Justice and the IRS. Its primary purpose was and is to allow Swiss banks to avoid criminal prosecution by coming forward and providing extensive banking details to the U.S. government and to pay a penalty.

    The Swiss Bank Program was actually more extensive in nature and included four categories of Swiss banks. The first category included banks that had already been prosecuted or banks that were already under investigation by the Department of Justice. Those banks were not eligible to participate. Category 2 banks were those banks who, before December 31, 2013, notified the Department of Justice that they had reason to believe that they had broken, or assisted in the breaking of U.S. laws with regard to secretive foreign bank accounts. Category 3 was comprised of banks who determined that they had not violated (or assisted in the violation) of U.S. foreign bank account laws and were willing to provide detailed information about their operation and appear to answer questions before the Department of Justice. Banks in Category 3 were eligible to receive a non-target letter from the Department of Justice.  Lastly, Category 4 was reserved for banks that were deemed to be compliant by meeting certain criteria.

    The program resulted in the Department of Justice coming to terms with 80 banks in Category 2, generating over $1.3 billion in penalties. Further, three Swiss banks and one Swiss bank cooperative me the qualifications for a non-target letter in Category 3. There were no banks that qualified for treatment under Category 4.

    The Swiss Bank Program is being considered a big win by the Department of Justice. In addition to raking in hefty penalties from participating banks, the Swiss Bank Program will ensure that the Department of Justice receives a voluminous amount of U.S. accountholder records. These records will be used as evidence in the prosecution of taxpayers who the Department of Justice believes to have willfully failed to comply with FBAR requirements.

    The Offshore Voluntary Disclosure Program

    In an effort to increase FBAR compliance among individuals, the IRS created the Offshore Voluntary Disclosure Program (OVDP). Under the program, taxpayers with undeclared foreign bank accounts agree to make a full and complete disclosure about the details of the account to the IRS and pay a fine along with any back-taxes or interest. In exchange, the government will agree to not criminally prosecute the taxpayer for willfully failing to comply with FBAR laws. Although the OVDP is not the only way that a taxpayer can come into compliance with regard to undeclared foreign bank accounts, it is certainly one of the most popular. But, like most government programs, there is a catch. Taxpayers who are already being investigated by the IRS for any tax-related matter may not qualify for the program. Thus, if the U.S. government has received information about your foreign account from one of the banks participating in the Swiss Bank Program, your participation in the program may be limited.

    Contact an Experienced Tax Attorney Today

    The tax and accounting professionals at the Tax Law Offices of David W. Klasing have helped a plethora of taxpayers with issues relating to undeclared offshore accounts. Although it is true that each taxpayer’s situation is different and the OVDP may not be the right strategy for everyone, seeking the help of an experienced tax attorney who is also a CPA is a great strategic move regardless of the eventual course of action. Don’t lose any more sleep worrying about when the government will discover your undeclared foreign bank account. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

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