Many of us can think back to a time where the term “Swiss bank” meant secrecy and represented a haven for tax avoidance. But over the past decade, the benefits of storing money have slowly, but surely dissipated. And though we may all know this, there are still some American taxpayers who may not quite understand that the game has changed and that the United States government is serious when they tell you to report your foreign accounts or go to jail.
Bernard Kramer, a Florida resident, pled guilty this week on charges related to conspiracy to defraud the United States and willfully failing to declare offshore accounts on his income taxes.
Under federal law, any American (living within the U.S. or abroad) must disclose any foreign bank account that has a balance of $10,000 or more. If the Department of Justice establishes that you willfully failed to disclose that account, a couple of very bad things could happen to you. First, there is a 50% civil penalty of the highest value of the account for each year that you failed to report. This could quickly exceed the value of the highest balance of the account itself. The second, but potentially scariest consequence, is the potential prison sentence. Those who simply fail to file an FBAR (declaring the offshore account) can be sent to prison for up to 10 years. If the government chooses to pursue tax evasion charges, an additional prison sentence of five years for each tax year at issue could be sought.
Mr. Kramer kept large sums of money in a Swiss bank account beginning in 1987. At the time, this wasn’t uncommon and there weren’t as many concerns with the disclosure of accounts to the IRS. But as time went on, Mr. Kramer chose to ignore the warning signs that the tax haven that was Switzerland was no longer. Kramer would meet with representatives from the Swiss bank in the Untied States to go over his account statements. The bank would also cut him checks that were under the $10,000 reporting limit to avoid detection by the feds.
UBS, a very large Swiss banking institution came under investigation by the U.S. in 2008 and many Americans became concerned with other account servicers in the region. Representatives from the Swiss bank that Kramer was housing his money assured him that his secret was safe with them and that there was nothing to worry about. Though in 2010, he transferred his funds to an Israeli bank and held them there until he was detected and prosecuted in 2012.
Mr. Kramer will be sentenced next February and has already agreed to pay over half of a million dollars plus back-taxes for the years in question.
Because Bernard Kramer chose to break the law even after being advised that the feds were closing in on foreign accounts, he now faces nearly 10 years in prison and will likely be paying restitution to the government for the rest of his life.
Don’t make the same mistake that Bernard Kramer did. Understand that the days of stashing your money away in a foreign bank account to avoid detection by the IRS are over. The IRS Criminal Investigations Division and the Department of Justice will find out about your account and you will be the next unfortunate taxpayer standing in front of a judge awaiting your federal prison sentence.
Luckily, the government has given Americans a way out. Through the Offshore Voluntary Disclosure Program, the experienced tax attorneys at the Tax Law Offices of David W. Klasing can assist you in coming clean and help you stay out of jail and keep as much money in your pocket as possible. But time is limited. If the feds find out about your account before you can disclose it, all bets are off. Contact our office for a reduced-rate consultation today.