For the past couple of years, we have brought our readers extensive information about the legal requirement to report foreign bank accounts to the federal government and how various programs and legislation have helped the Internal Revenue Service and the Department of Justice catch and lock up those American residents who haven’t complied. One of the largest sources of incriminating foreign account information is the Swiss Bank Program and according to the government, the program has run its course and it is suggested that increased DOJ prosecutions are to follow.
Speaking at an American Bar Association event, the Acting Assistant Attorney General, Caroline Ciraolo stated that the Swiss Bank Program was now closed to new applicants. She stated that the government was in the process of reviewing the information that was provided through the terms of the Program. Ciraolo said that 80 Swiss banks participated in the Program and that there are many more banks in Switzerland and abroad that are willing to hand over incriminating information to the U.S. government through other channels.
The Swiss Bank Program was established to allow banks in Switzerland to come forward, provide information to the U.S. government, and pay a penalty to avoid a criminal prosecution for aiding Americans in their attempt to hide money in foreign bank accounts. Some of the information that was sought by the federal government included the names and other account information of U.S. customers. Furthermore, the government required participating banks to hand over internal documents that could shed light on other foreign banks that may have aided Americans in their attempt to violate federal disclosure laws.
Foreign Bank Account Reporting (FBAR) laws require American residents to notify the government, on a yearly basis, of any signature authority or ownership interest in a foreign bank account that has had a high-balance of $10,000 or more at any time in the previous tax year. The willful failure to notify the government about the existence of the account is punishable by up to five years in a federal prison (for each year of non-disclosure) and penalties that are equal to half of the high-balance of the account during the year of non-reporting.
In addition to recent FATCA legislation that has required foreign banks all over the world to provide account information to the U.S., the IRS and DOJ have used the Swiss Bank Program to obtain incriminating information to use in prosecutions against American residents. Now that the Swiss Bank Program has come to a close, the government will be able to focus on prosecutions stemming from newly-acquired documents. Ciraolo suggested that taxpayers who have maintained undeclared foreign bank accounts should anticipate an investigation and prosecution. She further suggested participating in the IRS Offshore Voluntary Disclosure Program (OVDP).
Established by the IRS, the OVDP gives taxpayers a way out of a bad situation. Under the terms of the program, taxpayers who have undeclared foreign bank accounts can come forward, disclose the details of their account, pay a reduced-penalty, any back taxes, and interest, in exchange for the government’s word that they will not bring criminal charges against them. But there is a catch: if the government is already investigating the taxpayer for any tax-related reason, they may not be able to participate in the OVDP, leaving them vulnerable to criminal prosecution. A government “investigation” for the purposes of being disqualified from the OVDP can be as simple as a civil examination. Finally, the OVDP is also extremely time sensitive. As one of our recent blog posts discussed, a government official recently suggested that the OVDP could be coming to an end, much like the Swiss Bank Program. This is bad news for taxpayers with the OVDP as their only way to avoid the possibility of federal prison.
Taxpayers who have an interest or signature authority over an undeclared foreign bank account should contact an experienced criminal tax defense attorney as soon as possible. As mentioned above, time is of the essence. The tax law and accounting professionals at the tax law offices of David W. Klasing will work with you to determine the best course of action. One of the biggest mistakes that taxpayers make with regard to hidden offshore bank accounts is doing absolutely nothing. At this point, the government has incriminating information coming in from left and right and thus, it is only a matter of time until the government opens up a criminal investigation against you. Our team of zealous advocates is ready to work with you to mitigate or eliminate the negative consequences of being caught with an undeclared foreign bank account. Don’t let the government make the first move. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.