July 2009 Archives

Trial Looms in UBS Offshore Tax Evasion Case

July 31, 2009,

As pointed in my previous blog post the hearing in the IRS effort to enforce its John Doe Summons in the UBS Offshore Bank Account case had been delayed by mutual agreement with a status conference to be held on Wednesday, June 29th. According to an article by Tom Brown published by Reuters, at the status conference the parties announced that no settlement had been reached in the highly watched case in which the Internal Revenue Service seeks to obtain the names of 52,000 UBS offshore account holders who the IRS believes may have committed tax evasion, and who probably failed to file foreign bank account reports (FBARs). Judge Gold, the federal district court judge presiding over the case stated that “absent a signed settlement agreement” no requests for delay would be considered, and that trial of the UBS case would proceed to trial on Monday, August 3rd.

If you have a Swiss financial account, or an offshore account outside the United States, now is the time to consult with a tax attorney to find out whether or not you should make a voluntary disclosure, and participate in the IRS tax amnesty program.

If you have further questions, feel free to arrange a consultation with the tax litigation attorneys at Brager Tax Law Group, A P.C.

Offshore Account Information Still Wanted by the Internal Revenue Service to Pursue Alleged Tax Evasion

July 29, 2009,

The past few months have been filled with contention from the Swiss government and UBS in response to the Internal Revenue Service’s (IRS) “John Doe Summons,” which seeks to have UBS turn over the names of their US account holders. So far, UBS has been unwilling to provide the names of all but 250 or so Swiss bank accounts holders. UBS officials argue that disclosing names is a violation of Swiss law.

Several days ago Department of Justice (DOJ) filed a legal brief arguing that its summons to obtain offshore bank account information is enforceable under both US and Swiss law. DOJ points out that Swiss secrecy laws provide disclosure exceptions for certain circumstances – such as when providing information to an “authority,” and if approved by a UBS “regulator.” The fact that the law explicitly states there are exceptions, and that a person who violates this law can be exonerated in certain circumstances, leads the DOJ to conclude that Swiss law permits UBS to release the names of US taxpayers with offshore accounts.

Without commenting on the merits, it would seem that those with Swiss bank accounts have two basic choices:

1 - They can wait until the case is resolved, hoping that the IRS loses and UBS Swiss bank accounts remain secret. This option carries the risk of prosecution for criminal tax fraud and onerous civil tax penalties for failure to file foreign bank account reports (FBARs) in the event that the IRS prevails; or

2 - They can come forward now while the IRS still has its tax amnesty program, and protect themselves from criminal tax charges. Before coming forth under the tax amnesty program anyone with an offshore bank account, whether held at UBS or elsewhere, should consult with a knowledgeable tax attorney to determine if a voluntary disclosure is right for them.

If you have a UBS or other offshore bank account and have questions about avoiding tax evasion charges, or would like more information about the IRS Amnesty program, or have any other tax problems, contact the tax litigation attorneys at Brager Tax Law Group, A P.C.

Tax Amnesty Requests Result in 30 Questions to Offshore Bank Account Owners

July 21, 2009,

When the Internal Revenue Service (IRS) released its FBAR tax amnesty FAQs it stated that there would be no standard list of questions asked of foreign bank account holders who made a voluntary disclosure. The Wall Street Journal reported that at least one tax attorney has stated that his clients have been asked 30 standard questions. None of the questions are particularly surprising and are in line with questions our clients have been asked under the IRS’ previous voluntary compliance initiative (VCI). Nevertheless no-one who is filing for the FBAR tax amnesty should consider answering them without a tax attorney present, and maybe not even then. The questions appear designed to probe for signs of tax evasion, or tax fraud, as well assure the IRS that all Foreign Bank Account Reports Form 90-22.1 (FBARs) being filed are accurate. More troubling to tax preparers is that some of the questions are also designed to see if the tax preparer was complicit in the non-filing which could expose him or her to tax preparer penalties, or even criminal tax charges. It seems a CPA or other tax preparer who prepared the original tax returns must consider very carefully whether he has a conflict of interest before he represents that person in making a voluntary disclosure.

According to the Wall Street Journal those questions were:

• Is it your statement that the tax payers are willing to comply with the IRS and make a good faith arrangement to pay all taxes, penalties, fees and interest?
• Where are the funds held regarding the disclosure?
• Do you have any records? If not, whom are you working with at the bank? (Note: If the taxpayer is a UBS client and if they don't have the records, IRS will attempt to assist them in record retrieval).
• When was the account opened?
• How was the account opened?
• Who assisted you with the account opening?
• Who told you about the bank and how to initiate opening of the account?
• Do you have a trust set up relating to the account or the funds?
• How did you deposit money into the account?
• How did you withdraw money from the account?
• Did you have any credit or debit cards associated with the account?
• How did you correspond with the bank? Do you have records relating to the correspondence?
• Who is your current point of contact at the bank?
• Did you ever meet face to face with anyone from the bank? If so, where? When?
• Did you travel outside of the U.S. to conduct business relating to your account and or tax activities?
• Where was your bank statements sent?
• Who has ownership of the account? Is it a joint account?
• What is the source of the funds?
• Do you have tax returns?
• Have you prepared amended tax returns? If so, have you submitted them to the IRS?
• Who prepared your returns?
• When were your returns prepared?
• Did they know about the issues discussed today?
• Did you file FBARs? If not, why not?
• (For those who inherited the account) when did you take control of this account? And, all the related questions a 'yes' answer makes us ask.
• Did you trade US and/or foreign securities with this account? If yes, describe the mechanism for doing that (buy/sell orders, etc.)?
• Did you file returns?
• Do your or have you directly or indirectly controlled any foreign entities? Did you file the required returns for them?
• For UBS clients in particular – Have you been notified that the US requested information relating to your accounts?
• What countries do you have accounts in?

If you have questions about the questions, feel free to contact the tax attorneys at Brager Tax Law Group, A P.C.

UBS Offshore Bank Account Hearing Delayed

July 15, 2009,

The hearing on the John Doe summons enforcement case brought by the IRS to obtain the names of 52,000 UBS clients who may have committed tax fraud through the use of offshore financial accounts has been delayed. The key phrase is MAY have committed tax fraud. Generally, under the terms of the existing treaty with Switzerland, the IRS must have evidence of tax fraud or tax evasion before the Swiss will turn over offshore bank account information. The IRS currently lacks the necessary information.

The hearing which was scheduled to begin on Monday was postponed based upon a joint request by the IRS and UBS in order to give them more time to negotiate a resolution. A status conference has been set for July 29th.

The IRS announced on Sunday that any settlement would require that UBS turn over the information on a “significant number” of individuals with Swiss bank accounts at UBS. According to an article in Timesonline by Christine Seib, there was speculation the IRS would insist on between 7,000 and 19,000 names.

As my readers know, persons subject to U.S. jurisdiction with signature authority over, or a financial interest in, an offshore financial account must report that offshore financial account to the IRS on TD F 90-22.1 Foreign Bank Account Report (FBAR) form.

The key question that remains is whether the announcement suggests that individuals with secret foreign bank accounts should take advantage of the current tax amnesty, or continue to hope that UBS will not be forced to turn over the names.

Given the potential for criminal tax penalties, as well as civil penalties for tax fraud; not to mention an FBAR penalty of 50% of the balance in an offshore bank account, this question can only be answered after consultation with a knowledgeable tax attorney who knows all the facts of your case.

If you would like a consultation with a tax litigation attorney at the Brager Tax Law Group, please give us a call.

UBS Offshore Accounts to Be Protected by Swiss Government from IRS Tax Evasion Investigation

July 10, 2009,

The Swiss government has threatened to seize UBS Swiss bank account records that belong to U.S. citizens rather than allow that information to fall into the hands of the Internal Revenue Service (IRS). The Swiss made the statement in a court filing in the UBS summons lawsuit pending in District Court in Miami, Florida.

Does this mean that U.S. taxpayers who have offshore accounts, and who committed tax fraud or tax evasion can sleep more easily at night? Maybe. The Swiss and the IRS are engaged in a high stakes poker game. No one knows how it is going to turn out. Even if the IRS doesn’t get the information in this so-called John Doe summons case there are numerous other ways it can come to the attention of the IRS. For example, most tax fraud comes to light when an unhappy spouse or employee turns informant. Last year the story broke of how a bank employee at LGT in Lichtenstein was bribed by German officials to turn over secret offshore bank account records, which the Germans in turn handed over to the IRS.

U.S. citizens and residents who have Swiss bank accounts at UBS have a lot at stake. Even if they paid the bulk of their taxes they could be liable for Foreign Bank Account Report (FBAR) penalties equal to 50% of the balance in their account.

If you have an offshore bank account at UBS or anywhere else in the world, now is the time to consult a tax lawyer to understand your options, and see if the IRS tax amnesty makes sense for you. If you would like a consultation with the tax litigation attorneys at Brager Tax Law Group, A P.C. please call us.