August 2009 Archives

UBS Tax Fraud Case Settlement Details Revealed

August 20, 2009,

UBS has agreed to reveal the names and account information of 4,450 U.S. persons who are owners of UBS Swiss bank accounts who the Internal Revenue Service (IRS) believes have committed tax fraud. Clearly Swiss bank secrecy has more holes than Swiss cheese. The names will be revealed under the following procedure. UBS will notify its customers who are on the list that their names are to be turned over to the IRS. Those Swiss bank account owners who believe that doing so is in violation of Swiss law will be entitled to a decision from the Swiss Federal Tax Authority (SFTA) as to whether the turnover is legal. The Swiss have committed to processing any requests by the IRS so that the first 500 UBS Swiss bank accounts will be turned over within 90 days of the formal request by the IRS to the Swiss, and the last of the Swiss bank account names are to be turned over within one year.

Of course the names of who is on the list has not been disclosed, nor have the criteria for which Swiss bank accounts will be on the list been revealed. No such information is expected for 90 days. Clearly the intent is that some of the Swiss bank account owners who are not on the list, but don’t know they are not on the list will be motivated to participate in the IRS tax amnesty program which closes September 23rd.

Our tax attorneys are counseling many clients on the ins and outs of the IRS voluntary disclosure program. If you have a foreign bank account, and are interested in finding out more, please contact the tax litigation lawyers at Brager Tax Law Group, A P.C.

Fourth UBS FBAR Tax Fraud Defendant Pleads Guilty

August 17, 2009,

A Los Angeles, California man pled guilty to one count of failing to file a Foreign Bank Account Form TDF 90.22-1 (FBAR) pursuant to the Bank Secrecy Act 31 USC 5314. This is the fourth person with a UBS Swiss bank account to plead guilty to tax evasion charges. John McCarthy admitted that he skimmed funds from his business, and sent it to an offshore bank account at UBS held in the name of his Hong Kong corporation. According to the plea agreement it was UBS, and his Swiss lawyers who came up with this idea that created all of McCarthy’s offshore tax problems. The IRS found out about McCarthy when UBS turned over his name as part of the criminal tax case against UBS that was resolved earlier this year. The maximum penalty that the Court can impose is five years in prison; a fine of $250,000, or twice the amount of gross gain or loss from the offense whichever is greater. Sentencing hasn’t yet occurred. In addition, McCarthy agreed to civil FBAR penalties equal to 50% of the highest year balance in the account will be imposed, along with a 75% civil tax fraud penalty.

Most interesting to me about the case is that the IRS is reaching lower down the food chain. The amount of the unpaid tax was somewhere between $200,000 and $400,00 spread over a 5 year period. Assuming a 33% tax rate this suggests unreported income of as little as $120,000 per year. While this is hardly chicken feed, it shows the IRS willingness to prosecute medium size tax evasion cases.

If you have a foreign financial account, or any kind of tax problem contact the tax lawyers at Brager Tax Law Group, A P.C.

UBS Offshore Tax Evasion Case Moves Closer to Disclosure

August 13, 2009,

On Wednesday, the UBS offshore tax evasion case moved one step closer to UBS disclosing the names of persons the IRS believes have committed tax fraud and/or failed to file TD F-90-22.1, Foreign Bank Account Report (FBAR). The IRS announced that it had “initialed a settlement” with the Swiss government to settle the suit seeking the names of 52,000 U.S. persons with offshore UBS bank accounts. The terms of the settlement has not yet been disclosed, but most tax attorneys believe that it will require UBS to provide the names of thousands of Swiss bank account holders. The IRS has said that the terms will not be disclosed until final signatures have been obtained on the settlement, and that could occur as early as next week.

Some tax lawyers speculate that it will be only the names of the largest UBS account holders that will be disclosed, but I tend to disagree. Any settlement would have to provide the Swiss with a fig leaf to argue that they had not compromised their privacy laws. One way of doing this would be to loosen the interpretation of tax fraud under Swiss law, and provide the names of individuals who engaged in some activity suggesting they were covering up the existence of the offshore account. For example, holders of numbered accounts, or accounts held in the name of dummy corporations or trusts, or perhaps dual citizens of the U.S. and other countries who did not use their U.S. passports to open the accounts.

Once the settlement terms have been announced it is unknown how quickly names of UBS Swiss bank account holders will be turned over. However, once the IRS has the names it will be too late for those individuals to participate in the IRS tax amnesty, and receive the benefits of the offshore voluntary disclosure program.

If you have questions about the FBAR tax amnesty or have other tax problems feel free to contact the tax controversy lawyers at Brager Tax Law Group, A P.C.


August 10, 2009,

Last week I blogged that UBS and the IRS had announced a preliminary settlement to the lawsuit seeking the names of 52,000 U.S. persons with Swiss bank accounts at UBS who the IRS suspects of tax evasion, and failing to file foreign bank account reports (FBARs). The failure to file a TDF 90-22.1 a/k/a an FBAR can result in a penalty of 50% of the balance in the offshore bank account. UBS and the IRS were expected to file final settlement papers with Miami Federal District Court Judge Gold by Friday August 7th. However, on Friday the parties told Judge Gold that they needed until Wednesday, Aug. 12th to finalize a settlement which most tax attorneys including myself believe would involve UBS turning over the names of additional Swiss bank account owners.

Once a list is turned over an offshore bank account owner whose name is on the list would no longer qualify for the IRS tax amnesty program, and would potentially be subject to both civil and criminal tax fraud charges, as well as the 50% FBAR penalty.

Time may be of the essence for holders of UBS Swiss bank accounts. We strongly recommend consulting immediately with a knowledgeable tax lawyer to find out more about the terms of the IRS voluntary disclosure program.

If you have questions the ex-IRS tax attorneys at Brager Tax Law Group, A P.C. are available for a consultation.

UBS FBAR Summons Case Settlement Reached

August 3, 2009,

On Friday it was announced that UBS and the Internal Revenue Service had reached a settlement in the IRS lawsuit against UBS. The lawsuit sought to require UBS to turn over the names of 52,000 U.S persons with Swiss bank accounts at UBS. The IRS believes that the owners of some of these offshore accounts failed to file foreign bank account reports (FBARs), and may also have engaged in tax fraud. Settlement negotiations have been ongoing, and apparently those discussions have focused on how many offshore account holder names will be turned over to the IRS. The terms of the deal have not been announced, and the parties have agreed not to reveal the details at this time. The final settlement papers are due to be filed on August 7th, at which point I expect that the IRS will reveal how many offshore account holders names will be turned over.

This puts the holders of offshore financial accounts at UBS in a precarious position. Once UBS turns over the information those folks will no longer be eligible to make a voluntary disclosure under the IRS tax amnesty program, and will subject the owners of these Swiss bank accounts at risk for the 50% FBAR penalty, possible criminal prosecution for tax evasion, and a pile of other tax problems.

UBS Swiss bank account holders would be well advised to speak with a tax attorney to decide whether or not to participate in the tax amnesty because the window may be closing very shortly.

The former IRS tax attorneys at Brager Tax Law Group, A P.C. are ready to advise offshore bank account holders of their options.