June 2010 Archives

FBAR Confusion Reigns. Financial Interest in Offshore Bank Account Definition Stumps Many

June 25, 2010,

Foreign Bank Account Reports (FBAR) on Form TDF 90-22.1 are due in Detroit, Michigan on June 30th. Some CPAs and tax attorneys seem to be relying on an exception contained in IRS Notice 2010-23 which provides that persons who have signature authority, but no financial interest in a foreign bank account do not need to file an FBAR until June 30, 2011. The expectation is that the IRS may publish rules which would permanently exempt such persons from filing an FBAR. That’s fine, but some CPAs and even some tax lawyers believe that persons who are holding money for a foreign resident are allowed to use this exception to avoid filing an FBAR.

So for example, John opens an account in Israel for his father, Sam, who lives in Iraq. John is a U.S. citizen. Sam has never even been to the U.S. for a visit. The funds in the offshore account belong to Sam, but because the Israeli bank wouldn’t open up an account in Sam’s name unless he comes to Israel, John opens it in his own name, and puts Sam’s funds in the offshore bank account.

The assumption that John falls under IRS Notice 2010-23 is incorrect. John has a financial interest in the account. The definition of financial interest is set forth in the instructions to the FBAR, Form TDF 90-22.1 which states:

A United States person has a financial interest in each account
for which such person is the owner of record or has legal title,
whether the account is maintained for his or her own benefit or
for the benefit of others including non–United States persons. It’s
clear that John must file an FBAR on June 30, 2010 since he
holds legal title.

If you have an offshore bank account contact the tax litigation attorneys at Brager Tax Law Group, A P.C. to discuss your options.

UBS Offshore Swiss Account Voluntary Disclosure Enters Endgame

June 18, 2010,

The Swiss Parliament has decided to allow UBS to turn over the names of its Swiss bank account customers to the IRS. This means that the names of 4,450 UBS customers who are suspected of committing tax fraud, and FBAR (Foreign Bank Account Reports, TDF 90-22.1) violations will be turned over to the IRS by the August deadline. For a recap of the UBS John Doe summons litigation, and the subsequent twists and turns through the Swiss court system look here and here.

For owners of UBS Swiss bank accounts this may be the last chance to make a voluntary disclosure to the IRS, thereby greatly reducing the chances of criminal tax evasion, tax fraud, and willful non-filing of FBARs charges being filed. Making a voluntary disclosure at this point after the tax amnesty deadline has passed will not by itself eliminate harsh civil tax penalties, but is one step in the right direction.

Once the IRS has received an individual’s name from UBS it will be too late to make a voluntary disclosure, and a criminal tax investigation is almost a sure thing.

If you have a foreign bank account at UBS, a Swiss bank account anywhere else, or a foreign bank account anywhere in the world, and would like to learn more about your options contact the tax lawyers at Brager Tax Law Group, A P.C.

UBS Offshore Tax Fraud Case Takes Another Twist

June 9, 2010,

UBS Swiss Bank account owners who did not make a voluntary disclosure to the IRS last year breathed a sigh of relief when the lower house of the Swiss Parliament voted against amending the U.S. Swiss Tax Treaty to allow the handover of the names of U.S. holders of Swiss bank accounts who are suspected of tax evasion by the IRS. The story has more twists and turns than a John Grisham novel, most of which I have previously blogged about. To summarize briefly:

• A report by a disgruntled ex-employee of UBS led to the indictment of Bradley Birkenfeld a former UBS Swiss banker. Revelations by Birkenfeld led in turn to the indictment of UBS which paid 750 million dollars to the IRS to settle the criminal case. UBS turned over the names of 250 holders of offshore bank accounts.
• 150 of these UBS Swiss bank account owners are under active investigation by the IRS Criminal Investigation Division (CI), and the tax attorneys at the Department of Justice
• Approximately 10 individuals (including some at banks other than UBS) have already pled guilty to various charges including the filing of false documents, failure to file an FBAR, and tax fraud
• The IRS filed a John Doe summons demanding from UBS the names of all its clients who were U.S. citizens or residents
• In high level diplomatic negotiations the case was settled with UBS agreeing to turnover the names of approximately 4,450 UBS Swiss bank account owners.
• A decision by a Swiss Court earlier this year ruled that certain accounts could not be turned over under Swiss law despite the agreement with the IRS
• On June 3rd the upper house of the Swiss Parliament ratified a Treaty amendment which would overturn the Swiss Court decision

Although the Swiss lower house refused to ratify the Treaty amendment things are not over yet. The Swiss lawmakers are expected to go back to the bargaining table to see if the issue can be resolved. Further developments are expected by June 18th—the end of the Swiss parliamentary session.

If you have an offshore financial account, whether it is a Swiss bank account, or an offshore account in another country call the tax litigation lawyers at Brager Tax Law Group, a P.C. to find out about your options.