On July 15, 2010, Switzerland’s Federal Administrative Court issued a ruling rejecting a UBS account holder’s complaint that sought to prevent the release of her account information to the U.S. tax authorities. This ruling signifies the beginning of the end of the era of offshore bank secrecy. The Swiss banking system has long been a thorn in the IRS’s side. The Swiss’s bank secrecy laws provide that all account information is confidential and cannot be turned over to government officials unless a criminal act has been committed. The July 2010 ruling was in response to an agreement struck in August 2009 between the U.S. and Switzerland that sought to put an end to such practices. Under the deal, UBS agreed to provide the IRS with the names and account information of 4,450 Americans who housed as much as $20 billion in offshore accounts. The names were provided to the IRS by UBS in November 2010.
Expiring on October 15, 2009, the IRS offered a limited voluntary disclosure agreement ("VDA") program under which taxpayers were offered reduced penalties and exposure to a criminal indictment, if they came forward and voluntarily disclosed their previously unreported assets and income from foreign accounts. However, any individual included within the list provided by UBS in which had not begun the VDA program faces a high probability of facing significant penalties and potentially a criminal investigation.
This recent win is another notch under the IRS’s belt in its constant battle against tax evaders. The implications of the cooperation by the UBS and the Swiss government are vast. It is highly unlikely that the IRS will stop its crusade there. The IRS has shown time and time again that it is not a force to be reckoned with. As Ben Franklin famously said, “Two things in life are certain: death and taxes.”
The IRS requires any U.S. citizen or resident who owns a foreign financial account with a fair market value in excess of $10,000 to be reported annually on Form TDF 90-22.1. If you find that you have a foreign bank account in which has not been reported please contact us so that we may discuss the options in which you have. Over the past couple of years, dbbmckennon has represented various individuals in declaring foreign investment accounts and assisted in the preparation of the required forms.