By Amy Feldman
NEW YORK Nov 9 For those who have been hiding
assets overseas from U.S. tax authorities, knowingly or not,
the news that Credit Suisse will turn over names and account
details of certain U.S. clients to the Internal Revenue Service
could be the beginning of the end.
The IRS, aggressively seeking to bring taxpayers with
offshore assets and income back into the tax system, offered
several rounds of voluntary disclosure windows to induce
taxpayers to confess. The last window closed on September 9.
Now those with undisclosed foreign assets, who did not take
advantage of the amnesty, should seek tax advice immediately.
"The advice to someone over in Switzerland is to run like
hell for the nearest tax lawyer to discuss whether it makes
sense to do a voluntary disclosure," says Dennis Brager, a Los
Angeles tax attorney with Brager Tax Law Group, who specializes
in tax controversies.
Those who need to come forward include U.S. taxpayers with
numbered accounts in Switzerland, Americans living overseas,
including retirees, and immigrants in the United States who
have maintained financial lives overseas.
Though the window has closed, taxpayers with undisclosed
foreign assets may still be able to file a traditional
voluntary disclosure that would allow them to avoid potential
criminal prosecution, Brager says.
There are important differences between the specific
voluntary disclosure programs and a more traditional voluntary
disclosure. For one, the specific voluntary disclosure programs
spelled out penalties.
"Taxpayers who do not submit a voluntary disclosure run the
risk of detection by the IRS and the imposition of substantial
penalties, including the fraud penalty and foreign information
return penalties, and an increased risk of criminal
prosecution," the IRS notes.
A person convicted of tax evasion may face up to five years
in jail, according to the IRS.
CREDIT SUISSE ACTION
Credit Suisse , Switzerland's second-largest bank,
began notifying clients suspected of offshore tax evasion that
it intends to turn over their names and account details to the
IRS, with the help of Swiss tax authorities.
The move follows a recent formal request for the
information from the IRS, according a copy of the letter
obtained by Reuters.
The effort to round up tax evaders comes as the U.S.
government is trying to balance the budget and cut the deficit.
Decreasing the tax gap -- the difference between the amount of
tax owed and the amount actually paid by taxpayers -- is one of
the few relatively easy ways to bring in more revenues.
Those who voluntarily disclosed their failure to report
foreign bank accounts on the FBAR, or foreign bank account
reporting form, during the latest program, generally owed 25
percent of the highest aggregate balance between 2003 and 2010.
The FBAR filing is required for any U.S. citizen with at least
$10,000 in a foreign financial account.
But the penalties are far more severe if the IRS finds you
you did not file an FBAR, especially if the violation is
categorized as "willful."
In that case, the monetary penalties may run up to 50
percent of the amount in the accounts, or $100,000 for smaller
accounts, according to Baker Tilly, an international tax and
accounting firm. That means, if you never told the IRS about
the $2 million stashed overseas, you might say goodbye to $1
million of it.
Between the two amnesty efforts in 2009 and 2011, some
30,000 taxpayers have come forward. The IRS announced that it
had collected a total of $2.2 billion from people who
participated in the 2009 program, and an additional $500
million so far (a number that does not yet include penalties)
from those who participated in the 2011 effort.
For U.S. citizens who have not paid taxes on substantial
offshore assets, the hope of hiding from tax authorities seems
Says tax lawyer Brager: "I keep telling clients the same
thing, 'I don't know if you're going to get caught, or how
you're going to caught, but if you do, you're not going to like
what happens next.'"
The author is a Reuters contributor. Opinions expressed are