It’s a concept that is both old and storied. Even if you’ve never had reason to encounter one, chances are you’ve heard of the private Swiss bank account. Tales of money hidden away in a bank in the Alps, nothing to link it back to its owner. Whatever the realities behind the stories, bank accounts in Switzerland and other countries treasured for their privacy, may well be on their way out. For several years now, the U.S. has put pressure on foreign financial institutions to share depositor information and otherwise assist in efforts to track down tax evaders and discover undisclosed offshore assets and foreign bank accounts. Much of that activity has centered around FATCA, a law passed in 2010 designed to crackdown on tax evasion via foreign accounts. Since then many foreign governments or foreign financial institutions have negotiated treaties under the FATCA framework to automatically share information with the U.S. or the Treasury Department.
On the first day of this year, The International Convention on the Automatic Exchange of Banking Information entered into force in Switzerland. The convention provides procedures for Swiss banks to automatically share financial information on Swiss accounts held by citizens of certain countries. Switzerland is not alone. Nearly 100 countries, which together encompass all the major global financial centers, have agreed to adopt the standards. The schedule for that adoption varies — in the case of Switzerland, data collection begins this year and the first reporting of that data will begin next year — but the overall picture is clear. The day of the hidden offshore account is nearing its end.
For several years, as the Justice and Treasury Departments have pursued offshore tax evasion, the IRS has offered a series of voluntary disclosure programs. Originally these programs ran in limited windows. Beginning in 2012, however, the IRS instituted the Offshore Voluntary Disclosure Program (OVDP), which has no expiration date. Instead, the IRS reserves the right to change the particulars of the program, most notably the penalties that participants are charged. The olive branch to the taxpayer has remained the same throughout the life of the OVDP. By coming clean about their previously undisclosed offshore accounts and foreign assets, they pay reduced penalties and avoid criminal prosecution. Outside the OVDP, the penalties are steep and criminal charges can include jail time. There is something a catch, however. If the IRS has already begun an investigation into a taxpayer’s offshore accounts — something the IRS does before ever notifying the taxpayer — then that taxpayer is no longer eligible for the OVDP. And since the IRS is free to increase the penalties assessed during the OVDP at any time, taxpayers are well advised to take advantage of the program sooner rather than later.
If a taxpayer meets certain criteria, the most important of which is that their failure to disclose their foreign assets was not willful,they can qualify for the so-called streamlined OVDP. The streamlined OVDP is a simplified process in terms of documents and records that must be provided and involves lower penalties than the normal OVDP.
Horowitz Law Offices has represented clients during their participation in the OVDP since it’s inception and regularly represents clients before the IRS, the Illinois Department of Revenue and the Chicago Board of Finance to resolve their tax controversies. You are welcome to contact us at (312) 787-5533 or firstname.lastname@example.org