Taxation & Estate Planning

Big Brother IS Watching

By Darrin Mish

It has long been public knowledge that to avoid detection of any sum of money, you should deposit it into a secret Swiss bank account. If you still think that way, think again. Swiss bank accounts, once financial havens invisible to the prying eyes of the government, are no longer so. Yes, Big Brother IS watching-even your Swiss bank accounts. How is that possible?

Thanks to the IRS' voluntary disclosure program, the government now has an increasingly clearer picture of how money is siphoned out of the country and into offshore accounts like those in Swiss banks. The IRS is primarily concerned with suspected tax cheats who evade paying their taxes by depositing their money in these bank accounts.

In the voluntary disclosure program, which expires September 23, account holders of Swiss bank accounts voluntarily disclose details of their assets, including the identities of those who helped them set it up. Accountants, bankers, attorneys who surreptitiously or otherwise assist their clients in opening offshore bank accounts to evade taxes will soon find themselves the targets of IRS investigations.

The IRS has long been after such intermediaries who advise their clients on how to set up their finances in contravention of U.S. tax laws. One example is the prosecution of former officers of BDO Seidman who allegedly promoted illegal tax shelters to their clients.

Presently, the IRS is investigating up to 52,000 wealthy U.S. citizens suspected of tax evasion who maintain offshore bank accounts with UBS Bank of Switzerland. A very public battle has ensued between the bank and U.S. federal lawyers over information on these American account holders. The lawyers claim that the bank should collaborate by disclosing information on their clients who have not paid millions of dollars of taxes but the bank argues that to do so would violate Swiss banking secrecy laws. The Swiss government has made it clear that it may intervene by taking over the information to prevent disclosure.

The impasse is set to be brought before a Miami federal court judge this Friday.

Full post as published by IRS Problem Solver Blog on September 01, 2009 (boomark / email).