Taxation & Estate Planning

Confession ? Good for the Soul

By Darrin Mish

If confession is good for the soul, then pleading guilty is good for the IRS. In California, John McCarthy opened a Swiss bank account with UBS Bank in the name of COGS Enterprises Ltd., a Hong Kong company and did not file a FBAR (Foreign Bank and Financial Accounts Report). The amount of money McCarthy deposited into the account came up to more than $1 million. He made a plea agreement agreeing to plead guilty to the charge of failing to report the offshore account to the IRS for tax purposes and will make an initial appearance in court September 16th.

But this whole matter of tax evasion by wealthy Americans like McCarthy, who comes from Malibu, California, goes months further back in time. On February 18th, to avoid prosecution for helping its American clients to evade taxes, UBS handed over to the IRS the names and banking information of 250 of these clients. Since then, three other UBS clients besides McCarthy have also pleaded guilty to the same charges. But these 250 names are just the tip of the iceberg. The IRS seeks the disclosure of the identities of some 52,000 suspected Americans like McCarthy who have siphoned their money into UBS in order to avoid paying taxes on them.

After a long drawn out dispute that even drew in the governments of Switzerland and the United States, the bank has finally settled the lawsuit over these 52,000 account holders on August 12th.

As for McCarthy according to his plea, in 2003 he carried out his ruse by first depositing earnings from his businesses into a domestic bank account in the US. Then with the help of Swiss lawyers and UBS officers, he transferred the money into his COGS Enterprises account in UBS bank, Switzerland. Over the next five years, as McCarthy discussed his UBS account with his Swiss lawyers, they advised him to start a Liechtenstein foundation, a Panamanian or Hong Kong corporation as "an extra layer of privacy" that conceals his identity. As recently as last year, former UBS employees and McCarthy's Swiss lawyers helped him move his money into another Swiss bank to further avoid detection by the US authorities.

Part of McCarthy's guilty plea involves him cooperating with the prosecutors and paying a fine of 50% of the highest balance he had in his UBS account since 2003. The nature of his businesses is not known.
Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for almost two decades. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.

Full post as published by IRS Problem Solver Blog on September 12, 2009 (boomark / email).