Switzerland and the United States have agreed on a new Tax Information Exchange (TIA) Agreement, a further erosion of offshore banking secrecy. The new agreement will allow the U.S. greater access to banking records regarding Americans with Swiss accounts. Americans who have relied on offshore secrecy to avoid getting caught by the IRS need to re-examine their strategy, said Asher Rubinstein, an attorney with Rubinstein & Rubinstein.
“Many issues remain about the agreement: whether it will be narrowly tailored to requests regarding specific people, or more general “fishing expeditions,” like the ‘John Doe’ summons the United States is presently seeking to enforce against UBS. It is also not known whether the new TIA will only be prospective, or whether it will require disclosure of past accounts. The agreement will be subject to public referendum in Switzerland, where challenges to traditional banking secrecy have met with vigorous defense,” Rubinstein said.
Another open issue is whether the new agreement will result in the IRS dropping its litigation against UBS, demanding the disclosure of 52,000 accounts. The Swiss have indicated that the new agreement will effectively settle that case, while American officials state that the litigation will continue and the IRS will pursue disclosure of the offshore accounts.
In light of these events, Americans with non-compliant offshore accounts should consider voluntary disclosure before the IRS discovers their accounts. The IRS is offering a sort of amnesty to taxpayers who voluntarily come forward before they are discovered. The IRS' Voluntary Disclosure Program offers reduced penalties and a promise of no criminal prosecution. This program expires in less than three months and will not apply to taxpayers once the IRS gets their names.
“Pre-emptive disclosure is best made by qualified legal counsel, experienced in offshore compliance and IRS negotiations. Rubinstein & Rubinstein can approach the IRS on your behalf, demonstrate proper current compliance and negotiate to avoid criminal prosecution and reduce fines and penalties for past non-compliance. Although fines and penalties may be significant, they pale before the consequences of an IRS criminal prosecution,” said Rubinstein.
In addition, Americans with signature authority or other interest in a foreign bank or financial account in 2008 are required to file Treasury Form TD F 90-22.1, “Report of Foreign Bank and Financial Accounts”, also known as the “FBAR”, by June 30, 2009. The penalties for failing to file Form TD F 90-22.1 on time can be severe. Therefore, if you held an interest in a foreign account in 2008, it is imperative that you file Form TD F 90-22.1 by June 30, 2009. Participating in the Voluntary Disclosure Program will also remedy FBAR non-filing for previous years.
Rubinstein & Rubinstein, LLP represents many clients with offshore accounts, in connection with Voluntary Disclosure, FBAR filing and conversion to tax-compliant structures. “If you have a non-compliant foreign account, contact counsel before the IRS finds you,” Rubinstein said.
Contacts:
Rubinstein & Rubinstein, LLP
Asher Rubinstein, Esq.,
212-888-6600
www.AssetLawyer.com
arubinstein@assetlawyer.com