The Undisclosed Foreign Bank Account and the IRS
The first version of the Broadway show “Evita” made its way
to Broadway in 1979. The revival of the show in 2012 was a hit as was the movie
starring Madonna. From that show, portending perhaps future IRS action, was the
song called “And the Money Kept Rolling In”, lyrics by Tim Rice. For those who
may have missed the production, the story of Eva Peron is classic. She was the
second wife of Juan Peron, dictator of Argentina.
She became famously loved by her Argentinean constituents for the Peron Foundation
which extracted money contributions which were then given by Eva to the poor
and destitute. Only an application to show need and her approval was required.
One verse of that song is particularly appropriate for the current melee
surrounding foreign bank accounts and the failure to properly report their
existence and any tax required to be paid to the IRS.
If the Money keeps rolling in,
what's a girl to do?
Cream a little off the top for
expenses, wouldn't you?
But where on earth can people hide
their little piece of heaven?
Thank God for Switzerland!
Where a girl and a guy with a
little petty cash between them
Can be sure when they deposit no
one's seen them
Oh, what bliss to sign your checks
as 30127
Never been an account in the name
of Eva Peron!!
And so it
was for many years, whether Americans were using these foreign bank
accounts
for their convenience when working overseas or as their little piece of heaven
individual
clients and their lawyers and accountants will have to determine. But the
secrecy
surrounding the Swiss bank account has been broken. The IRS through an
informant laid rest the magic numbered bank account. The now
famous case involves the Swiss bank called UBS. Threatening IRS criminal action
against the bank UBS turned over the names of more than 4000 US
taxpayers who had maintained Swiss bank accounts. More banks have been leaned
on by the Internal Revenue Service and the government of Switzerland
has vowed its cooperation with the Internal Revenue Service. Other countries have followed suit and more are likely to agree to cooperate with IRS under threat of IRS action against them.
IRS soon realized it had hit the tax mother lode. But instead
of attempting to assign numerous agents to ferret out these undisclosed bank
accounts the agency decided instead to create a voluntary disclosure program
called the “Offshore Voluntary Disclosure Initiative”. It has been wildly
successful and has brought in over $5 billion in taxes, penalties and interest
from approximately 35,000 cooperating and scared taxpayers. The teeth in the
IRS program is the potential for criminal exposure. Having a foreign bank
account may be one thing, but spending time in a federal penitentiary as a
consequence is an entirely different matter. As news of the breach in the wall
of silence in Switzerland began to spread and the resulting cooperation of banks and securities firms
overseas, clients began showing up on we lawyer’s door steps.The pace of investigation will not soon abate as IRS and Government generally get more computer savvy and taxpayers realize that it may be better to come clean about these accounts than be exposed to huge tax penalties and possible criminal sanctions. Eva would have been caught in a New York minute.
