IRS batting 1000 in game of offshore hide and seek

Over the past few years, efforts to crackdown on tax evasion by pressuring banks to reveal depositor information from offshore accounts has been yielding big dividends to the IRS. Most recently, the Agency procured a guilty plea in Boston’s federal court against Michael F. Schiavo, the managing director for SCG Consulting Group and a director at Boston Private Bank and Trust Co., for failing to file a Foreign Bank and Accounts Report (FBAR) for an offshore account he held at HSBC in Bermuda.

IRS tax attorneys say Schiavo is just one in a long line of offshore bank depositors in trouble for not reporting foreign bank accounts and seeking to avoid paying back taxes owed because of those accounts. Tax lawyers following the Agency’s criminal prosecutions note the government has already criminally charged UBS, the biggest bank in Switzerland, and a least two dozen former UBS customers, four former UBS bankers, and five different banks within the Credit Suisse Group AG (CSGN).

In February 2009, UBS agreed to pay $780 million dollars to avoid prosecution for aiding Americans who were trying to evade paying taxes. Tax attorneys familiar with the case say the bank conceded its Swiss private bankers had, in fact, helped wealthy U.S. tax evaders avoid paying taxes between 2000 and 2007. The bank also admitted to setting up sham offshore companies in “tax havens” situated in places like Hong Kong, Panama and the British Virgin Islands. USB had reportedly created misleading forms which indicated those sham companies, not the Bank’s U.S. depositors, were the beneficial owners.

In addition, four Credit Suisse bankers were also indicted on charges they’d conspired to help U.S. citizens evade back taxes through secret bank accounts. The allegations in the indictment, according to IRS tax attorneys, suggest that as late as 2008, Credit Suisse had “thousands” of accounts with $3 billion dollars in assets not disclosed to the IRS.

Earlier this year, tax lawyers say HSBC was subject to an IRS summons seeking information about Americans with offshore accounts in India between 2002 and 2010. To illustrate the scope and severity of the problem, tax attorneys point out that through September 2010, HSBC had approximately 9,000 U.S. customers with non-resident Indian accounts of $100,000 or more, totaling somewhere in the neighborhood of $400 million dollars. Significantly, only about fifteen percent (15%) of those customers filed FBARs (or 1,391 taxpayers) meaning approximately eighty five percent (85%) are subject to IRS criminal prosecutions.

IRS tax lawyers say this is only the tip of the iceberg. So far, the IRS has prosecuted and procured convictions against dozens of U.S. citizens and there is no indication they’ll be running out of prosecution targets soon. So if you have had an offshore account and/or currently maintain such an account, make sure you comply with reporting requirement (FBARs are due in June) and get competent assistance from a tax attorney familiar with offshore account reporting requirements, to avoid possible problems and get all of your questions answered.


Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

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