A 05/28/2013 article in the New York Times reports that:
The Swiss government said on Wednesday that it would allow its banks to disclose information on American clients with hidden accounts, a watershed move intended to help resolve a long-running dispute with the United States over tax evasion.
The decision, which comes amid widening scrutiny in Europe of tax havens, is a turning point in what has been an escalating conflict between Switzerland and the United States.
Eveline Widmer-Schlumpf, Switzerland’s finance minister, said the move would enable Swiss banks to accept an offer by the United States government to hand over broad client details and pay fines in exchange for a promise by United States authorities not to indict any banks.
Disclosure of actual client names and account data, which American authorities have been aggressively seeking, would take place under a taxation treaty between the two countries that the American side has not yet ratified. Banks under criminal scrutiny that agree to cooperate with the decision could still face deferred-prosecution or non-prosecution agreements, a lesser punishment than indictment.
The effect of this development will be to require potential U.S. defendants with undisclosed money in Swiss bank accounts to negotiate settlements and pay fines to avoid indictment and prosecution.
Along with Switzerland, which has a long history of bank secrecy that has attracted deposits from wealthy tax evaders and dictators, there are many other smaller tax havens that have bank secrecy laws. There is no reason to think that the U.S. Justice and Treasury Departments will not expand their efforts to force disclosure of accounts in these other jurisdictions.
This development together with WikiLeaks-type disclosure of these accounts puts U.S. taxpayers with unreported accounts in the cross hairs. U.S. taxpayers with undisclosed deposits need to act quickly to understand the extent of their exposure and to develop a plan to clean up their problem.
I note the following from this lengthy New York Times article.
Also in 2009, Switzerland and the United States signed a protocol amending a 1996 tax treaty governing exchanges of information on Americans suspected of avoiding taxes. While the protocol has been approved by the Swiss Parliament, it has been held up in the United States Senate, blocked by Senator Rand Paul, a Republican from Kentucky. The protocol makes it easier for American authorities to seek client and account data from Switzerland.
Why is Rand Paul trying to hold up this protocol? It would seem his campaign contribution list would be scrutinized by Treasury and Justice for the identification of wealthy tax evaders who have made substantial campaign contributions to block legal measures that would expose them.
Practical next steps
- Note the date on this article. It describes the rules as they stood then, and tax procedure changes.
- Start from the notice you actually received: the number in the top right corner and the date printed on it decide what is still open to you.
- Pull your account transcripts before deciding anything. They show what the IRS believes about your account, which is not always what the letters say.
- If a deadline is running or the amount is significant, have someone read the file before you respond.
Official sources for current verification
- IRS Topic No. 201 — The Collection Process
- IRS Publication 594 — The IRS Collection Process
- IRS Topic No. 202 — Tax Payment Options
- IRS — IRS Audits
- Taxpayer Advocate Service — Audits in Person
- IRS — Accuracy-Related Penalty
Important notice
This material provides general information, not legal or tax advice. Tax outcomes depend on the facts, procedural history, applicable law, and current agency guidance. Reading this page does not create an attorney-client relationship.
