October 30, 2009

The War on Tax Havens

The US government has declared war on well-known tax havens like Switzerland, the Cayman Islands, Bermuda and even Hong Kong. For the longest time, it was an open secret that if you wanted to have your money undetected, bank it into a Swiss bank account. The bank secrecy laws in countries like Switzerland will keep your identity anonymous and your bank balance invisible.

But since the much-publicized dispute between the IRS and UBS bank of Switzerland, these tax havens have come under threat of exposure. The IRS has suspected about 52,000 American depositors with UBS have been hiding their money in their bank accounts without paying taxes on them. In fact, they have also suspected the bank of secretly soliciting wealthy Americans to start accounts for that purpose. With a network of individual intermediaries comprising their own bank employees, accountants, lawyers and tax specialists, the bank has helped American clients create corporate tax structures designed to hide their assets.

But the IRS pressure on UBS to reveal the details of these 52,000 depositors have culminated in a settlement between the two parties and the US and Swiss governments. This has not come a moment too soon for the cash-strapped American economy. The settlement is also welcomed by American taxpayers as a whole who had always felt that the rich were treated differently.

Nevertheless, the IRS cannot have it all their way under the settlement, which sees UBS hand over information of the suspected American tax dodgers to the Swiss government. It will be the Swiss government, not the IRS that gets to determine which depositors' information is finally revealed. This will result in the information of only a small fraction of the 52,000 depositors being disclosed, 4,450 of them to be exact.

In the meantime, the IRS is having a Voluntary Disclosure program to enable tax cheats with offshore accounts to confess to their tax evasion in exchange for not being prosecuted. However, these ones will still be liable for their back taxes, penalties and interest charges.

With the ratio of accounts revealed to actual number of suspected accounts of tax cheats being so low, many UBS clients might just risk prosecution by staying quiet rather than come forward of their own accord to the IRS with their bank details. Voluntarily coming forward will mean everything you own in these offshore accounts is exposed and you have to pay hefty penalties and interests in addition to taxes. But keeping quiet means everything stays as status quo, unless you are one of the 4,450.

This situation has galvanized the IRS, Justice Department, Congress and US Treasury to step up their efforts to weed out tax evaders, no matter which country they hide their money in. So watch out, all you tax havens, Uncle Sam wants you!

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. 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.

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