What will Swiss Bank Program agreements mean for noncompliant U.S. account holders?
First off, the disclosure requirement kicks in for U.S. persons when an offshore account has a balance of $10,000 or more. You make the disclosure electronically on FinCEN Form 114 by June 30. Failure to file can result in severe and draconian penalties.
The Internal Revenue Service is on a third round of its offshore voluntary disclosure program (OVDP) for those who are not in compliance. Time is starting to run short to resolve undeclared offshore accounts at the lower penalty of 27.5 percent. Last August, the Internal Revenue Service increased penalties to 50 percent if an IRS or Department of Justice investigation became public before a taxpayer submitted a pre-clearance request.
Marketing for U.S. accounts
Last week, the U.S. Department of Justice announced its second resolution under the Swiss Bank program with Vadian Bank AG located in St. Gallen, Switzerland. We expect to hear about more agreements over the next months.
Vadian admitted that it had accepted the accounts of U.S. individuals after the criminal investigation of UBS became public. In 2008, its number of U.S.-related accounts under management increased from two to 70. It was aware that these account holders were not all compliant on their U.S. taxes.
As part of the agreement, the bank will cooperate with any civil or criminal cases and pay a fine of approximately $4.2 million.
For an U.S. accountholder with an undeclared Vadian account, it is still possible to take advantage of OVDP. However, the penalty to enter the program is now higher. With any undisclosed offshore account, seek the guidance of a skilled tax attorney to obtain the best possible resolution.