Criminal penalties - for tax evasion or anything else - are typically measured in monetary fines and prison sentence lengths. For conviction on a serious charge, the sentence is often to a term of many years in prison.
Five hundred years ago, in the age of European exploration, America was thought of as a New World. And in many ways, the clash between old and new has continued to this day.
Over the past few years, the federal government and the Internal Revenue Service have spent considerable time, resources and energy in uncovering instances of offshore tax evasion. As recent posts on our California blog and news stories indicate, the IRS is making headway with the Swiss government. Now other nations are getting into the act.
Offshore bank accounts are a hot topic in the tax world because the IRS recently released its newest voluntary offshore disclosure initiative. This program allows California taxpayers to disclose their offshore accounts and accept a penalty in lieu of criminal tax evasion charges.
Last month we discussed several tax law issues related to offshore bank accounts and a U.S. tax probe that targets Swiss banks. California taxpayers caught hiding money in foreign bank accounts can face civil and criminal penalties associated with the failure to disclose all foreign assets on federal income tax returns. The IRS has intensified its scrutiny of foreign countries with strict banking privacy rules because it believes that taxpayers in California and across the country are using foreign accounts for tax evasion purposes.
Although an offshore tax evasion investigation may be more alarming to an individual taxpayer, federal authorities also routinely target large financial institutions such as banks. Credit Suisse Group AG, one of the world's largest banks, is the most recent target of federal criminal probes into possible tax evasion.
With the current poor economy, combined with a political climate hostile to both taxes and government spending, it is no surprise that the federal government has found a renewed interest in collecting all tax revenues that are due, from any source. Tax evasion has always been a crime, but now rooting it out and collecting unpaid taxes has become almost a crusade.
The U.S. government crackdown on offshore bank accounts used for tax evasion is continuing to make the news. A banker for a Swiss cantonal bank recently pled guilty to advising an American client on how to hide a bank account at a regional canton bank in Switzerland.
Twenty-five people have been charged with tax evasion in connection with their accounts held with the Swiss bank UBS. Two of them are California residents, living in or near San Diego. The Justice Department has identified Bernard Goldstein of Carlsbad and Jeffrey Chatfield of San Diego as offshore bank account holders believed to be hiding money from the IRS.
Swiss bank accounts have offered the appeal of secrecy for hundreds of years. Some wealthy American depositors have taken advantage of this secrecy to hide assets and evade taxes. Others use the offshore accounts in ways that do not run as much risk of the IRS's displeasure.