We’ve written before about attorneys using fear of criminal prosecution to pressure people to enter the IRS Offshore Voluntary Disclosure Program (OVDP). For instance, we recently wrote:
Many tax attorneys advise their clients with undeclared foreign assets that the OVDP is their sole option. Such attorneys scare their clients by citing the many Department of Justice (DOJ) criminal prosecutions of Americans with undeclared offshore accounts, and the attorneys promote a voluntary disclosure as the only way to become compliant and avoid civil or criminal tax fraud consequences.
We do not believe that everybody with foreign assets should automatically rush to enter the OVDP and pay the high penalties. The OVDP, with its “one size fits all” 27.5% penalty, is not always the best, or only, course of action in all offshore cases. (For the original, please see here.)
We note this article that was published last week on Forbes.com: Swiss Banks Disclosure of Americans, Many More Expected by End of Year.
The title suggests that the Swiss banks will give to the US government the identities of Americans with accounts, by the end of 2013.
The author is a very knowledgeable tax attorney, but the title of the article is misleading, and the article itself is silent on the actual terms of what is to occur by the end of 2013.
The end of 2013 deadline is for the Swiss banks who are participating in the Swiss-US Settlement Agreement (which we wrote about here) to send a letter to the US Department of Justice indicating that the bank will be participating in the Settlement. The end-of-year deadline is not one by which the Swiss banks will reveal the identities of Americans with Swiss accounts. Per the settlement agreement, the letter from the bank to DOJ is to contain:
- the bank’s plan going forward regarding participating in the Settlement Agreement;
- waiver of applicable statutes of limitation;
- appointment of an independent examiner who will review the bank’s accounts for US clients;
- the bank’s agreement to maintain bank records, and
- other information specific to the bank itself.
Provision of the US clients’ identities is not part of the December 31, 2013 deadline. However, we do expect that to happen within weeks or months into 2014. After the bank letter to DOJ by December 31, the bank then has 120 days to prepare and present to DOJ a presentation containing certain client data – numbers, not names – but this will be enough for DOJ to then submit a treaty request to Switzerland asking for actual names.
Our experience is that the Swiss banks are all rushing to advise their clients to make a voluntary disclosure of their accounts to the IRS. The banks are also freezing the accounts, pending submission of W-9 forms, evidence of tax compliance (e.g., FBARs submitted to the Treasury Department) or evidence of participation in the OVDP.
The point is that names and identities will be disclosed, but probably not before December 31.
Articles such as the one in Forbes send an incorrect message that people have merely two weeks before their names will be given to the US authorities, with the suggestion that they must run and retain a tax lawyer to make a voluntary disclosure before December 31. In fact, US taxpayers with Swiss accounts should be meeting with qualified tax counsel, and US taxpayers should be giving serious consideration to a Voluntary Disclosure (or other strategies to achieve tax compliance, see here), but they should not be scared into doing so by misinformation, prematurely, without examining all possible alternatives.