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IRS Discloses What It Considers Tax Evasion By Persons With Offshore Accounts

Posted in Offshore Account Update, UBS / HSBC on December 15, 2009 | Share

On November 17, the IRS released the terms of the agreement it reached with UBS AG regarding the criteria UBS will use to determine which of its U.S. clients to turn over to the IRS

Why is this so important?  Two reasons.  First, if you have an account with a UBS offshore branch, you want to know the chances of you being on the list.  Second, even if you do not have an account at UBS, it gives some insight into agreements the IRS and DOJ may be negotiating with other foreign banks, including the foreign bank you do have your account at.   

So, what are the terms?  The IRS and DOJ agreed for UBS to disclose the identity of U.S. taxpayers with foreign accounts at UBS based on the following criteria:

  • US persons, domiciled in the US, who directly held and beneficially owned undisclosed custody accounts and banking deposit accounts in excess of 1 million Swiss Francs at any point in time during the period of years 2001 through 2008 with UBS and for which a reasonable suspicion of “tax fraud or the like” can be demonstrated.  (“Undislosed” means no W-9 was filed for the account.)
  • The 1 million Swiss Francs threshold dips to 250,000 Swiss Francs for accountholders who concealed funds, submitted incorrect or false documents to UBS or the I.R.S., or otherwise engaged in what the I.R.S. terms “a scheme of lies” with respect to the account. 
  • US persons (whether they are located in the US or not) who beneficially owned “offshore company accounts” that have been established or maintained during the period of years 2001 through 2008 and for which a reasonable suspicion of “tax fraud or the like” can be demonstrated – i.e., “sham” companies established for tax fraud and evasion purposes.
  • US persons who did not file a W-9 over at least three years since 1998, and for which the accounts generated annual revenue to the client of at least 100,000 Swiss Francs. 

Of course, the IRS and DOJ are not going to rest on their laurels.  They will pursue similar agreements with other foreign banks.  At least now we have a blueprint of how the IRS and DOJ will shape their tax evasion investigations vis-a vis offshore accounts.

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