According to Bloomberg, the UBS prosecution is accomplishing exactly what the IRS intended: massive disclosure. Clients of numerous Swiss banks are disclosing their offshore accounts to the IRS to avoid criminal prosecution. (Hint: If you happen to have an offshore account, declare it before September 23 to avoid the Wesley Snipes treatment). Further, the IRS is using the disclosed information to chase down other banks and law firms that may be holding out:
The disclosure program and the U.S. lawsuit settled by UBS are helping the U.S. crack down on offshore tax evasion by pursuing financial institutions and intermediaries including law firms, IRS Commissioner Doug Shulman said Aug. 19.This makes sense.
Advising US taxpayers not to declare their income, from whatever source derived, is a crime. See I.R.C. §§ 7201 et. seq. As a US Citizen or resident, you are subject to tax on your income earned anywhere in the world (This is today's TTT). Thus, if a law firm advises a US Citizen or resident not to report their offshore accounts (or any other income from anywhere in the world) on their annual 1040, both the law firm and the taxpayer face criminal liability.
And that is how they got UBS. UBS was advising clients not to report their Swiss accounts to the IRS. The IRS went after UBS on criminal charges of facilitating tax evasion (Aside: the Swiss distinguish between tax evasion and tax fraud). UBS has substantial assets and clients in the US and opted to cooperate rather than see its US operations shut down.
Now that disclosure has started, expect to see a lot more cooperation by foreign banks, tax attorneys, and high net-worth individuals when it comes to their future dealings with the IRS. Maybe, just maybe, the extra added revenue will reduce the inevitable future tax increases imposed on the rest of us.
UPDATE: The IRS has extended their disclosure deadline to October 15.
thanks for this post
ReplyDeleteI think it is a shame that the IRS has gone so rancid after UBS, the ability to hold US assets in foreign banks, i think, is paramount and I don't understand why the strong enforcement. Swiss banks have traditionally been solid rocks for investment holdings. And, why is this bad when some us Fortune 500 companies only pay, in the aggregate, some 20-30% corp income tax by sliding their income in foreign entities. The latter is legal?
ReplyDeleteI just figured out what TTT meant. Nice way to change the adage to something positive.
ReplyDeletethis IRS witch hunt is going to cost the US economy big money. Soon all the European countries will demand that the US banks disclose all the rich European citizens names that have "secret" account in the USA so those people can pay taxes in their home contries. Foreigners pay no tax on gains in the US.
ReplyDeleteThose typical political moves for Pres. Obama and Sen. Levin appealing to the ignornant masses of the public by going after "tax cheats" without doing the reasearch of what the long term effect will be. All the dummies are yelling "yea,yea, go after those cheats" not knowing that the Europeans will take their money and run when the US gov't agrees to release the names of those rich Europeans. Maybe another banking crisis???
This IRS crackdown on wealthy taxpayers evading the payment of taxes on US income by using law firms and the "private client" banking services of foreign banks to smuggle unreported income out of the US is long overdue and should be pursued with the greatest possible vigor. The IRS and the Criminal Division of the Department of Justice should prosecute aggressively not only those taxpayers who fail to disclose such actions by September 23, but also the lawyers, law firms, bankers and accountants who have facilitated their criminal conduct by fraudulently forming sham corporations to conceal their smuggling of income out of the US. No non-custodial plea bargains for this -- try them and send them to prison for the maximum possible terms.
ReplyDelete