AV Rated Attorney, David M. GarvinAward Winning Tax defense Attorney (305) 371-8101 AV Rated Attorney (305) 371-8101 Award Winning Criminal Tax Attorney
Miami, Tampa, Orlando, Tax Attorney, Tax Lawyer, White collar crime defense, Fort Lauderdale, Palm Beach
In the past, Americans with bank accounts in foreign countries were able to rely on secrecy as a protection against the IRS. Banking secrecy was codified as statutory law (and in some cases, written into the constitution) of certain countries. Other countries observed long traditions and cultures of financial secrecy. Although Switzerland signed a Mutual Legal Assistance Treaty (MLAT) with the US back in the 1990's, that treaty allowed for secrecy to be breached and information shared only for criminal investigations, not the mere failure to report income in a foreign bank account. Thus, Americans with accounts in Switzerland were able to rely on Swiss banking secrecy, as long as they were not connected with criminal activities.

No longer. Recently, offshore banking secrecy has been significantly eroded. Now, in all countries, failure to report a foreign account or income in that account constitutes criminal activity and will give rise to exchange of banking information with the IRS.

Recent Erosion of Offshore Banking Secrecy

Consider the following, all within the past few months:

The IRS has sued UBS, criminally and civilly, claiming that UBS conspired and even encouraged Americans to hide income in secret UBS accounts. In February, 2009, UBS settled the criminal charges, paid a large fine and handed the IRS the names of hundreds of Americans with UBS accounts. The IRS is now investigating and prosecuting these account holders. In the civil lawsuit, the US has subpoenaed the names of some 52,000 Americans with undeclared UBS accounts. Given UBS' significant presence and immense volume of assets in the US, we expect that eventually, UBS will comply with the subpoena.

The IRS is also investigating Credit Suisse and HSBC. The IRS has stated that many other offshore banks are being targeted for investigation as well. One IRS tactic is to issue "John Doe" summonses, which seek information on an entire class of unknown account holders, rather than an individual taxpayer already known to have a foreign bank account. Courts have already proven their willingness to grant such "John Doe" summonses.

The OECD (Organization for Economic Co-Operation and Development), a multi-governmental organization based in Europe, is pursuing its own campaign against "tax havens". In March, 2009, virtually all of the formerly "secret" tax haven jurisdictions, including Switzerland, Liechtenstein and Monaco, agreed to the exchange of banking information with foreign governments, including the US. This ends decades and in some cases centuries of banking secrecy.

Domestically, President Obama and Senators Levin and Baucus have each introduced proposed legislation targeting foreign accounts and Americans who own them. President Obama's legislation seeks to increase the IRS budget and manpower to pursue undeclared money offshore, including hiring 800 IRS special agents to investigate foreign accounts.

Government officials of Caribbean and Central American jurisdictions have advised us that the Obama administration has already indicated to them that Tax Information Exchange Agreements (TIEAs) are on the way and are non-negotiable. Under these TIEAs, the US Treasury Department can request assistance directly from foreign banks in cases of IRS civil audits.

What Should You Do if You Have an Offshore Account?

In light of the above challenges to offshore banking, Americans with undisclosed foreign accounts, including accounts held in the name of companies, trusts or nominees, have reason to be seriously concerned.

There are two potential issues with undisclosed offshore bank accounts: First, not reporting the existence of those accounts to the government (on disclosure forms such as US Treasury Form TD F 90-22.1, Report of Foreign Bank and Financial Account (the "FBAR"), and "checking the box" on the 1040 annual tax return), which can result in significant fines and penalties. The second issue is not paying tax on income earned in a foreign bank account. Failure to pay taxes carries significant civil and criminal consequences. Usually, an undeclared foreign account will involve both issues; not reporting the existence of the account and not paying taxes on income in that account, resulting in a host of attendant civil and criminal fines and penalties, even jail.

If You Have an Undeclared Foreign Bank Account, What Should You Do?

A: Do Nothing
You could do nothing and hope that the IRS does not discover the account. You would be relying on past banking secrecy as a means of providing some degree of protection going forward. Perhaps your account is not at a large bank like UBS, or is in a quieter jurisdiction, and is "off the radar". Given the changing context of foreign banking and the recent erosion of offshore secrecy, sooner or later the IRS may find you and then it will be too late. As discussed above, this strategy is not recommended and it is against the law.

Amend Past Tax Returns ("Quiet Disclosure")
Some US taxpayers with undeclared foreign accounts are hoping to "sneak by" by amending their past tax returns quietly, and paying back taxes on income earned in a foreign account. This is known as a "Quiet Disclosure".

On May 7, 2009, the IRS announced that Quiet Disclosures will not work. The IRS is targeting amended tax returns reporting increases in income, to determine if enforcement action is appropriate. Even though tax returns are amended and back taxes paid, account holders will still face penalties and criminal charges.

There are other problems with "Quiet Disclosures". They only address payment of back taxes and interest, not penalties. Also, they do not address the issue of the taxpayer's failure to report the foreign account, i.e., filing the "FBAR", and 1040 "check the box". If the foreign account was in the name of a foreign trust, then an IRS Form 3520 was probably due also. If the foreign account was in the name of a foreign corporation, then an IRS Form 5471 was probably due. Quiet disclosure does not correct these past non-reporting issues.

Pre-emptive Disclosure and Negotiation ("Voluntary Disclosure")
If you currently have an interest in a non-compliant offshore account, you should consider voluntary disclosure of that interest before the IRS discovers it. The IRS is offering a sort of amnesty to taxpayers who voluntarily come forward before they are discovered. The IRS' Voluntary Disclosure Program offers reduced penalties and a promise of no criminal prosecution. Such a pre-emptive disclosure is best made by qualified legal counsel, experienced in offshore compliance and IRS negotiations. We can approach the IRS on your behalf, demonstrate proper current compliance and negotiate to avoid criminal prosecution and reduce fines and penalties for past non-compliance. Although fines and penalties may be significant, they pale before the consequences of an IRS criminal prosecution. We have a very successful track record with the IRS.

If you are an American taxpayer with an offshore account that you thought was secret, you have very little time to bring it into compliance. Given the elimination of offshore banking secrecy discussed above, you should expect that the IRS will soon learn about your offshore account. UBS has already revealed the identities of some US account holders, and we can expect that UBS, Credit Suisse, HSBC and other banks will provide a complete list of US account holders in the near future. If the IRS gets your name, it will be too late to take advantage of the Voluntary Disclosure Program.

Convert to a Tax-Compliant Structure
We have long counseled proper tax disclosure of foreign accounts and the use of tax-compliant strategies to minimize US taxation on foreign assets. We also advise clients on the legitimization of non-compliant offshore assets. We counsel clients with regard to transforming a non-compliant offshore account into one that complies with current US law. Although we cannot erase a non-compliant past, we can ensure full compliance going forward. Converting a non-compliant foreign account into a compliant structure is often done in tandem with a Voluntary Disclosure. In other words, make amends for past non-compliance, and ensure ongoing future compliance.

Failing to remedy a non-compliant offshore account puts you at serious risk of harsh penalties in the event of discovery, including IRS criminal prosecution. As recent events have proven, discovery is very likely. The window of opportunity is closing fast. See us before it is too late.

IRS Criminal Investigation, IRS Defense Esq.

Foreign Bank Accounts

          Tax and criminal trial lawyer David M. Garvin, P.A. is AVVO rated as excellent and has been recognized as one of the top criminal defense litigator in the country. He holds a Martindale Hubbell AV rating* , has been recognized by SuperLawyers (limited to the top 5% of attorneys in Florida) and was selected by the  Daily Business Review as the "Most Effective Lawyer for 2010 in the area of complex litigation".

           The law offices of David M. Garvin, P.A. concentrates on serious criminal tax cases and white collar crime defense.  Mr. Garvin is a Florida Bar Certified tax attorney and accepts cases nationally. Mr. Garvin defends serious tax and criminal cases alleging tax fraud, bank fraud, healthcare fraud, commodities fraud, wire fraud, bank fraud, ponzi schemes, tax evasion, money laundering, false statements and other serious white collar crimes.

           To make an appointment please call in Miami (305) 371-8101, in Tampa (813) 413-0140, in Orlando (407) 218-4650 or email to: ontrial2@gmail.com

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          This web site is designed for general information only.  The information presented at this site should not be construed to be formal legal advice nor the formation of a atty/client relationship. To learn what is a criminal and  tax attorney read our pages.

          The tax defense firm of David M. Garvin, P.A. has proudly provided exemplary legal services to clients throughout the United States including Orlando, Tampa, Miami, Fort Lauderdale, West Palm Beach, Naples, Hollywood, Miami Beach, Coral Gables, Key West, Tallahassee, Miami, Jacksonville, Los Angeles, Chicago, New York, Atlanta, Dallas, Houston, Knoxville, Philadelphia, Pittsburgh, San Francisco, Little Rock, San Diego, Cleveland, Washington DC, Las Vegas and Boston. Servicing Miami-Dade County, Broward County, Palm Beach County, Monroe County, Leon County, Duval County and Collier County.

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