In 2009 Zurich-based UBS avoided federal prosecution by paying $780 million, admitting it helped thousands of United States citizens evade federal taxes and turned over the names of 250 clients to U.S. authorities. U.S. prosecutors have since charged about 50 Americans with tax crimes
One such former client, Luis Quintero, from Florida, was recently sentenced to four months in federal prison for failing to disclose $4 million in Swiss bank accounts. Quintero, a 64-year-old wholesale perfume importer, pleaded guilty in April and agreed to pay a $2 million fine for failing to file a Report of Foreign Bank and Financial Accounts for the calendar year 2006, according to court records. Read the full article by Susannah Nesmith here.
There is still time to obtain tax relief (and relief from criminal charges) for those with unreported foreign bank accounts.
The deadline for participating in the IRS’ Offshore Voluntary Disclosure Initiative (OVDI) is August 31, 2011. Under this program, the IRS is giving taxpayers an opportunity to report their foreign bank accounts without facing criminal sanctions. One thing we do know is that some people are simply too fearful and are not going to come forward because they are not willing to face the consequences. However, some tax professionals believe that the risks are multiplied for those that are not willing to participate in this initiative. The rationale is that the IRS must work even more aggressively to catch and prosecute the non-participants in order for the initiative to work. If not, then it will not seem that the participants received any benefit by disclosing their foreign bank accounts.
For information on obtaining an extension on submitting your FBAR filings, see Question 25.1 of the IRS’ Q&A page.
If you have one or more foreign bank accounts or other financial accounts, you may be required to file a Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), which is due by June 30, 2011. The aggregate value of your accounts must be higher than $10,000 to trigger the filing requirement. The FBAR is required even if the accounts did not generate any interest or taxable income during the past year.
Penalties for willful non-compliance with FBAR reporting requirements are severe: $100,000 or more for civil penalties and $500,000 for criminal penalties, plus possible prison time.
If you failed to file FBAR reports for prior years, you should file them along with a statement explaining why they were filed late. However, if your account(s) generated any reportable income for the delinquent years, then you should follow the procedures under the IRS 2011 Offshore Voluntary Disclosure Initiative.