U.S. tax cheaters line up against their accused ex-Swiss banker

American taxpayers who opted to disclose their offshore accounts to avoid prosecution paraded into a New York courtroom this week.

They came to testify against their former Swiss banker who is on trial for helping customers conceal millions of dollars from the Internal Revenue Service as the U.S. began cracking down on tax evasion. The taxpayers told jurors how Stefan Buck, 37, former head of private banking for Bank Frey & Co., advised them to open accounts at the Zurich-based financial institution after UBS Group AG admitted in 2009 that it fostered tax cheats and paid a $780 million penalty.

Prosecutors allege Buck conspired with a Swiss lawyer, Edgar Paltzer, to open and maintain undeclared accounts on behalf of U.S. taxpayers who were forced to close accounts at other banks.

Buck is one of the few foreign bankers, lawyers and advisers charged in the U.S. effort to tackle Swiss-aided offshore tax evasion who is defending himself in court. A handful of the defendants, including Paltzer, have pleaded guilty and agreed to cooperate, while at least two have been convicted and two others were acquitted.

Client Testimony

Christine Warsaw, a 67-year-old from Carefree, Arizona, testified that Buck convinced her and her late husband, Steve, to move about $1 million to Bank Frey from Credit Agricole SA, where employees told them it was “kicking out the American accounts” because of concern about U.S. scrutiny.

“We didn’t want the IRS to be notified,” Warsaw said. “It would open us up to investigation.”

Warsaw said Buck told them he didn’t have to report their holdings to the IRS if they allowed Bank Frey to have discretionary management of the account, and that it couldn’t hold U.S.-based securities or investments. They opened two accounts at Bank Frey, which Warsaw said they closed after getting a subpoena in 2011.

The couple entered a voluntary offshore disclosure program and paid more than $1 million in taxes, interest and penalties on the accounts, she said in federal court in Manhattan

The 2009 UBS settlement led to more than 50,000 voluntary disclosures to the IRS and the repatriation of billions of dollars. It also led 80 other Swiss banks to reach non-prosecution agreements with the Justice Department to resolve potential liability in the U.S. for tax-related criminal activity.

Buck’s attorney, Marc Agnifilo, tried to shift the blame onto the taxpayers during his opening statements, saying that many of them have been evading taxes since the 1970s, while his client was only born in 1980. Buck was a low-level employee at Bank Frey who was simply following orders from his superiors, Agnifilo said.

“This case involves a massive and unwarranted shift in personal responsibility,” Agnifilo said. “All but one of them got a pass, a complete pass from criminal prosecution. The rest of them broke the laws of this country with total impunity. All they had to do was point at Switzerland.”

The case is U.S. v Paltzer, 13-cr-00282, U.S. District Court, Southern District of New York (Manhattan).

Source: Accounting Today

IRS Committed to Stopping Offshore Tax Cheating

Over the years, numerous individuals have been identified as evading U.S. taxes by attempting to hide income in offshore banks, brokerage accounts or nominee entities. Then access the funds using debit cards, credit cards or wire transfers. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as bankers and others suspected of helping clients hide their assets overseas.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant  fines, as well as the possibility of criminal prosecution.

Since 2009, tens of thousands of individuals have come forward to voluntarily disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore is increasingly more difficult.

At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program  following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program will be open for an indefinite period until otherwise announced.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 501-896-2999

Offshore Voluntary Compliance Efforts Top $10 Billion

As international compliance efforts pass several new milestones, the Internal Revenue Service reminds U.S. taxpayers with undisclosed offshore accounts that they should use existing paths to come into full compliance with their federal tax obligations.
Updated data shows 55,800 taxpayers have come into the Offshore Voluntary Disclosure Program (OVDP) to resolve their tax obligations, paying more than $9.9 billion in taxes, interest and penalties since 2009. In addition, another 48,000 taxpayers have made use of separate streamlined procedures to correct prior non-willful omissions and meet their federal tax obligations, paying approximately $450 million in taxes, interest and penalties.
“The IRS has passed several major milestones in our offshore efforts, collecting a combined $10 billion with 100,000 taxpayers coming back into compliance,” said IRS Commissioner John Koskinen. “As we continue to receive more information on foreign accounts, people’s ability to avoid detection becomes harder and harder. The IRS continues to urge those people with international tax issues to come forward to meet their tax obligations.”
Under the Foreign Account Tax Compliance Act (FATCA) and the network of inter-governmental agreements (IGAs) between the U.S. and partner jurisdictions, automatic third-party account reporting has entered its second year. More information also continues to come to the IRS as a result of the Department of Justice’s Swiss Bank Program. As part of a series on non-prosecution agreements, the participating banks continue to provide information on potential non-compliance by U.S. taxpayers.
OVDP offers taxpayers with undisclosed income from foreign financial accounts and assets an opportunity to get current with their tax returns and information reporting obligations. The program encourages taxpayers to voluntarily disclose foreign financial accounts and assets now rather than risk detection by the IRS at a later date and face more severe penalties and possible criminal prosecution.

Courtesy of IRS

For information contact Neikirk, Mahoney and Smith at 502-896-2999