Four More Swiss Banks Penalized
The Department of Justice, Tax Division, has come to 
agreement with four new Swiss banks. The NPA agreements were signed by the following banks:
- Société Générale Private Banking (Lugano-Svizzera) – Penalty of $1,363,000
- MediBank AG – Penalty of $826,000
- LBBW (Schweiz) AG – Penalty of $34,000
- Scobag Privatbank AG – Penalty of $9,090
These banks must provide full disclosure of all US names and values associated with accounts from August 1st, 2008, to the present. They must close all recalcitrant accounts in two years, dormant accounts in four years. Furthermore, these four banks will be added to the OVDP FAQ 7.2 list of named banks.
Any US person that has undisclosed foreign financial assets at one of these banks now has a uniform miscellaneous offshore penalty of 50% of the highest aggregate balance tax year in 2014 OVDP.
Switzerland Publishes Tax Evader List
According to the Swiss weekly Sonntagszeitung (in German) and as reported in Forbes, the Swiss government is publishing the names of all known tax evaders, including their nationality and birthdate, in its publicly available federal news publication. This highly unusual step could mark the unofficial end of Swiss bank secrecy as practiced in that country since the early 1930s.
Publication is meant to allow listed persons to take legal steps to protect themselves and protest the publication, a measure many account holders are apparently not even aware of. It also makes public names of tax evaders in countries where contact with such persons is not allowed. Those U.S. citizens, in connection with whom an administrative assistance procedure is running, are said to be exempt from the publication.
The Nightmarish Impact of Fatca on U.S. Tax Payers
This New York Times article talks about some of the unintended consequences of Fatca and provides timely and relevant insight into the impact it has had on American taxpayers, dual citizens, accidental Americans and many others living and working in foreign (non-U.S. domiciled) jurisdictions. Many companies and banks are making determinations on whether or not to work with or provide services to people based on their citizenship status.
From a practitioner’s standpoint, some of these stories seem fairly unreasonable due to reactions based on misinformation. American taxpayers in foreign jurisdictions, regardless of their facts and circumstances, should seek and locate Federally Authorized Tax Practitioners that can assist them with their compliance needs with the IRS.
Once in full compliance with the IRS, there should be no reason why foreign banks, employers, etc. should not be able to work with these people as before Fatca. Readers for whom the cost of compliance with the banks is an issue should refer to the end of the New York Times article where Gatca (Global Fatca) is briefly mentioned. The OECD may make this a reality at some point. Banks in all areas of the world will need to find a way to comply with these laws as part of the cost of operations.
To note though, once a taxpayer is in full compliance, stays in compliance on year-in, year-out basis with the IRS, and has completed the necessary W9 form (W-8BEN-E for a business), then there should be no issues to hinder the taxpayer from doing business or living in a foreign jurisdiction.
Foreign Tax Credits vs. Deductions
This post provides a summary of Chief Counsel Advice CCA 201517005. Under this advice, the IRS clarifies the difference between foreign tax credits and foreign tax deductions in regards to the ability to claim a refund. Of significant note is that the foreign tax deduction falls under the refund statute expiration date illustrated in IRC 6511(d)(2)(A).
This means that if a tax return was prepared improperly and needed to be amended to take advantage of a foreign tax deduction or change the characterization of a foreign tax credit to a foreign tax deduction, then the return must be submitted within the three statute of limitations to make a proper refund request. Alternatively, if a foreign tax credit was not taken properly, a tax return could be amended within a ten year statute of limitations and produce a proper, timely claim of refund IRC 6511(d)(3)(A).
As the world of taxation becomes smaller, taxpayers facing issues of foreign tax deductions and credits, becomes larger. It is crucial to understand the current guidance and it’s applicability to a fact pattern to produce the best possible outcome.
Swiss Banks Crack Down with Fatca Letters
Another recent article in Forbes illustrates an issue that many taxpayers are currently facing. Foreign banks across the world are sending out Fatca letters with W8-BEN and W9 forms asking taxpayers to fill them out properly to comply with Fatca, the IRS and the United States Government.
However, before filling out these forms, taxpayers need to conduct a due diligence analysis on their Fbar, 8939 and Schedule B compliance over the last six to eight years. These forms, when submitted back to the banks and ultimately the IRS, could spark an investigation for the un-wary and non-compliant taxpayer.
Additionally, the Program for Swiss Banks is gaining traction. The Department of Justice recently negotiated a very swift non-prosecution agreement with another Swiss Bank. There are now 14 banks listed with the IRS that invoke a 50% penalty under OVDP. Taxpayers who are facing any of these issues or receiving Fatca notices and have concerns should immediately contact a Federally Authorized Tax Practitioner and seek assistance.
About Five Stone Tax Advisers
Five Stone Tax Advisers has years of experience negotiating directly with the IRS to get the best possible outcome for you. Our International Tax Advisory and Compliance unit has a team of tax attorneys, certified public accountants and enrolled agents that form a single sourced point of contact that will provide services for all the legal, compliance and financial reconstruction aspects of offshore account cases.
