Credit Suisse and Declaration of Offshore Funds

May 31, 2014

The jury's verdict in the case of Carl R. Zwerner, rendered on May 28, 2014, and the Credit Suisse AG guilty plea entered on May 19, 2014, demonstrate that the IRS is tightening the noose around those individuals with offshore accounts who have still failed to come forward to declare the offshore funds. The IRS is not just targeting Swiss accounts. They are seeking information about the accounts of US citizens and residents in financial institutions around the globe and have thus far received the cooperation of the governments in more than 60 countries. For example, agreements are now in place and IRS investigative activity is underway in formerly secure countries like Lichtenstein, Isle of Mann, Israel, and Singapore. In Zwerner, the jury found that the taxpayer willfully failed to file the Report of Foreign Bank and Financial Accounts forms for three of the four years charged.  The Jury also found that Mr. Zwerner was not eligible for the IRS's 2009 Offshore Voluntary Disclosure Program and its limited penalty structure.  In Zwerner, the IRS is seeking penalties of 50 percent of the account for each of the years involved.  Although the Judge will ultimately determine penalties, the taxpayer's exposure is in excess of 100 percent of the undisclosed account.  In the past the IRS has limited penalty requests to one year or 50 percent of the account.  With their victory in Zwerner, however, expect FBAR penalties in excess of 100 percent to become the norm. As the names of Credit Suisse customers are disclosed to the IRS, we expect IRS audits and proposed  penalties to soar. Had the defendant Zwerner acted sooner he may have been able to take advantage of the Offshore Voluntary Disclosure program to avoid criminal prosecution and limit civil penalties. That is still a possibility for individuals with undisclosed foreign accounts who act quickly before their names are disclosed to the IRS. For further information, please call Julian Fortuna at 678.336.7191

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