The US Internal Revenue Service (IRS) has added more banks to the swelling list of financial institutions involved in tax avoidance.
Customers of these banks owning up to past financial indiscretions under the Offshore Voluntary Disclosure Program (OVDP) face penalties based on balances over the past eight years.
Penalties for not properly disclosing tax on income earned with banks off the list are an average 27.5% the OVDP penalty – but those for the 93 banks on the list are doubled up to 50% or $100,000.
However, the penalty is for each offence and one Florida taxpayer has paid 150% of his bank balance as a penalty.
Carl Zwerner ended up paying $2.24 million in OVDP penalties for accounts worth $1.6 million.
Is your offshore bank on the IRS penalty list?
The latest banks listed are:
- Bank J. Safra Sarasin SA(effective 23/12/15);
- Coutts & Co (effective 23/12/15);
- Gonet & Cie (effective 23/12/15);
- Banque Cantonal du Valais(effective 23/12/15);
- Banque Cantonale Vaudoise (effective 23/12/15);
- Bank Lombard Odier (effective 31/12/15);
- DZ Privatbank (Schweiz) AG (effective 31/12/15);
- Union Bancaire Privée, UBP SA(effective 6/1/16);
- Leodan Privatbank AG(effective date to be announced)
The full list of banks on the OVDP penalty surcharge list is published on the IRS web site.
US taxpayers considering an OVDP disclosure need to take professional tax advice as the IRS offers other disclosure routes.
A tax adviser should work out the likely penalties under the different options and suggest which route to take.
Many US taxpayers who put off voluntary disclosure because they believed Foreign Account Tax Compliance Act (FATCA) would be repealed are now caught in a countdown.
FATCA implications
Foreign banks and financial institutions will start automatically reporting details of accounts controlled by US nationals within a few weeks. If the IRS uncovers tax avoidance, the penalties are likely to be set much higher than those for volunteers.
FATCA is a game changer for US taxpayers who have hidden cash and investments offshore.
The law requires foreign financial institutions to identify their US customers and report their personal and financial details to the IRS.
The IRS then compares that data to tax filings and other forms, such as FBARS, which should show the same income and gains from offshore transactions as the FATCA report.
If they do not tie up, it’s likely a tax inquiry will follow and any transgression will be considered wilful, attracting the highest level of penalties.
