If you are holding an undeclared foreign bank account, don’t depend on the Swiss or anyone else. Recently, the U.S. government went to court against the United Bank of Switzerland (UBS) in an attempt to force them to hand over all of the names of American citizens holding accounts with their bank. The Swiss gave in, but only a little.
It is estimated that about 50,000 Americans have Swiss bank accounts. UBS only handed over 250 names. They said they only gave the names of people they thought might be committing a criminal act.
It is not illegal for an American citizen to hold an overseas bank account. What is illegal is for that account to go undeclared on your income tax return. There is a box on your return that you are supposed to check if you maintain an overseas bank account. If you do not check that box, but do maintain an overseas account, that is illegal.
Hundreds of thousands of United States citizens maintain legal overseas bank accounts. They are legal because they check the box. The Internal Revenue Service is now aggressively seeking illegal accounts from all around the world, not just in Switzerland.
What is remarkable about the Swiss turning over any information at all is that it is the key nature of the Swiss banking system that the identity of account holders remains private. The United States government has been attempting to get the names of American account holders from the Swiss for decades. Now, they have relented, if only slightly. Some believe this is a sign of the times.
The Internal Revenue service must believe this as well because they made an amnesty offer to undisclosed holders of foreign bank accounts just this year. Under the deal, the Internal Revenue Service would hold you immune from fines and prosecution if you willingly gave up your name and account information. The deadline date was September 23rd.
Since that date has come and gone, you are now in for the full treatment should the Internal Revenue Service find you holding an undisclosed foreign account. They can drag you into a very deep investigation of your entire financial and personal history. They call this investigation a lifestyle audit. They might not quit there. Since you have been hiding the existence of this foreign account, they will want to know how you got every red cent that’s in there and they will drag in the Department of Homeland Security to help.
After all, who is to say that you are not an international terrorist or drug cartel member?