The IRS has recently gotten access to the highest depositors in UBS after a threat to nationalize UBS deposits in the US. There is an ongoing campaign to have everyone reveal their overseas bank account information. The penalty for being discovered in the UBS information is a fine of $250,000. This is far worse than letting the gov know you have a little money in a local bank by your summer home so you can by groceries.
Are you referring to this column?
What is a “Swiss bank account”? (February 27, 1981)
I know UBS is getting pretty strict about their rules. When I was in Switzerland last summer on vacation, I tried to open an account at UBS and I was rejected (even though I am a Swiss citizen) for the sole reason that I live in the US.
The IRS’ concern is that people were hiding income in Swiss bank accounts to avoid paying US taxes on it.
I had a friend who was visiting Switzerland and decided he’d like to have a Swiss bank account.
He opened the account with a few hundred dollars, and withdrew all but $10. He didn’t mention he had any issues about opening an account, but I guess it wasn’t a business account and there wasn’t a bunch of money involved. For all I know, it’s just a savings account.
Not true, well at least the fine is not a fixed amount. It is based upon how much you had, etc:
http://www.hgexperts.com/article.asp?id=6818
"*Even with amnesty, the amounts owing are still quite painful. In a Frequently Asked Questions released by the IRS on May 6, 2009, the IRS provides the following example based on a $1 million unreported foreign account balance and $300,000 of unreported interest covering five years:
“If the taxpayer comes forward and has their voluntary disclosure accepted by the IRS, they …would pay $386,000 plus interest. This includes:
- Tax of $105,000 [assumes a 35% tax bracket] plus interest,
- An accuracy-related penalty of $21,000 (i.e., $105,000 x 20%), and
- An additional penalty, in lieu of the FBAR and other potential penalties that may apply, of $260,000 (i.e., $1,300,000 x 20%).”
In short, the taxpayer under amnesty pays the U.S. 129% of the total income that was earned. However, this is mild when compared to what the government explains will be demanded without amnesty and $300,000 of total unreported income. In short, the amounts owing will almost two times the entire account balance and accumulated unreported income:
“If the taxpayer didn’t come forward and the IRS discovered their offshore activities, they face up to $2,306,000 in tax, accuracy-related penalty, and FBAR penalty. The taxpayer would also be liable for interest and possibly additional penalties, and an examination could lead to criminal prosecution.
The civil liabilities potentially include:
- The tax and accuracy-related penalty, plus interest, as described above,
- FBAR penalties totaling up to $2,175,000 for willful failures to file complete and correct FBARs (2003- $100,000, 2004 - $100,000, 2005 - $100,000, 2006 - $600,000, 2007 - $625,000 and 2008 - $650,000),
- The potential of having the fraud penalty (75 percent) apply, and
- The potential of substantial additional information return penalties if the foreign account or assets is held through a foreign entity such as a trust or corporation and required information returns were not filed.
Note that if the foreign activity started more than six years ago, the Service may also have the right to examine additional years.”*
So, yes, if you accepted amnesty (too late!) and had a million bucks squirreled away illegally, then yes you would have owed around $250K.
But now it could be as much as $2.5 million. However, there’s nothing magical about a Swiss bank account. You’d owe the exact same amount if the IRS found you hiding any other undeclared income to the amount of $1 million, except that the FBAR penalties would likely not apply.
Now, in theory a US Citizen could have a secret Swiss bank account and have reported all the income already (including a Form TD F 90-22 (FBAR)) in which case there’s no real problem.
Just as a related topic: What’s the big deal about offshore banks? - The Straight Dope
Hmmm… the article doesn’t say about the original $1M, which presumably is also unreported income of some sort? It’s only talking about the interest earned.
Is this a misleading FAQ trying to get unsuspecting dupes to report money which the government will then take? Presumably if the $1M is also unreported income, then pretty much everything and then some goes to the government.
I suspect that anyone who has significant Swiss assets and does not seek professional advice deserves what’s coming.
“originally they were intended to prevent the Gestapo from learning about illegal German foreign deposits during the 1930s”
This is an urban legend. A tremendously successful one, though (it even fooled Cecil!), propagated by the Swiss banks themselves. The truth surfaced during recent debates between other countries (mainly Germany) and Switzerland regarding the secrecy of accounts. Switzerland has been forced to decrease the level of secrecy and cooperate when people are being investigated for tax evasion. (Until recently, at least, tax <I>evasion</I>, i.e. not reporting taxable income, was not even a crime in Switzerland, just tax <I>fraud</I> (i.e. forging documents etc). Much illegal money in Switzerland comes from Germany, for tax-evasion purposes. The idea was that by introducing the lie that the numbered accounts were originally set up to protect Jewish fortunes from the Nazis, Germany would not want to criticise the system.
I think Cecil needs to update this piece!
When was this? Is your friend a US resident? Did he tell them he was a US resident when he opened the account? And was it with UBS?