IRS Chief Pleased With Offshore Amnesty Haul
by Leroy Baker, Tax-News.com October 16, 2009
US Internal Revenue Service (IRS) Commissioner Doug Shulman has said that he is pleased with the response to the agency’s voluntary offshore bank account disclosure scheme, the deadline for which passed on October 15.
According to Shulman, the IRS received some 7,500 applications for the scheme, with disclosures ranging from USD10,000 to as much as USD100m associated with foreign bank accounts in all corners of the globe.
The latest offshore disclosure initiative seems to have been much more successful than a similar scheme administered by the IRS in 2004 known as the Offshore Voluntary Compliance Initiative. Under the 2004 amnesty, only 1,300 individuals came forward and the IRS collected about USD170m in unpaid tax. Shulman, however, has not disclosed how much the 2009 scheme will bring in for the Treasury, but it is certain to be a much higher figure.
The latest amnesty scheme was launched by the agency in March this year, and is just one of the many initiatives being used by the Obama administration to ensure that offshore income, both personal and corporate, is taxed in the US. Under the terms of the 2009 scheme, those making a voluntary disclosure about money held overseas face a penalty of 20% of the highest aggregate value of the account on one day in the last six years. The IRS also removed the threat of criminal prosecution. Ordinarily, if a taxpayer is discovered to have undeclared offshore income or assets, they face penalties up to 100% and possible jail time. The original deadline was set for September 23, but the IRS extended the amnesty until October 15 after it received an influx of requests from tax practitioners who themselves have been inundated with enquires about the scheme from their clients. Shulman warned that no further extensions will be granted, and that the agency will be unlikely to run another amnesty program any time soon.
Buoyed by the success of the 2009 amnesty, Shulman has revealed that the IRS is opening more representative offices abroad in places like Panama, China and Australia, and will also increase staffing levels in existing overseas offices, which include Barbados and Hong Kong.
The agency is also to create a dedicated team of enforcement and investigation officers to chase up wealthy individuals with complex, often international-based, financial arrangements, and President Obama’s 2010 budget includes extra resources for the IRS to hire almost 800 additional enforcement personnel.
Sixth UBS Client Pleads Guilty to Tax Charges
By WebCPA.com Staff
A retired Boeing sales manager is the latest UBS client to plead guilty to filing a false tax return after the Swiss bank agreed to disclose the identities of some of its U.S. clients.
Robert Cittadini of Bellevue, Wash., accepted responsibility for hiding up to $1.86 million in accounts at the Swiss bank and failing to report the income he earned from the accounts on his 2001 to 2003 tax returns. Cittadini also did not file a Report of Foreign Bank and Financial Accounts, or F-BAR form, for each of those years.
Cittadini initially opened an account with UBS in the early 1990s in his own name, but around 2001, Swiss banker Hansruedi Schumaker, who was indicted in August 2009 on conspiracy charges, helped him transfer assets from his UBS account to an account named for Mataropa Finance Limited, a nominee Hong Kong corporation that helped him hide the assets. Swiss lawyer Matthias Rickenbach, also indicted in August, was a director of the Hong Kong entity.
Sentencing in Cittadini’s case is scheduled for Jan. 8, 2010. He faces up to three years in prison and a $250,000 fine. He also has agreed to pay a civil F-BAR penalty based on 50 percent of the highest account balance from 2001 to 2007.
“This is a time of reckoning for those who thought they had found a safe haven for cheating,” said U.S. Attorney Jenny A. Durkan in a statement. “People who avoid paying their fair share hurt all of us who follow the law and conscientiously pay our taxes.”
In February 2009, UBS entered into a deferred prosecution agreement in which the bank admitted to helping U.S. taxpayers hide accounts from the IRS. As part of the agreement, UBS provided the U.S. government with the identities and account information of some U.S. customers of the bank’s cross-border business. Cittadini’s case is the sixth guilty plea arising from that information.
In June 2009, Steven Michael Rubinstein, a Boca Raton, Fla., accountant, pleaded guilty to filing a false tax return. In April 2009, another UBS client, Robert Moran, a Ft. Lauderdale, Fla., yacht broker, pleaded guilty to filing a false tax return. In July 2009, Jeffrey Chernick, of Stanfordville, N.Y., pleaded guilty to filing a false tax return. In August 2009, John McCarthy, a resident of Malibu, Calif., pleaded guilty to failing to report his ownership of and interest in a foreign financial account. In September 2009, Juergenn Homann of Saddle River, N.J., pleaded guilty to failure to file an F-BAR form.
Over the summer, UBS agreed to hand over information on an additional 4,450 U.S. clients under an agreement brokered by the Swiss and U.S. governments.
IRS Corporate Audit Division Will Examine UBS Tax Evasion Cases
By Ryan J. Donmoyer, Bloomberg.com
The U.S. Internal Revenue Service is shifting audits of wealthy Americans suspected of offshore tax evasion to an elite division that usually examines businesses as it prepares to receive data on 4,450 UBS AG Swiss bank accounts.
The tax agency posted internal job listings yesterday seeking auditors to work for a newly created office within its Large and Mid-Size Business division that will be tasked with monitoring what it called the “global high-wealth industry.”
The move centralizes responsibility for auditing wealthy individuals suspected of offshore tax evasion in a unit with the most experience navigating international tax treaties and untangling complex cross-border business structures.
“That’s where the most sophistication is at IRS,” said Michael Murphy, a former deputy IRS commissioner who is now a consultant for the law firm Sutherland Asbill & Brennan LLP in Washington.
Responsibility for auditing wealthy individuals is currently split among IRS divisions devoted to small businesses and self-employed wage earners and investors, which don’t have as much experience in cross-border transactions, Murphy said.
The IRS says it anticipates handling up to 10,000 new cases related to UBS, including thousands of people who come forward voluntarily in exchange for reduced penalties before Sept. 23.
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UBS whistle-blower gets 40-month sentence
By Martha Brannigan, MiamiHerald.com
In a surprisingly heavy judgment, Bradley Birkenfeld, the former UBS private banker who blew the whistle on a wide-ranging scheme in which the Swiss bank helped wealthy Americans dodge income taxes through secret accounts, was sentenced to 40 months in prison Friday morning.
The sentence was 10 months longer than the prosecution had asked for. The defense had sought probation, pointing to the major impact of Birkenfeld’s unprecedented cooperation. The prosecutors said Birkenfeld is still helping the government and will remain free until Jan. 8, 2010.
In federal court in Fort Lauderdale, U.S. District Judge William J. Zloch ordered Birkenfeld to pay a $30,000 fine. After prison, he has three years of probation.
Birkenfeld, a tall and athletic man of 44, laid the foundation for the federal government’s most devastating assault ever on Swiss banking secrecy and offshore tax cheats. He wore a gray pinstripe suit, blue shirt, red tie and the beginnings of a goatee.
Drawing heavily on details Birkenfeld provided about UBS’ illegal practices in helping U.S. tax cheats, the Internal Revenue Service filed a civil suit seeking to force the bank to turn over information on thousands of unidentified UBS account-holders with secret offshore accounts.
As a result, the U.S. and Swiss government on Wednesday unveiled details of an agreement under which the IRS will end up getting details on 4,450 secret accounts through diplomatic channels in exchange for abandoning its aggressive court tactics.
Assistant U.S. attorney Jeffrey A. Neiman recommended that Birkenfeld get 30 months in prison for his conviction on one count of conspiracy to defraud the government — down from the 60-month maximum sentence he is exposed to — because of his extensive cooperation.
Zloch had delayed Birkenfeld’s sentencing four times at the request of prosecutors who are continuing to debrief him, but last week turned down a fifth request.
Birkenfeld was one of about 50 UBS private bankers catering to U.S. clients. His special services to rich Americans who wanted to hide money in secret offshore accounts once included slipping through U.S. Customs carrying diamonds stuffed inside a toothpaste tube.
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Voluntary Disclosure
From IRS.gov
Taxpayers with unreported income relating to offshore transactions who wish to voluntarily disclose the information to the IRS can find information on the process.
For a complete understanding of the voluntary disclosure procedures, see Internal Revenue Manual (IRM) 9.5.11.9
Taxpayers wanting to participate in the IRS voluntary disclosure process should call the phone number associated with the state in which they reside. See Contact IRS About Voluntary Disclosure. (Updated 7/29/09)
See also Voluntary Disclosure: Questions and Answers re: the voluntary disclosure process and undisclosed offshore accounts (Updated 8/25/2009).
Swiss Banking Executive and Swiss Lawyer Charged With Conspiring to Defraud the United States
Defendants Aided Wealthy Americans Conceal Assets in Secret Swiss Bank Accounts
From PRNewswire.com
Hansruedi Schumacher and Matthias Rickenbach, both of Switzerland, were indicted today for conspiring to defraud the United States, the Justice Department and Internal Revenue Service (IRS) announced. According to the indictment, Schumacher worked as an executive manager at Neue Zuercher Bank (NZB), a Swiss private bank located in Zurich, Switzerland. Rickenbach worked as a Swiss attorney who provided legal advice and services to U.S. clients. Both are alleged to have aided wealthy Americans conceal assets and income in Switzerland from United States authorities.
According to the indictment, Schumacher and Rickenbach helped wealthy American clients conceal their assets by establishing sham and nominee offshore entities to hide their U.S. clients’ assets and income while allowing these clients to still control the assets and make investment decisions.
The indictment further alleges that Schumacher and Rickenbach regularly traveled to the United States to conduct banking and investment activities with their U.S. clients and that when they traveled they concealed their business activities in the United States by falsely representing to American authorities that they were traveling to the U.S. for personal reasons. While in the United States, the defendants would sometimes bring cash for their clients..
According to court documents, Schumacher and Rickenbach aided their wealthy American clients repatriate money back to the United States using several deceptive means. Schumacher and Rickenbach helped their clients obtain offshore credit cards and created sham loan documents. Additionally, Schumacher and Rickenbach falsified bank documents to generate the appearance that assets of their U.S. clients belonged to Swiss citizens, and they falsified documents to disguise their United States clients’ repatriation of offshore funds as inheritances from foreign citizens.
According to court documents, Schumacher and Rickenbach discouraged their U.S. clients from voluntarily coming into compliance in the United States. Instead, the defendants encouraged their clients to transfer their assets from UBS, a large Swiss bank, to NZB, a smaller bank in Switzerland. The defendants told their clients that their assets and identification would be safer at NZB because they had no presence in the United States and was therefore less likely to be pressured by the American authorities to disclose the identities of their United States clients.
“The Justice Department will continue to investigate leads provided by U.S. taxpayers who have come forward to disclose foreign bank accounts and will prosecute those foreign bankers and banks who illegally helped U.S. clients evade taxes,” said John A. DiCicco, Acting Assistant Attorney General of the Justice Department’s Tax Division. “We encourage foreign banks to come forward and disclose their conduct immediately, before we learn about their criminal conduct from U.S. taxpayers.”
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U.S. Builds Crime Cases on Clients of UBS
By Lynnley Browning, New York Times (8/13/09)
Federal prosecutors are building criminal cases against 150 wealthy American clients of the Swiss banking giant UBS as part of a continuing investigation into tax evasion, a person briefed on the matter said Thursday.
Many of the inquiries, which are being handled by dozens of prosecutors around the country, will result in criminal complaints, said this person, who was not authorized to speak publicly. While it is not clear where the government got the 150 names, federal investigators received 285 names from UBS in February as part of a settlement, as well as names from other sources. In February, UBS agreed to pay $780 million to settle charges that it had helped American clients evade taxes on nearly $20 billion hidden in offshore accounts.
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IRS Releases Streamlined Offshore Voluntary Disclosure Form
The IRS has posted to its Web site a three-page “optional format” short form for taxpayers to use when applying for the Voluntary Disclosure Program. The form asks taxpayers to estimate the annual highest aggregate value for their offshore accounts or assets for the years 2003–2008. It also requires them to list estimated total unreported income from offshore accounts for each of those years.
For accounts or assets for which the taxpayer has control or is a beneficial owner, the form requires taxpayers to list any and all financial institutions and the country where the institution is located. Taxpayers must also explain the purpose for establishing the offshore account and list each person or entity affiliated with the account.
Affected taxpayers have until Sept. 23 to apply to participate in the Voluntary Disclosure Program. Under the program, taxpayers making voluntary disclosures of offshore noncompliance can avoid the foreign bank and financial account balance nondisclosure penalty provisions and other provisions pertaining to various information returns. The IRS has published local phone numbers in 50 states and 9 foreign countries that taxpayers can use to contact the IRS about voluntary disclosure.
U.S. demands UBS “comply in full” in tax evasion case
By Tom Brown, Reuters.com
The U.S. Justice Department said on Tuesday it was pressing ahead with its five-month-old lawsuit against UBS AG to force the Swiss bank to identify thousands of U.S. clients with secret UBS accounts.
Despite recent media speculation about a possible settlement of the case, the Justice Department said in a brief filed with a Florida court that it was seeking to enforce tax compliance with the full weight of U.S. law.
“The United States has a strong national interest in making sure that all U.S. taxpayers comply with the tax laws, including disclosing their offshore accounts, and paying all the taxes they owe,” the department said in the brief.
The U.S. government sued UBS in February in the U.S. Southern District Court of Florida, seeking the names of 52,000 Americans suspected of using the bank to hide nearly $15 billion in assets and evade U.S. taxes.
“The United States has proven its case for enforcement. The Court should order UBS to comply in full,” the Justice Department said in its filing.
In response, a spokesman for UBS said enforcement of the U.S. summons would require the bank to violate Swiss law and was inconsistent with U.S.-Swiss treaty frameworks.
A court hearing on the U.S. government case against UBS has been scheduled for July 13.
Click link above for complete article.
UBS Client Rubinstein Pleads Guilty Over Tax Return
By Mort Lucoff and David Voreacos, Bloomberg.com
A Florida millionaire pleaded guilty to filing a false tax return that failed to disclose secret accounts he held at UBS AG, the largest Swiss bank by assets.
Steven Michael Rubinstein, 55, of Boca Raton, was the first U.S. taxpayer charged after UBS gave more than 250 customer names to the Internal Revenue Service under a Feb. 18 agreement to avoid prosecution for helping wealthy Americans evade taxes. He entered his plea today in federal court in Miami.
UBS handed over account data on Rubinstein, a chartered accountant who has worked since 1994 at an international yacht company. He is cooperating with a U.S. probe of scores of U.S. taxpayers. He pleaded guilty to filing a false return in 2004 and admitted failing to disclose UBS accounts from 2001 to 2007.
“Today’s guilty plea resolves the first prosecution of a UBS client based upon records received from UBS,” Jeffrey Sloman, acting U.S. attorney in Miami, said in a statement. “More prosecutions are expected to follow.”
Rubinstein, who was arrested on April 2, faces up to three years in prison. He also admitted failing to file reports of foreign bank and financial accounts, or FBARs. He must pay back taxes, fines and a penalty of 50 percent of the highest annual balance from 2001 to 2007. He is free on $12 million bail.
Rubinstein admitted UBS helped him set up the British Virgin Islands corporation Hybridge International Ltd. Over seven years, his UBS bankers helped him buy and sell securities worth 4.5 million Swiss francs ($4.1 million), he admitted.
Real Estate, Krugerrands
He also admitted transferring $3 million from UBS to a Monaco account and then to the U.S. to buy property and build his home in Boca Raton. In all, he transferred $7 million from a Monaco account to build his home. He also used his UBS accounts to deposit and sell more than $2 million worth of South African Krugerrands.
UBS, based in Zurich, avoided prosecution by admitting it helped taxpayers hide money in Swiss accounts to dodge paying U.S. taxes. UBS also agreed to make reforms and pay $780 million in fines and penalties.
As part of its agreement, UBS admitted that from 2000 to 2007, its Swiss private bankers helped wealthy Americans evade U.S. taxes by setting up sham offshore companies in tax havens. UBS said it created misleading forms saying those offshore companies, not taxpayers, were the beneficial owners.
On Feb. 19, the U.S. government sued UBS to try to force disclosure of the identities of as many as 52,000 American account holders who allegedly hid their secret Swiss accounts.
Passports, Boat Keys
A U.S. magistrate judge at a bail hearing April 8 ordered Rubinstein to surrender his U.S. and South African passports and keys to his 45-foot boat.
Rubinstein’s home is worth $5 million to $6 million, he said at the hearing. He said he owned two condominiums in Boca Raton worth about $1 million and a condominium near Tel Aviv worth about $800,000. He said he also owned a 2007 Mercedes and a 2002 Mercedes and leased a Lincoln Navigator.
Rubinstein’s attorney, Robert Panoff, declined to comment.
The case is U.S. v. Rubinstein, 09-cr-60166, U.S. District Court, Southern District of Florida (Miami).
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