US Justice and Treasury Departments are making public announcements regarding their successful penetration of the Swiss banking secrecy laws. The IRS Commissioner, Douglas Shulman held a news conference in Washington, DC 17 Nov 09 to proclaim their “offshore disclosure initiative” a big success.  

The Justice Department has projected that “tens of millions of dollars” in taxes will be collected by the US Treasury as a result.  The IRS Commissioner declined to predict or reveal how the government arrived at these projected figures.

However, there are some insights available that can be derived from the US-Swiss agreement that shed light on both who they are targeting and what financial levels attract their attention.  The accounts targeted for disclosure by the Swiss contained over 1 million Swiss Francs (about $990,000 US), although smaller account balances of 250,000 Swiss Francs were included as well as any accounts that generated more than 100,000 Swiss Francs annual income.

The US Treasury and Justice Departments are proud of their efforts to make a significant dent in the bank secrecy laws of other countries.  The US banking industry is required to disclose nearly any and all details and large monetary transactions are reported daily as a matter of normal business.  But the international banking community has long resisted and that prompted a few of the US politicians – who seem eager to spend vast sums of money they don’t have -- to claim that billions of dollars of taxes go uncollected by ‘international tax evaders’.  The implication being, that if they could only get all the tax cheats to pay up they could easily afford the programs they propose.  The result was that administrations of both political parties have used the State Department efforts and international negotiations to leverage access by the US government into private financial records that they have no legal jurisdiction or control over.

The collapse of the Swiss banking protections started with the Swiss decision to disclose the long-held assets of Nazi-era transfers and to facilitate the recovery of those assets by the heirs of the lawful owners who often had little documentation, but could demonstrate heritage rights.  It was long overdue and provided the legitimate heirs with access to their parents and grandparents assets.

The US government is currently demanding access to financial institution records in countries they determine to be ‘tax havens’ including Panamá.  They are using the successful penetration of the stalwart Swiss banking as leverage to gain access to the records in other international banking centers.

So what action does a US citizen/taxpayer need to take?

 US citizen-taxpayers with a cumulative sum in excess of $10,000 in any combination of offshore accounts are required to file the annual Treasury Department Form 90-22.1 disclosing the financial accounts they have a financial interest in or signature control over.  The TD F 90-22.1 document was significantly expanded in December 2008. The form is NOT part of your annual income tax return and is due in Detroit by 30 June each year.  However there may be link on the income tax return that will trigger a cross-check to see if the report has been filed.  The TD form is an information return, there is no tax calculation and so far as this CPA has been able to determine, no late filing fees.  There can be substantial fines and penalties for failure to file the forms which this author has noted in previous public articles and newsletter postings to his client base.