• The Geithner effect and offshore bank account enforcement (my point there is that the IRS is making people fear them yet people are willing to cheat more — “keep doing what you’re doing and you’ll keep getting what you’re getting” is the moral of THAT story).
• Latest guilty plea in Swiss bank land (a doctor will go to jail for doing dumb things with a relatively small amount of money, and the moral of THAT story is that if you need expert advice go find a real expert).

Please check the main website regularly, as that is where most of my writing will be done.

ITALIANS are reckoned to have around €300 billion ($440 billion) of assets stashed abroad. The government would like to lure them back, or at least recoup some of the taxes it has lost out on. Tuesday December 15th was the deadline for bringing home or declaring assets secreted beyond the country’s borders under an initiative enacted in August known as the scudo fiscale, or “tax shield”.

The terms are attractive. Offenders remain anonymous throughout (hence the name). A penalty equal to 5% of assets wipes the slate clean of any tax offences committed before the end of 2008. UniCredit, a large Italian bank, describes the measure as extremely advantageous for residents who have been non-compliant.

Contrast that with the IRS and its “Sinners Must Burn In Hell” approach to penalties. “You will pay 20% and be grateful” seems to be the standard approach in the U.S.

It remains to be seen how successful the Italian amnesty turns out to be. I would expect — all else equal — that lower penalties mean greater enthusiasm amongst noncompliant taxpayers. Cheaper is better.

Of course, “all else equal” never exists. But at least in one key attribute the Italian tax authorities and the IRS are alike. Just like our friends at 1111 Constitution Avenue, the Italian tax boffins are demonizing the Swiss:

The Swiss are the main targets. Almost two-thirds of €78 billion brought to light by a previous scudo fiscale eight years ago were held in Switzerland. Even now, Italian financial assets in Ticino, an Italian-speaking Swiss canton, probably amount to €130 billion-170 billion. Italy has branded its neighbour an unco-operative tax haven and does not allow assets held in Switzerland to become compliant in the same way as those in other countries on the OECD’s “white list” of offshore tax centres.

“The scudo fiscale and the inequitable treatment of Switzerland have created a difficult climate,” complains Franco Citterio, director of the banking association in Ticino. Mr Citterio cites “excessive” frontier checks by Italian border guards and incursions by plain-clothes policemen into Switzerland to film customers in Lugano, the canton’s financial capital.

Some doubt whether Switzerland will really lose out. The government in Rome hopes that the scudo fiscale will raise about €4 billion in penalties, meaning that around €80 billion of assets will be declared. Less than a quarter of that amount will return home, forecasts Sergio Ermotti, UniCredit’s deputy chief executive. A senior banker in Lugano believes that the expertise of Swiss private banks means that many Italian clients will continue to entrust their wealth to them, either in Switzerland itself or in their onshore Italian branches.

Thanks, T, for sending the link.

Secrecy is a doomed tax strategy. It may be now, or it may be later. But sooner or later secrecy will fail you. (Or if it works for you, when you die you will kick the problem over to your kids. Lucky them.)

Unintended consequences, bucko. Unintended consequences. As the anti-secrecy brigade continues to push, watch carefully for signs of the unintended consequences. Subtle but inexorable, they are.

In German

The Google Translate version follows:

SWITZERLAND SACRIFICE UBS CLIENTS

The American tax authorities are not only the data from UBS tell customers, but also those of the participating Swiss asset manager. Whether UBS employees or not.

Vasilii MUSTUR AND ARTHUR RUTISHAUSER

It was a closely guarded state secret. Now, the “Sunday makes” transparent criteria by which 4450 data of American bank UBS clients to the Internal Revenue Service (IRS) will be handed out. As a concerned customer confirms shall hand over the “Sunday”, the Swiss Federal Tax Administration to the U.S. from the customer if the following criteria are met:

● 1 Delivered, all data from living in America customers (technical term U.S. persons) who at least once from 2001 to 2008 more than one million francs on an undeclared account (non-technical term had W-9) and for which a “reasonable suspicion of fraud or similar “exists.

● 2nd Data will be delivered by “U.S. persons”, wherever they reside, if they are economically justified with an account of so-called offshore company were. These data were already partially delivered last February. New down as well Liechtenstein foundations underneath. Here, too, must be a “reasonable suspicion of fraud or the like” are available.

A “reasonable suspicion of fraud or similar” for non-declared accounts of living in America, U.S. persons (case 1) is available in the following cases: the case of activities as they are to build a “so-called building lies” necessary or the submission of non – correctly or incorrectly completed documents. This is the classic form of fraud. In this case, customers are concerned their property during the relevant period under one million francs, but at least it was once over 250 000 francs.

As the “same” as the major so-called tax evasion is under Swiss law. That must be achieved during three years on an income of 100 000 francs, and not the U.S. have been reported. At least one of these income must fall within the period between 2001 and 2008.

In case 2 is for example used to Liechtenstein foundations. For their beneficial owners in the case of fraud is also a lower limit of 250 000 francs. As a heavy tax revenues are again of 100 000 francs for three years, with at least one from 2001 to 2008, qualified.

The Americans will be delivered to the knife not only customers but also their environment. If the above-mentioned categories met, the following documents must be provided:

● All account information about the American UBS clients. Including details of who was at best signatory asset managers.

● The correspondence between the bank and the customer concerned.

● Internal data related to U.S. customers, and where available, consistent with their agents.

● Internal UBS communications and memoranda and reports, all information on existing accounts that do not fall under the above criteria. Everything will be delivered on paper or electronic data.

This meant that Switzerland also provides asset managers and customer advisors, whether at the UBS hired or not, from the American justice system. The IRS reserves the right to explicitly use all data obtained for future legal proceedings.

The IRS has already done in several cases, and Swiss wealth managers were indicted in the U.S. and issued for the arrest for acts that were committed in Switzerland, under Swiss law are perfectly legal.

These Konrad Hummler private banker: “It’s just the curse of the evil deed – namely that they wanted to save the UBS inder present form, including a subsidiary in the USA -: Our authorities have thus become recipients of orders. Whatever you do in the future, we must not let ourselves be cornering! ”

• Low balance in the account — high enough to trigger the reporting requirement but low enough so you wonder why the IRS would even care;
• It’s his mom’s money, not his; and
• He learned about the FBAR problem after the deadline of 15-Oct-09.

There are a lot of you out there — people who didn’t know about the FBAR problems — that you have to report the existence of foreign accounts over which you have ownership or control. Keep reading. I will be putting most of the new stuff on the firm’s main website but will put cross-links here so you can find your way.

Call us. We can help you with the “I’m late to the FBAR party, what do I do?” problem. My mobile phone is +1-626-437-2500.

• Go to the IRS website and find the address and phone number for the IRS Criminal Investigations office for where you live.
• Call them and get their fax number.
• Do the edits you need to do. Don’t worry about being Marcel F-ing Proust. Just hack it up and get the info in there.
• Fax that sumbitch to the IRS.
• Call them and ask them to confirm that they got your fax.
• Find someone to buy you a drink.
• Call me on my mobile at +1-626-437-2500 and hire us to take you from there. Or call someone else. ‘Cause you’re going to need it.

OK. Jay Johnson is going to hate me. But if you can’t figure out where to send your letter, fax it to him. Full info is below helpfully pre-built into this letter. I’m just sayin’ that you take the position that you got your letter into the IRS before the deadline. Yeah footfault on the PLACE for filing. But you’re in.

Remember, I’m not telling you to do this. I’m just giving you the ammo if you need to get it done.

Here you go. Vaya con Dios.

October 15, 2009

Jay N. Johnson
Supervisory Special Agent

IRS-Criminal Investigation
Los Angeles Field Office
801 Civic Center Drive West
Room 218, MS 8000
Santa Ana, CA 92701

Delivered via fax to 714-347-9561

Subject: Voluntary Disclosure Regarding Offshore Activities
Taxpayer: (Name)
Social Security Number:

Date of Birth:

Address on Return:

Dear Mr. Johnson:

This letter constitutes the above-identified taxpayers’ formal notice to the Internal Revenue Service of their desire to participate in the current program for voluntary disclosure of offshore activities by U.S. taxpayers. The taxpayers are fully willing to cooperate with the IRS
in determining the correct tax liability.

The voluntary disclosure made relates to Swiss accounts owned by them.

Please contact me for follow-up questions. My daytime telephone number is _____________ and my email address is ______________. I will be following up shortly with a second letter, following the guidelines of the “Offshore Voluntary Disclosures – Optional Format” letter published by the IRS on 7/28/2009.

I look forward to working with you or one of the Special Agents in your office in order to process this application and receive a determination letter from your office advising that the taxpayers are eligible for the voluntary disclosure program.

Very truly yours,

Philip D.W. Hodgen

Copy (with enclosures): (Client)

If you want to go forward with the voluntary disclosure program, launch it yourself (look at FAQ #5 and FAQ #5 and call your local Criminal Investigations office to confirm what they want from you) then call us next week. We will be happy to talk about stepping in then.

And wouldn’t you know it? Today was the day that the main switch on our network decided to bork. Thanks www.technolene.com and Louis Katz for getting us up and going fast.

Incidentally and unrelated — the FedEx guy says that package volume is increasing. Leading economic indicator?

No deep comments at the moment. Too busy. Read it then go tell the IRS that they need a good 6th Grade English teacher to come in and straighten them out. In fact I know just the person. (Hi, Renee!)

Notice 2009-62
 
Release Date: AUGUST 07, 2009

Part III — Administrative, Procedural, and Miscellaneous

I. BACKGROUND AND PURPOSE

The Report of Foreign Bank and Financial Accounts, Form TD F 90-22.1 (hereinafter referred to as “FBAR”), provides necessary information for certain governmental agencies. Information on the FBAR may be used in criminal, tax, or regulatory investigations or proceedings, or in the conduct of intelligence or counterintelligence activities, including analysis, to protect against international terrorism. This governmental need for information is balanced with the administrative concerns presented by the filing of the information by U.S. persons.

In October 2008, the IRS revised the FBAR and the accompanying instructions. On June 5, 2009, the IRS issued Announcement 2009-51, 2009-25 I.R.B. 1105, which stated that the IRS is temporarily suspending the filing requirement of the FBAR for those persons who are not U.S. citizens, residents, or domestic entities. On May 6, 2009 and June 24, 2009, the IRS posted questions and answers (Q&As-9 and -43, respectively) on its public website (www.irs.gov) that provide relief to certain persons who only recently learned of their obligation to file an FBAR by setting forth conditions and procedures for filing Form TD F 90-22.1 by September 23, 2009. More information concerning this relief is available at http://www.irs.gov/newsroom/article/0,,id=210027,00.html. This Notice provides additional administrative relief for (i) persons with no financial interest in a foreign financial account but with signature or other authority over the foreign financial account (hereinafter referred to as “signature authority”), and (ii) persons with a financial interest in, or signature authority over, a foreign financial account in which the assets are held in a commingled fund (hereinafter referred to as “foreign commingled funds”). The Department of the Treasury intends to issue regulations clarifying the FBAR filing requirements pertaining to those persons with respect to these foreign financial accounts, and solicits comments related to these FBAR filing requirements in this Notice.

II. EXTENDED FILING DATE FOR SPECIFIED PERSONS

A. Current FBAR Instructions

The current instructions to the FBAR provide, with certain exceptions, that U.S. persons that have signature authority over, but no financial interest in, a foreign financial account are required to file an FBAR. These persons must report the account on an FBAR even if the foreign financial account is reported on an FBAR filed by the owner of the account (or other person that has a financial interest in the account).

The current instructions to the FBAR also provide that a foreign financial account that must be reported on an FBAR includes any bank, securities, securities derivatives, or other financial instruments account. The FBAR instructions further provide that those accounts “generally also encompass any accounts in which the assets are held in a commingled fund and the account owner holds an equity interest in the fund (including mutual funds).”

The current instructions to the FBAR also provide that Form TD F 90-22.1 with respect to a given calendar year must be filed with the Department of the Treasury on or before June 30 of the succeeding year. Thus, except as provided in the prior relief granted by the IRS on its public website and the relief granted in this Notice, FBARs with respect to the 2008 calendar year should have been filed on or before June 30, 2009.

B. Extended Date for Filing an FBAR

In light of the additional time needed for the Department of the Treasury to address issues pertaining to FBAR filing requirements and the need to provide administrative relief for (i) persons with signature authority over, but no financial interest in, a foreign financial account, and (ii) persons with a financial interest in, or signature authority over, a foreign commingled fund, this Notice provides that those persons have until June 30, 2010, to file an FBAR for the 2008 and earlier calendar years with respect to these foreign financial accounts. Thus, eligible persons that avail themselves of the administrative relief provided in this Notice may need to file FBARs for the 2008, 2009 and earlier calendar years on or before June 30, 2010, to the extent provided in future guidance.

The FBAR filing extension provided by this Notice applies to FBARs with respect to 2008 and earlier calendar years. For (i) persons with signature authority over, but no financial interest in, a foreign financial account, and (ii) persons with a financial interest in, or signature authority over, a foreign commingled fund, the FBAR filing extension provided in this Notice supplements the filing extension to September 23, 2009, previously provided by the IRS on its public website.

III. REQUEST FOR PUBLIC COMMENTS

The Department of the Treasury is interested in receiving comments on the following issues affecting a person’s FBAR filing obligation.

The Department of the Treasury requests comments regarding when a person with signature authority over, but no financial interest in, a foreign financial account should be relieved of filing an FBAR for the account. For example, comments are requested regarding whether relief from filing would be appropriate if a person with a financial interest in the account has filed an FBAR.

The Department of the Treasury requests comments discussing in what circumstances the exception from FBAR filing currently available for officers and employees of banks and certain publicly-traded domestic companies might be expanded to apply to all officers and employees with only signature authority over, and no financial interest in, an employer’s foreign financial account, including circumstances in which an individual has been advised that an FBAR has been filed with respect to a foreign financial account for which that person has signature authority. The Department of the Treasury also requests comments discussing how the bank and publicly-traded company exception (including the requirement of notification that an FBAR was filed by a U.S. person with a financial interest in the account) might apply to officers and employees with only signature authority over accounts owned by clients of their employer.

The Department of the Treasury requests comments concerning when an interest in a foreign entity (e.g., a corporation, partnership, trust, or estate) should be subject to FBAR reporting. For example, comments are requested regarding the possibility of applying the principles of sections 1297 and 1298(b) of the Internal Revenue Code to determine when an interest in a foreign entity should be subject to FBAR reporting. Comments are also requested regarding whether the passive asset and passive income thresholds of 50 percent and 75 percent, respectively, are appropriate and whether the tests should apply conjunctively.

The Department of the Treasury also requests comments on whether a U.S. person should be relieved from an FBAR filing requirement with respect to a foreign commingled fund in other circumstances, such as when filing would be duplicative of other reporting.

Interested persons should submit comments and suggestions with respect to the guidance on FBAR reporting in this Notice by October 6, 2009, to:
 

Internal Revenue Service
Attn: CC:PA:LPD:PR (Notice 2009-62)
Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, D.C. 20044

or hand deliver comments Monday through Friday between the hours of 8 a.m. and 4 p.m. to:
 

Courier’s Desk
Internal Revenue Service
Attn: CC:PA:LPD:PR (Notice 2009-62)
1111 Constitution Avenue, N.W.
Washington, D.C. 20224

A copy of those comments should also be sent to:
 

Financial Crimes Enforcement Network
Department of the Treasury
P.O. Box 39
Vienna, VA 22183

Alternatively, the public may submit comments electronically via e-mail to the following address: Notice.Comments@irscounsel.treas.gov with a copy to regcomments@fincen.gov. Respondents should include “Notice 2009-62″ in the subject line of any comment submitted.

All comments submitted by the public will be made available for public inspection and copying in their entirety.

IV. EFFECTIVE DATE

This Notice applies to FBARs (Form TD F 90-22.1) with respect to calendar year 2008 and prior calendar years.

V. CONTACT INFORMATION

For further information regarding the relief relating to signature authority, contact Terra-Lynn Zentara at (202) 283-7659 (not a toll-free call). For further information regarding foreign commingled funds, contact Joseph Henderson at (202) 622-3446 (not a toll-free call).