On September 1, 1914, “Martha,” the last remaining passenger pigeon (ectopistes migratorius), died at the Cincinnati Zoo. On September 7, 1936, “Benjamin,” the last Tasmanian tiger (thylacinus cynocephalus), died at Australia’s Hobart Zoo. And on June 24, 2012, “Lonesome George,” the last living Pinta Island tortoise (chelonoidis nigra abingdoni), died in Ecuador’s Galapagos National Park.
When you think of endangered species, you naturally think of plants and animals. But the IRS has its own endangered species list (called “listed transactions”), and that means sometimes even tax strategies go extinct. So, for example, in October, 2006, the last grandfathered private annuity trust was formed. On April 10, 2007, most so-called “Section 419(e)” plans were shot down. Now, could the venerable Swiss bank account (bankum secretus strongius) be next?
Switzerland’s banking laws have long made it a crime to reveal an account holder’s name. At the same time, Swiss authorities have historically refused to cooperate with foreign countries where failure to report taxable income is concerned. Together, these policies made Switzerland the banker of choice for Colombian drug lords, Sub-Saharan kleptocrats, Russian oligarchs, and even the so-called “Wolf of Wall Street,” Jordan Belfort.
But recently those protections have melted away like so much Swiss chocolate sitting in the bright alpine sun. It started back in 2008 when Bradley Birkenfeld, a mid-level banker, blew the whistle on helping American taxpayers “forget” to report millions of dollars of interest income. Birkenfeld’s bombshell landed him a 40-month prison sentence and a $104 million reward from the IRS. A year later, the Department of Justice fined the biggest Swiss bank $790 million and cut a deal with the Swiss government, giving them power to force their banks to disgorge information on American depositors almost on demand. In 2012, an even stronger settlement required 300 Swiss banks to identify their American account holders or face their own penalties. Most recently, “Beanie Babies” creator Ty Warner pled guilty to evading $5 million in tax and agreed to a $53 million fine — and still faces four years in jail.
And now? Well, some observers say that Swiss banks are actually doing the IRS’s job for them. Better to rat out clients than pay IRS fines! Banks are pressuring Americans to report their accounts, and even freezing accounts unless clients can prove they’re playing by the new rules. U.S. attorneys are generally advising clients with secret accounts to ‘fess up now before the IRS finds them and penalizes them 50% of their balances. At this point, attorneys say, discovery is a matter of “when,” not “if.” That message appears to be hitting home. Since 2009, over 38,000 Americans have come forth and paid over $5 billion in taxes, penalties, and interest. The once-celebrated Swiss bank account appears headed the way of the dodo, as far as U.S. tax cheats are concerned.
Look, we Chicago Accountants, understand that everybody wants to pay less tax. But there’s a right way to do it and there’s a wrong way to do it. The right way is to take advantage of hundreds of legitimate deductions, credits, and strategies contained in the tax code and treasury regulations. And it all starts with a plan. We can give you that plan, and it doesn’t involve a trip to Zurich or Geneva to visit your money. So call us the Tax Preparers now to see how much you might be overpaying.