WASHINGTON: The Justice Department has begun scrutinizing thousands of U.S. taxpayers’ Swiss bank accounts to compare bank information with what the taxpayers have reported to the Internal Revenue Service.
Discrepancies between accounts and filings could trigger prosecutions, said Nanette Davis, a senior lawyer with the Justice Department’s Tax Division, at a recent conference. Ms. Davis declined to specify the size of accounts attracting the most scrutiny.
Lawyers familiar with the government’s offshore-account programs said the Department is likely looking hardest at accounts above $1 million, or $500,000 if there is evidence the taxpayer sought to conceal them.
The data for the Justice Department’s comparisons are coming mostly from 80 Swiss banks that participated in a limited-amnesty program offered by the Department. The program, which ended in January, allowed the banks to avoid criminal prosecution for encouraging U.S. tax evasion if they pressed their clients to confess the accounts, turned over detailed records, agreed to assist with investigations, and paid penalties totaling more than $1.3 billion.
Charles Rettig, a tax lawyer with Hochman, Salkin, Rettig, Toscher & Perez in Los Angeles, said he is aware of audits based on discussions with government officials and other lawyers.
“The government now has a wealth of information about secret offshore accounts and they are scrubbing the data to develop leads,” he said.
U.S. investigations of about eight mostly larger Swiss banks are ongoing.
Many U.S. taxpayers who hid money in Swiss accounts have already declared them in a series of limited-amnesty programs run by the IRS since 2009, when Swiss banking giant UBS Group AG admitted that it helped U.S. taxpayers hide money abroad. Since then more than 54,000 participants have paid more than $8 billion to avoid prosecution in connection with secreting money in such accounts.
The Swiss examination is allowing tax officials to spot offshore-account holders who didn’t enter the IRS’s programs or didn’t declare all their accounts.
The data could also expose people who wrongly entered another IRS amnesty for offshore accounts known as the “streamlined” program, which now has more than 30,000 participants. It is meant for Americans here and abroad who weren’t willfully breaking U.S. tax laws on foreign accounts and could apply to millions of people.
The streamlined program’s penalties are much lower. The current penalties for Americans whohid money abroad can be as high as 50% of account assets, not including lawyers’ fees. Buttaxpayers in the streamlined program pay only 5% in some cases and often nothing if they live abroad.
As such, some participants may have entered it although they intended to dodge U.S. taxes.
Ms. Davis said that the Justice Department has access to recorded phone calls between bankers and their U.S. customers that could provide evidence of willfulness, as could other bank records showing secrecy structures such as trusts or foundations.
The Swiss bank data also includes details of transfers out of accounts held by U.S. taxpayers, so it will help U.S. authorities pursue “leavers”—people who moved money to avoid the U.S. crackdown on offshore accounts. Among the places the money went was Singapore, which had strict bank secrecy laws.
Even so, last week, the Justice Department disclosed that UBS Group AG had complied with a U.S. summons to deliver records for a U.S. client’s account held in Singapore. According to the department, the client had moved the money from UBS in Switzerland to UBS in Singapore.
A spokeswoman for UBS said the release was in compliance with Singapore law because the client gave his consent.
