Independent Contractor Compliance Blog - by Collabrus™

WASHINGTON, D.C. - The Internal Revenue Service and the Department of Justice announced the successful negotiation of an agreement that will result in the IRS receiving an unprecedented amount of information on United States holders of accounts at the Swiss bank UBS.  

Once sacred information will now be used to close the Tax Gap.

In January of this year, I reported that the IRS is increasing efforts on closing the International Tax Gap. The IRS defines the International Tax Gap as the difference between the amount of tax that international taxpayers should pay and the amount that is paid voluntarily and on time.

The UBS information which will be obtained by the IRS has been guarded by Swiss law, until now. As a result of this agreement the IRS will receive confidential bank information on an estimated 10,000 UBS accounts of US persons.

The IRS has been investigating and preparing to take action since before 2009.

When I first reported on this in the beginning of this year, I wrote that, “In my experience, when any government agency is publically talking about an issue, they have already been studying it quietly for some time.”

It seems the IRS had actively been investigating International Tax Gap cases when it announced in January they were looking at the issue. For example;

On Feb. 18, 2009, “UBS AG-Switzerland’s largest bank, entered into a deferred prosecution agreement on charges of conspiring to defraud the United States by impeding the Internal Revenue Service (IRS).”

To have entered an agreement in February means the process had been going on long before that date.

The IRS was pursuing actions against the Swiss bank in 2008.

According to the IRS, the Justice Department filed papers earlier this summer, “seeking an order from a federal court in Miami, Fla., authorizing the IRS to use a John Doe summons to request information from Zurich, Switzerland-based UBS AG about U.S. taxpayers who may be using Swiss bank accounts to evade federal income taxes.”

Voluntarily compliance is no longer an option.

By the time the IRS had issued the press releases informing the public they were looking at the International Tax Gap, they had most likely already entered into a secret agreement to obtain the information and account information was already being transferred to the IRS. 

In fact, in an August 2009 press release, it states, “To date, the IRS and the Department of Justice have successfully prosecuted four United States customers of UBS whose information was provided to the IRS by UBS as part of the Deferred Prosecution Agreement.”

Thousands of accounts are being turned over to the IRS.

The IRS press release also stated, “Under the agreement, the IRS will receive information on [thousands of] accounts of various amounts and types, including bank-only accounts, custody accounts in which securities or other investment assets were held and offshore company nominee accounts through which an individual indirectly held beneficial ownership in the accounts.”

There will be both civil and criminal prosecutions from this action.

The press release states, “Information provided to the IRS through this process will be thoroughly examined for all potential civil and criminal tax violations. The IRS will assess any additional tax, interest and a number of applicable penalties….The IRS will also recommend criminal prosecution in those cases where the facts warrant such an action…”

This is the level of aggressiveness you may expect from tax enforcement agencies.

It doesn’t matter if it is income taxes or employment taxes.  Both federal and state tax agencies have proven over and over they will aggressively use every tool possible to enforce the tax laws and to close the tax gap-both domestic and international.

That’s why you need to protect your business with the assistance of a proven expert.