IRS squeezes Swiss bank clients for evidence

WASHINGTON (AP) âÄî The IRS is ratcheting up the pressure on Americans who kept secret Swiss bank accounts, giving them six months to come clean and cough up any evidence against their advisers or bankers. Tax lawyers told The Associated Press Thursday that demands for information and evidence have increased sharply since the government sued UBS AG to try to get the names of tens of thousands of U.S. citizens who may have dodged taxes through Swiss accounts. Putting the squeeze on rich Americans who hid their wealth, IRS Commissioner Douglas Shulman on Thursday also laid out a six-month window for those with secret offshore accounts to come clean under specific terms and penalties. The Obama administration wants UBS to turn over information on as many as 52,000 U.S. customers who concealed their accounts from the government in violation of tax laws. In February, the bank agreed to pay $780 million and turn over the names of roughly 250 U.S. clients, but the Justice Department sued to get the names of tens of thousands more. Swiss authorities have vowed to fight to protect their tradition of bank secrecy. Beyond Switzerland, the UBS case could also lead to the discovery of other offshore accounts held by Americans who avoided paying taxes. The IRS’s new warning and offer applies not just to UBS or Swiss banking clients, but to any U.S. taxpayers who have had secret, tax-dodging accounts anywhere in the world. Robert McKenzie, a Chicago-based lawyer who has more than a dozen Swiss bank clients seeking to voluntarily disclose their account information to the government, said more recent clients who have come forward are now being asked a slew of new detailed questions about how the accounts were handled, and by whom. “My view is the IRS is now looking to find those who promote these financial devices, and give advice on these financial devices, and expand the investigation,” said McKenzie. McKenzie said that before the government struck a deferred prosecution deal with UBS last month, the Internal Revenue Service had six fairly straightforward questions it asked of U.S. taxpayers holding Swiss accounts who voluntarily came forward. McKenzie said new clients coming forward are now confronting a list of nearly 30 detailed questions, asking not just about financial documents, but any travel to conduct banking business, documents and correspondence related to the accounts, and which bank employees helped them manage the accounts. McKenzie said some of the account-holders he has advised are still willing to “roll the dice” and see if the IRS catches them, but he is advising them to come clean with Uncle Sam, because others are. “Each time somebody comes in, it leads to a greater possibility the next person will be discovered because his neighbor disclosed,” said McKenzie. Those with such Swiss accounts include doctors, immigrants, and even a retired American bank executive, McKenzie said. Lawrence Horn, a New Jersey lawyer who also represents Swiss bank clients, agreed that the demands for information have increased markedly as the government continues its legal fight over Swiss bank secrecy. “The procedure used to be, ‘You show me a little, I’ll show you a little,'” said Horn. “Now they want information up front. They’re asking specific questions about when an account was opened, who helped you open it, and if a law firm was used to open it.” Shulman, the IRS commissioner, told reporters on a conference call Thursday that the agency was offering a six-month window for offshore bank clients to come forward under terms he called fair but firm. Those who come forward on their own can expect to pay back taxes and interest for a six-year period, as well as a penalty of 20 percent of the amount held in the accounts in whatever year their balance was highest, Shulman said. “This is a chance for people to come clean on their own,” said Shulman. “For taxpayers who continue to hide their heads in the sand, the situation will only become more dire.” The deal is only good for six months, Shulman warned, after which the IRS will re-evaluate the terms. By law, the IRS can seek as much as 50 percent of the balances of some accounts used to avoid paying taxes. ____ On the Net: IRS: