More US tax evaders will be caught as offshore havens accept FATCA

Wealthy Americans looking to minimize their tax liabilities have long relied on offshore bank accounts — in the Caribbean, Switzerland and elsewhere — to shield their assets from the watchful eyes of Uncle Sam. While many of these accounts are completely legal, others were set up with the express purpose of avoiding taxes that the accountholders would otherwise have to pay.

Whatever shelter these accountholders once had, it is quickly going away. Both the U.S. Department of the Treasury and the Internal Revenue Service are cracking down hard on suspected offshore tax evasion. Their efforts have been boosted over the last several months, now that foreign governments have agreed to join in the fight. These governments have agreed to help the U.S. enforce provisions of the 2010 Foreign Account Tax Compliance Act, commonly referred to as FATCA.

In February 2013, the U.S. government entered into a pact with Swiss authorities that would require Swiss banks to provide more information about American account holders to U.S. taxing authorities. As part of the agreement, Swiss banks will be required to provide information on American-held offshore accounts worth over $50,000.

In late January, the U.S. government issued guidance for FATCA compliance to governments and banking authorities in the Caribbean. Like Switzerland, many of these governments have also signed agreements to disclose information about potentially-illegal offshore bank accounts.

A number of other countries have also signed similar agreements, including Mexico, Denmark, Ireland, the United Kingdom, Norway and Spain.

Penalties for offshore tax evasion

The consequences of being caught with illegal offshore accounts can be very severe. Convictions for tax evasion can bring penalties including several years in prison and millions of dollars in fines.

An illustrative example of the consequences of offshore tax evasion can be found in the recent case of a Florida woman who recently pleaded guilty to charges resulting from a failure to report taxable income on approximately $42 million in accounts held by the Swiss banking giant UBS. Authorities say the woman moved her assets around in the names of foreign foundations and corporations in an attempt to avoid detection by U.S. taxing authorities.

The woman has already agreed to pay nearly $21.7 million in back taxes and civil fines stemming from the crime. In addition, she could face up six years in federal prison. She may also be forced to give up her home and other assets in forfeiture proceedings.

While one case certainly isn't representative of how all offshore tax evasion cases will be handled, it does highlight the importance of taking tax crimes charges seriously. Because the potential penalties for these crimes are so severe, it is important to mount a proactive defense early on in the case. If you or a loved one has been accused of violating U.S. offshore tax laws, contact an experienced tax crimes defense lawyer who can help you protect your rights and your future.