It's the height of basketball season. The Miami Heat and other pro teams are in full swing. And the "March Madness" of the NCAA tournament gets underway next month, with millions of people ready to engage in the hoopla.
It would seem appropriate, then, to apply a basketball metaphor to this tax blog. Given the stance taken by the IRS towards offshore accounts in recent years, such a metaphor easily suggests itself. The agency continues to put on the full-court press against holders of foreign accounts.
In this post, we'll discuss one example of this. In a case decided by a federal appeals court earlier this month, U.S. taxpayers were seeking to recover from the Swiss banking giant UBS for its role in causing them to incur large tax penalties for failure to report foreign accounts to the IRS.
UBS admitted in 2009 that it assisted several thousand Americans with evasion of taxes on offshore accounts. Under pressure from the U.S. Department of Justice, UBS paid a $780 million fine for facilitating tax evasion.
Three UBS customers joined an offshore voluntary disclosure initiative offered by the IRS. To participate in the amnesty program, these taxpayers had to pay not only back taxes, but tax penalties of at least 20 percent. In 2011, these customers brought suit against UBS, seeking to recover their costs for settling with the IRS and get a share of profits UBS allegedly made on the accounts.
The three taxpayers alleged that UBS failed to inform them of the need to disclose the foreign accounts. And they sought class-action status for other taxpayers similarly situated.
But the U.S. Court of Appeals for the 7th Circuit has held, however, that held for UBS. The court reasoned that UBS did not have a duty to stop its customers from evading taxes.
In short, the full-court press on foreign account disclosure is still on. This ruling is a reminder that foreign financial institutions are not always the most reliable of teammates in defending against it.
Source: "UBS wins end to "travesty" of lawsuit over tax evasion," Reuters, Jonathan Stempel, 2-7-13
Our firm handles situations similar to those discussed in this post in Miami and throughout South Florida. To learn more about our practice, please visit our page on offshore accounts.