Friday, August 21, 2009

U.S. Continues to Uncover the Methods Used by Wealthy Tax-Evaders

In our last post, we addressed that the IRS was receiving an overwhelming number of disclosures from wealthy taxpayers, regarding income earned, but not reported, on offshore accounts. The U.S. continues to aggressively pursue the people who use these schemes to avoid paying income tax and the financial institutions that have willingly assisted and advised on how to set up these accounts.

The identities of many of these account holders have been revealed through the government’s civil and criminal cases against the Swiss bank, UBS. The bank turned over the names of 250 account holder as part of a criminal settlement. The number of names is about to grow significantly due to a separate settlement in a civil case against UBS, where it is expected that the bank will turn over thousands of names of U.S. account holders. This revelation makes for a large number of nervous tax-evaders. The bank unsuccessfully argued that it could not provide the account information due to Swiss privacy laws.

The IRS has been pursuing charges against the account holders revealed to it by the bank in the criminal settlement. There have been at least four guilty pleas to date. These cases have revealed in detail the elaborate schemes set up by wealthy U.S. residents with the assistance of UBS and Swiss lawyers. A recent Wall Street Journal (WSJ) article, UBS Tax Crackdown Widens to Hong Kong, identifies a California resident who opened a Swiss bank account with UBS in the name of a Hong Kong entity. The Californian moved more than $1 million from a Los Angeles business to the offshore account. The details of these schemes will continue to be revealed as the U.S. investigation spreads.

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