New IRS Rules Target Secret Offshore Bank Accounts
Posted Jul 16, 2008 11:00 AM CST
By Martha Neil
In the wake of a series of revelations concerning secret accounts at UBS AG and other foreign banks, new rules are about to be released by the Internal Revenue Service seek to close loopholes previously used by some U.S. investors to avoid taxes by concealing assets in such accounts.
The revised regulations tighten the requirements for so-called Qualified Intermediary contracts, under which account-holders at foreign banks can keep money there with the IRS' blessing, according to Bloomberg. Among other changes, they require IRS-approved auditors reviewing bank records to report apparent fraud. (Foreign banks generally agree to the audits in order to make their accounts attractive to U.S. residents.)
It hasn't yet been decided whether to make the new rules retroactive.
"We're trying to pierce the veil,'' says Barry Shott, deputy commissioner of international affairs for the IRS. "It's going to happen in the near future. This is not a long-term project.''
As discussed in earlier ABAJournal.com posts, UBS and other foreign banks have been in the spotlight lately after it came to light that some UBS representatives apparently were helping American residents set up secret accounts worth some $20 billion to avoid paying U.S. taxes.
UBS is one of about 5,000 foreign banks in 70 countries that are considered qualified intermediaries, in an IRS program in which the banks agree to notify the agency of U.S. depositors and the earnings in their accounts and submit to examination by IRS-approved auditors. In return, they are permitted to withhold taxes for such account-holders at favorable rates.
"The IRS is putting the finishing touches on the new rules one day before the Senate Permanent Subcommittee on Investigations releases a report on secret accounts at Zurich- based UBS and Liechtenstein's LGT Group," Bloomberg notes.
ABAJournal.com: "IRS Isn’t Just Pursuing UBS Clients; Auditors to Look at Other Foreign Banks"
ABAJournal.com: "Billionaire Olenicoff’s Plea Docs Describe Tax Evasion Techniques"
ABAJournal.com: "Tough Calls for US Tax Dodgers & Counsel; Secret Bank Accounts Exposed"