IRS Isn’t Just Pursuing UBS Clients; Auditors to Look at Other Foreign Banks

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Tax Law

IRS Isn’t Just Pursuing UBS Clients; Auditors to Look at Other Foreign Banks

Posted Jul 3, 2008, 09:19 am CDT
By Martha Neil

In the wake of a precedent-setting federal court ruling earlier this week that the IRS can seek the names of Americans holding secret accounts from Swiss-based UBS AG, the agency is stepping up enforcement efforts at other foreign banks.

It is asking auditors at major accounting firms to help identify banks at which U.S. residents may have established secret accounts in an effort to avoid paying taxes, and has scheduled a Tuesday conference call to discuss the issue with the accounting firms, reports Bloomberg.

UBS apparently was 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.

However, it appears from court filings that UBS, at least, was not notifying the IRS of all such accounts, dividing U.S. customers into two groups: those who were willing to submit required paperwork and "undeclared" account-holders, according to Bloomberg.

A former UBS private banker and U.S. citizen, Bradley Birkenfeld, pleaded guilty last month to conspiring to help a California billionaire, Igor Olenicoff, evade income tax on assets hidden in Switzerland and Liechtenstein, as Bloomberg details in an earlier article. In plea documents, Birkenfeld, who is scheduled to be sentenced next month, says UBS helped wealthy U.S. clients conceal some $20 billion in assets.

Earlier coverage:

ABAJournal.com: "US Court Tells Swiss Bank UBS to Reveal Customer Names"

ABAJournal.com: "Tough Calls for US Tax Dodgers & Counsel; Secret Bank Accounts Exposed"

ABAJournal.com: "Billionaire Olenicoff’s Plea Docs Describe Tax Evasion Techniques"

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Posted by Kay Sieverding - 1 month, 3 weeks, 3 days, 11 hours, 37 minutes ago

I think the IRS should investigate companies that sell insurance into U.S. markets without registering with state insurance divisions. These companies are apparently not paying state and federal income taxes. One example I think is Mutual Insurance Limited of Bermuda. Another example I think is Attorneys’ Liability Assurance Society. Both are in Bermuda. Like UBS, apparently both send personnel into the U.S. State statutes usually define the business of insurance to include use of their courts and that would I think include paying a lawyer to defend a claim they insured. If they are in the business of insurance according to state law, then shouldn’t they have to pay state and federal income taxes even if they don’t have real estate in the U.S.? This could add up to a lot of lost tax dollars and is a big competitive disadvantage to insurance companies that have offices in the U.S.

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