For all US taxpayers who have been watching developments in FATCA, FBAR reporting and the IRS Offshore Voluntary Disclosure Program or OVDP, last week’s court case was striking in it’s message: The IRS will not accept taxpayer claims of “innocent error” or related claims such as “ignorance to the law” or a “simple omission.” The IRS’ victory in court last week against a US taxpayer outed by Swiss Bank UBS Group is a warning shot across the bow for all US taxpayers with offshore accounts, investments or assets. It also provides a sound legal basis for moving forward quickly against all US taxpayers.
The taxpayer who brought the suit, Bernhard Gubser, is a 66 year old US resident taxpayer who moved to the US decades ago. In his complaint, Mr. Gubser believed the “IRS rules for determining if his mistake was willful—or, done with the knowledge that an omission would violate the law” were “unclear.” This lawsuit directly challenged the IRS’ ability to make a determination that a taxpayer’s actions were a “willful” attempt to shield assets, accounts and income from the agency, or a “non-willful” act – which is what Mr. Gubser had originally claimed. What is the difference between the original $10,000 penalty claimed by Mr. Gubser in his streamlined application, and the findings of the IRS? $1.4 million for Mr. Gubser, and he is still exposed to criminal tax evasion charges and the genuine potential for jail time.
How did the IRS learn of Mr. Gubser’s offshore activities? His accounts, assets, balances and transactions in the Swiss Bank UBS were reported by the bank itself directly to the IRS under terms of a settlement with the US Justice Department a few years ago. This may be the first case of a US taxpayer outed by Swiss bank UBS but it won’t be the last. The message is clear: come into full compliance with the IRS and FBAR reporting requirements immediately, or face draconian consequences. If you have questions about offshore accounts and FBAR compliance we invite you to contact us for a free consultation at 866-631-3470.
