The Department of Justice issued a press release on Monday advising that it has filed court papers to allow the IRS access to request information from UBS AG about US taxpayers who may be using Swiss bank accounts to evade federal income taxes.
The Times had previously reported that UBS might reveal up to 20,000 names in light of the investigation into its banking practices. That has apparently yet to happen. So, the IRS is hoping to serve what is known as a “John Doe” summons on UBS; a John Doe summons is used to obtain information when the exact identities of persons are unknown.
The results could be huge. Last month, former UBS banker Bradley Birkenfeld pleaded guilty to conspiring to defraud the IRS by assisting clients in avoiding US reporting requirements. Birkenfeld claimed that UBS employees assisted wealthy US taxpayers by creating sham entities and then filing IRS forms falsely claiming that the entities were the owners of the accounts. The total of assets at UBS held in this manner – and thus not reported for tax reasons – is said to be close to $20 billion.
What would this information mean to the IRS? Penalties for willful failure to report a foreign account can result in a penalty of up to 50% of the amount in the account. So yeah, the IRS is seeking to recover up to $10 billion in penalties alone.
The results of this case could prove to be big with respect to enforcement of other offshore assets. Similar investigations in other countries, such as Germany, in light of the Liechtenstein scandal, yielded the names of several high profile celebs, sports figures and business people. Who knows what will turn up in Switzerland?
