The United States is one of the only countries that tax the earnings of its citizens that are earned in another country. As such, the IRS often deals with foreign banks in order to discover accounts of Americans who are avoiding paying taxes on foreign earnings. Since before 2011, one of those foreign banks has been under investigation for “opening and maintaining” accounts that are undeclared by American citizens, including some in California.
Recently, the foreign bank and the United States came to a settlement regarding these activities. No criminal charges will be filed and the bank will pay approximately $33.3 million to the United States. This kind of cooperation from both sides has no precedent in the international banking community.
The next best deal was with a Swiss bank back in 2009, and that bank only got a deferred prosecution. The bank, Liechtensteinische Landesbank (LLB), is in the process of turning over account numbers and names of its American. The Lichtenstein bank is not hindered by secrecy laws as Swiss banks are, so LLB was in a better position to make a deal than the Swiss banks that are also currently under investigation.
According to one source, time is running short for those U.S. citizens who have not disclosed foreign bank accounts to the IRS. As more foreign banks such as this one begin to reveal their client data to the United States, more Americans could find themselves under fire from the IRS. Anyone in California who has foreign accounts may want to seek advice and assistance in making sure those accounts do not lead to negative consequences from the IRS and the U.S. Department of Justice.
Source: Reuters, “U.S., Liechtenstein bank reach settlement in tax evasion case,” Patrick Temple-West, July 30, 2013