Swiss Numbered Bank Accounts for FBAR & FATCA
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Reporting Swiss Numbered Accounts in US
Swiss Numbered Accounts: A Swiss Numbered Account is a relic from the 80’s & 90’s and was used to avoid the IRS & maintain confidentiality. These accounts pre-dated the dismantling of Switzerland as a tax haven, and before the introduction of the deferred prosecution agreement. By opening a Swiss numbered account, an account holder would not have their name directly identified with the account.
For example: Melissa has $800,000 and a Swiss bank account. She does not want the US Government (or her soon-to-be ex-husband) to know anything about the money that she inherited from a foreign relative.
Therefore, when Melissa opened the account in Switzerland, she opened it using a Swiss Numbered Account.
Swiss Numbered Accounts are Dangerous
One of the most important reasons why a number account is dangerous, is because it is essentially an intentional misrepresentation by way of willful blindness. In other words, when a person opens a bank account, the financial institution is tasked with sending you ongoing information and statements about your account.
When you open up a numbered account, your name is intentionally disassociated from the account.
And, generally for a fee, the Foreign Financial Institution puts a hold on sending out any statements or other account information to you – and intentionally keeps you in the dark.
How Does IRS Find Your Swiss Numbered Account?
With the introduction of FATCA (Foreign Account Tax Compliance Act), a renewed interest in FBAR (Report of Foreign Bank and Financial Accounts), and various other tools at the U.S. Government’s disposal (Hague Convention, Global enforcement initiative, and J5 for example) it is becoming easier for the IRS to obtain your offshore account information.
Still, one of the most common ways for the IRS to obtain your Swiss bank account information is by the foreign institution volunteering the information by way of a deferred prosecution agreement.
Deferred Prosecutions and Swiss Numbered Accounts
Under a deferred prosecution agreement (which several Swiss institutions have entered into), the foreign financial institution volunteers your previously “Secret” or “Hidden” Account information to the IRS.
The IRS is then armed with enough information to show that you were willful in your failure to report the account information and/or pay tax on the income. And, the Internal Revenue Service does not always immediately act on the information they receive on your foreign accounts.
They may wait until you are already under audit (aka reverse eggshell audit) – and put you in a serious jam.
If the matter is not handled properly, it may lead to a criminal investigation.
What if I am Out of Offshore Compliance?
If you are out of offshore compliance, the penalties can be severe. Therefore, you may consider entering the IRS offshore voluntary disclosure/tax amnesty, before it is too late.
What Should You Do?
Everyone makes mistakes. If at some point you discover that you should have been reporting your foreign income, accounts, assets or investments, the prudent and least costly (but most effective) method for getting compliance is through one of the approved IRS offshore voluntary disclosure programs.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm today for assistance.