Swiss Numbered Bank Accounts (2019) – IRS, FBAR & FATCA Penalty
Swiss Numbered Bank Accounts: A Swiss Numbered Bank account is a relic from the 80’s & 90’s and was used to avoid the IRS & maintain confidentiality.
Swiss Numbered Bank Accounts
For example: David has $800,000 and a Swiss bank account. He does not want the US Government (or his soon-to-be ex-wife) to know anything about the money.
Therefore, when David opened the account in Switzerland, he opened it using a number account.
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 the IRS Find out About Your 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 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.
The IRS 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 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 program.
4 Types of IRS Voluntary Disclosure Programs
There are typically four types of IRS Voluntary Disclosure programs, and they include:
- Traditional (IRM) IRS Voluntary Disclosure Program
- Streamlined Domestic Offshore Procedures (SDOP)
- Streamlined Foreign Offshore Procedures (SFOP)
- Reasonable Cause (RC)
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Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver, and has also earned the prestigious Enrolled Agent credential. Mr. Golding is also a Board Certified Tax Law Specialist Attorney (A designation earned by Less than 1% of Attorneys nationwide.)