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Undeclared Accounts in Singapore Are Under IRS Investigation | FBAR Attorney

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For several years now, Sherayzen Law Office has been warning U.S. taxpayers about the ever-increasing IRS interest in undeclared accounts in Singapore. On June 22, 2016, the IRS announced that UBS AG has complied with the IRS summons for bank records held in its Singapore office. This news come after repeated initiatives by the IRS to follow the money that was flowing out of what used to be secret Swiss bank accounts into the undeclared accounts in Singapore.

Facts Surrounding the IRS Summons Regarding UBS Undeclared Accounts in Singapore

The IRS served an administrative summons on UBS for records pertaining to accounts held by Ching-Ye “Henry” Hsiaw. According to the petition, the IRS needed the records in order to determine Hsiaw’s federal income tax liabilities for the years 2006 through 2011. Hsiaw transferred funds from a Switzerland-based account with UBS to the UBS Singapore branch in 2002, according to the declaration of a revenue agent filed at the same time as the petition. UBS refused to produce the records, and the United States filed its petition to enforce the summons.

“The Department of Justice and the IRS are committed to making sure that offshore tax evasion is detected and dealt with appropriately,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Tax Division. “One critical component of that effort is making sure that the IRS has all of the information it needs to audit taxpayers with offshore assets. In this case, we filed a petition to enforce a summons for offshore documents, but that’s only one of the tools we have available for gathering information. Taxpayers with offshore assets who underreported their income should come forward before we come looking for them.”

Lessons to be Learned from the Recent Summons of UBS Undeclared Accounts in Singapore

The recent IRS summons of UBS undeclared accounts in Singapore and the startling ease with which the IRS obtained the necessary information, confirm three earlier predictions that Sherayzen Law Office made after the announcing of the DOJ Program for Swiss Banks. First, the IRS takes a keen interest in the undeclared accounts in Singapore and it will not satisfy itself simply with destroying the Swiss bank secrecy laws with respect to U.S. taxpayers. The IRS is actively expanding its investigations beyond Switzerland and Singapore is definitely one of its top targets.

Second, the IRS will continue to utilize in its investigations the information that it obtained from the Swiss Bank Program, the IRS offshore voluntary disclosure programs and the IRS compliance procedures. The IRS has obtained mountains of information from these programs regarding not only the “favorite” countries for opening and maintaining undeclared accounts, but also the main patterns of U.S. tax noncompliance. In fact, the IRS now has evidence at its disposal to prosecute foreign banks far beyond Switzerland (a fact confirmed by recent criminal prosecutions of two Cayman Islands financial institutions). Hence, the undeclared accounts in Singapore and the foreign banks which are holding them are under increased IRS scrutiny today.

Finally, the implementation of FATCA combined with the two trends described above makes the discovery of undeclared accounts in Singapore (and most other countries) increasingly likely. Furthermore, it seems that the IRS also feels more and more confident to ask the courts for harsher penalties against noncomplying U.S. taxpayers.

What Should U.S. Taxpayers with Undeclared Accounts in Singapore Do?

U.S. taxpayers with undeclared accounts in Singapore now face a very unpleasant scenario where their discovery by the IRS can occur at any point with the imposition of draconian penalties and even potential prison time. Furthermore, it appears that such a discovery by the IRS is not only possible, but very likely.

Given the high probability of the discovery of their undeclared accounts in Singapore, the noncompliant U.S. taxpayers should retain as soon as possible an experienced international tax firm to explore their voluntary disclosure options. One of the best international tax law firms that provides these services is Sherayzen Law Office, Ltd.

Contact Sherayzen Law Office for Professional Help with Your Undeclared Accounts in Singapore

If you have undeclared accounts in Singapore (or any other country), you should immediately contact Sherayzen Law Office for professional help. Sherayzen Law Office is an international tax law firm that is highly experienced in offshore voluntary disclosures, including IRS Offshore Voluntary Disclosure Program and Streamlined Compliance Procedures (both Domestic and Foreign). You can rely on us with confidence that your case will be handled in an efficient, speedy and professional manner. We will strive for the best result for you!

Contact Us Today to Schedule Your Confidential Consultation!

Last Swiss Bank Program Category 2 Resolution

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On January 27, 2016, the US Department of Justice (DOJ) declared the last Swiss Bank Program Category 2 Resolution. The Swiss Bank Program was proclaimed on August 29, 2013, and constituted an unprecedented triumph of US economic might over the most formidable bank secrecy bulwark (though, already a greatly weakened one since the 2008 UBS case) which Switzerland had been for hundreds of years.

Under the Swiss Bank Program, the Swiss banks were forced to turn over a large amount of information regarding foreign accounts held by US persons, cooperate with US information requests, and, in case of category 2 banks, pay a fine. In return, the Swiss banks were provided a guarantee against US criminal prosecution in the form of non-prosecution agreements.

The Swiss Bank Program was successful, though not every eligible Swiss bank actually chose to participate in the Program. The most profitable part of the Program consisted of the Category 2 banks, which had to pay fines as a condition of their participation in the Swiss Bank Program.

The first resolution with a Category 2 bank occurred on March 30, 2015. On January 27, 2016, the last Swiss Bank Program Category 2 resolution took place after reaching a Non-Prosecution Agreement with HSZH Verwaltungs AG (HSZH).

In total, the DOJ signed Non-Prosecution Agreements with about 80 banks and collected more than $1.36 billion in Swiss Bank Penalties, including $49 million from the last Swiss Bank Program Category 2 resolution. While this amount pales in comparison with the originally-projected amounts (due to penalty mitigation), the enormous impact the Program has had on the worldwide US tax compliance and convincing foreign governments to accept FATCA render this Program an important success for the US government.

The final Swiss Bank Program Category 2 resolution marked the end of the Category 2 part of the Swiss Bank Program, but an important question remains – will we see the re-appearance of the Swiss Bank Program with Category 2 banks in another country? While the implementation of FATCA reduces the probability of a chance of another program similar to Swiss Bank Program, one cannot fully discount this possibility. It is possible that the IRS will identify another important center (such as the Cayman Islands, Hong Kong, Isle of Mann, Singapore, et cetera) of US tax non-compliance based on the information collected in the Swiss Bank Program and attack this center.

On the other hand, one can also see the appearance of a global “Swiss Bank Program” which banks of any country can enter in order to prevent US criminal prosecution.

Whatever form the future voluntary disclosure program for foreign banks will take, one can be certain that the last Swiss Bank Program Category 2 Resolution with HSZH was not the last IRS enforcement effort with respect to foreign banks.

Form 8938 Definition of Foreign Financial Institution

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Financial accounts maintained by a Foreign Financial Institution constitute one of the main categories of Specified Foreign Financial Assets that need to be reported on IRS Form 8938. While it seems trivial, it is important to understand what is meant by “Foreign Financial Institution” within the context of Form 8938 – i.e. what is the Form 8938 Definition of Foreign Financial Institution?

There are two parts of Foreign Financial Institution that need to be separately defined: “foreign” and “financial institution”.

Form 8938 Definition of Foreign Financial Institution: What is “Foreign”?

For the purposes of Form 8938, a financial institution is foreign if the financial institution is organized under the laws a of a jurisdiction other than United States and its territories. Thus, a domestic financial institution is the one that is organized under the laws of any of the 50 states of the United States, the district of Columbia, and US territories of American Samoa, Guam, the Northern Mariana Islands, Puerto Rico or US Virgin Islands – everything else is foreign.

It is important to note that a foreign financial institution is defined by the laws of a jurisdiction under which it was organized, not by where it operates. Thus, a domestic institution that operates overseas is not foreign.

Form 8938 Definition of Foreign Financial Institution: What is a “Financial Institution”?

Now that we were able to define the “foreign part of the Foreign Financial Institution, let’s turn our attention to the second part of this term – “financial institution”. This concept is defined broadly. In order for a Foreign Financial Institution to be considered a financial institution, it has to do one of the following:

1. Accept deposits in the ordinary course of a banking or similar business);

2. Hold financial assets for the account of others as a substantial part of its business; and

3. Engage (or holds itself out as being engaged) primarily in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, or any interest (including a futures or forward contract or option) in such securities, partnership interests, or commodities.

This definition easily covers banks, credit unions, brokerages, various financial advisors, and everyone who is involved in any of the activities listed above. This even includes financial trusts.

Moreover, a foreign financial institution includes various investment vehicles such as foreign mutual funds, foreign hedge funds, and foreign private equity funds. It should be noted that these types of investment vehicles may also need to be reported on Form 8621 as PFICs.

Contact Sherayzen Law Office for Help With Form 8938 Filing

Filing a correct Form 8938 is an essential part of your US tax compliance. Moreover, failure to file Form 8938 may lead to various penalties and complicate your Offshore Voluntary Disclosure.

This why you need to help of the experienced tax team of Sherayzen Law Office. We have helped hundreds of US taxpayers to bring and maintain their US tax affairs into full compliance and we can help you.

Contact Us Today to Schedule Your Confidential Consultation!