The Internal Revenue Service is very serious  in making sure that all taxpayers pay their fair share. The long arm of the law has collected over $5.5 billion in the first three offshore programs and increase pressure is now being felt in Switzerland as a result of the tax deal made with the United States government.
 

Tax deal reached between Switzerland and the United States

 
A tax deal reached between Switzerland and the United States on Thursday effectively put an end to the status of the small Alpine country as a tax haven for wealthy Americans.
The agreement  came after more than three years of intense discussions between the two countries, is expected to punish Swiss banks that helped wealthy Americans hide money from United States tax authorities in offshore accounts and require them to disclose information about United States account holders.
Even before the tax agreement many banks in Switzerland had started to turn away American clients, fearing at least additional administrative burdens from the United States authorities.
The deal is expected to accelerate that trend and make it even harder for American expatriates in Switzerland to find banking services.
 

“It’s pretty close to the end for Swiss banking for wealthy Americans.

If you are thinking of an expatriate in to Switzerland for tax reasons that could be in an enormous mistake.
“It’s pretty close to the end for Swiss banking for wealthy Americans,” Ben Jones, principal associate at law firm Eversheds in London, said. “But then again you had to be a pretty naïve U.S. taxpayer if you were thinking you could still hide funds in Swiss banks.” With so much money at stake the Internal Revenue Service is no longer go ignore the international taxpayer not paying their taxes.
 

The formal agreement reached

 
The formal agreement was reached by the Justice Department (DOJ) in Washington and which was presented by Swiss which calls for stiff measures that lift the veil of Swiss banking secrecy.
As part of the deal banks will be required to provide the details on accounts in which American taxpayers have an interest through treaty channels, disclose all cross-border activities and close the accounts of Americans who are evading taxes. Taxpayers who failed to report will come under stiff fines and criminal prosecution. .
The Internal Revenue Service and the Department of Justice actively keep all current prosecutions on their website for all to see.
The Swiss government said the deal allows Switzerland to draw a line under past tax disputes with the United States and create some certainty for the Swiss banking industry.
“It’s a solution we can live with,” Eveline Widmer-Schlumpf, the Swiss finance minister and president of the Federal Council, said at a news conference in Switzerland on Friday morning. “It provides the possibility for us to move forward and not have to continue fighting with the past.”
Without an agreement, the reputation of Switzerland as a financial center would have continued to suffer for years to come, she said. But she also said it was still possible that a bank could collapse under the heavy financial burden of fines imposed by American authorities.
 

U.S. Pressure

The Swiss government has been resisting cooperation until now because the secrecy of its banking system has long made the country an offshore money haven for wealthy foreigners.
But scrutiny in Europe of tax havens has been widening and pressure from the United States, including a number of arrests of Swiss bankers who traveled to the United States, started to increase pressure on Switzerland to come to an agreement.
For Swiss banks, the agreement ends uncertainty about possible prosecution, but the final size of the penalties remains to be decided. Even banks that will not have to pay large penalties that could hurt their finances and operations are bracing for spiraling costs because of the additional data they will be required to dig up and provide to authorities.
Sindy Schmiegel Werner, a spokeswoman for the Swiss Bankers Association, said the deal was “the least bad solution.” “There’s no doubt that this will be very, very painful for the banks,” she said.
Despite greater tax scrutiny, money continued to flow into Swiss banks from abroad over the past years.
Amid the chaos of the European debt crisis and growing fears about the safety of deposits in some European banks, Switzerland continued to be considered a safe haven for investments.
Switzerland was the top destination in 2012 for offshore wealth, defined as assets booked in a country where the investor has no legal residence or tax domicile, registering $2.2 trillion, followed by Hong Kong and Singapore, according to the Boston Consulting Group 2013 Global Wealth report.
 

UBS, the largest Swiss bank Agreed

 
It was in 2009 that UBS, the largest Swiss bank, agreed to enter into a deferred-prosecution agreement with the United States, turning over thousands of client names and paying a million dollar fine.
But soon after UBS admitted criminal wrongdoing in selling tax-evasion services to wealthy Americans, the Justice Department authorities were incensed that other Swiss banks offered shelter to American clients fleeing UBS.
In 2012, the United States Justice Department indicted Wegelin & Company, Switzerland’s oldest bank, for misconduct from the early 2000s until 2011. The once prestigious Swiss bank pleaded guilty in January, putting it out of business after 272 years. The Swiss government feared that more indictments could follow, seriously threatening the existence of some banks.
This report should send out a loud boom to all those persons involved in overseas banking. Both the Department of Justice in the Internal Revenue Service will be on a mission to hunt all  financial activity down.
With this much money at stake and the federal government not wanting to raise taxes these international clients are easy targets for the federal government and the criminal courts.
 

The IRS Offshore Voluntary Disclosure Program

 
The Internal Revenue Service stated that its offshore voluntary disclosure programs have exceeded the $5 billion mark and released new details regarding the voluntary disclosure program announced in January, including tightening the eligibility requirements.
 
Shulman said the IRS offshore voluntary disclosure programs have so far resulted in the collection of more than $5 billion in back taxes, interest and penalties from 33,000 voluntary disclosures made under the first two programs.
In addition, another 1,500 disclosures have been made under the new program announced in January.
The voluntary disclosure programs are part of a wider effort by the IRS to stop offshore tax evasion and ensure tax compliance.
This includes beefed up enforcement, criminal prosecution and implementation of third-party reporting through the Foreign Account Tax Compliance Act ( FATCA).
The IRS also closed a loophole that’s been used by some taxpayers with offshore accounts. Under existing law, if a taxpayer challenges in a foreign court the disclosure of tax information by that government, the taxpayer is required to notify the U.S. Justice Department of the appeal.
The IRS said that if the taxpayer fails to comply with this law and does not notify the U.S. Justice Department of the foreign appeal, the taxpayer will no longer be eligible for the Offshore Voluntary Disclosure Program ( OVDP).
The IRS also put taxpayers on notice that their eligibility for OVDP could be terminated once the U.S. government has taken action in connection with their specific financial institution.
Additional details of these eligibility issues are available in a new set of questions and answers released today on the current OVDP, which was announced in January ( see IR-2012-5).
The IRS reopened the OVDP following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs.
This program – which helps bring people back into the tax system — will be open for an indefinite period until otherwise announced. The program is similar to the 2011 program in many ways, but with a few key differences.
Unlike last year, there is no set deadline for people to apply. However, the terms of the program could change at any time going forward.
Under the current OVDP, the offshore penalty has been raised to 27.5 percent from 25 percent in the 2011 program. The reduced penalty categories of 5 percent and 12.5 percent are still available.
The IRS also announced a plan to help U.S. citizens residing overseas to catch up with tax filing obligations and assistance for people with foreign retirement plan issues