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What Kind of People Hide Money in Swiss Accounts?
By Stacie Clifford Kitts, CPA
Ever wonder what kind of people hide money in Swiss bank accounts? Well here is your chance to get a glimpse into the world of some people who really did it.
There must have been some sweat’ in going on over at these tax cheats house’s when it was announced that a deal was struck to give them up.
I just can’t understand the motivation of the people on the below list. The dollar amounts that were hidden and that are now subjecting the account holders to prosecution – just not worth it in my mind.
I know, we are talking a few million dollars in most cases and that is a large amount of cash – no doubt. Nevertheless, let us put it into perspective, the risk is jail, a 50% penalty, plus the tax that should have been paid including associated penalties and interest.
Besides, if I had a million dollars or so after tax, (which these tax cheats would have) I am confident that I would be happy with that. Yes – a cool million is okay with me. Moreover, I think the rest of the “average” folk out there would agree with me.
Don’t’ get me wrong, I’m never going to turn down a few million dollars if it is offered (legally this is). However, if in a different life I was willing to risk jail over some crime that I was contemplating, the payoff would have to be some astronomical amount of money, so much in fact, that I would never get away with it because everyone on the planet would be looking for me.
So the good news for me, I will never be on a “cheat” list because the compensation will never – ever be enough to justify the risk.
Oct. 5, 2009 — Roberto Cittadini of Bellevue, Wash., pleaded guilty to filing a false tax return and admitted to concealing nearly $2 million in Swiss bank accounts. Cittadini, a retired sales manager for Boeing, failed to file a Report Foreign Bank and Financial Accounts (F-BAR) for 2001 through 2003.
Sept. 25, 2009 — Juergen Homann of Saddle River, N.J., pleaded guilty to failure to file a Report of Foreign Bank or Financial Accounts and accepted responsibility for concealing more than $5 million in Swiss bank accounts.
Aug. 14, 2009 — John McCarthy was charged with failing to inform the government of a Swiss bank account as part of a scheme to move at least $1 million from the United States into Swiss bank accounts with the goal of avoiding the payment of federal income taxes.
July 28, 2009 — Jeffrey P. Chernick, of Stanfordville, N.Y., pleaded guilty to charges of filing a false tax return. Chernick, who owns a corporation which represents toy manufacturers in China and Hong Kong, accepted responsibility for concealing more than $8 million in Swiss bank accounts.
June 25, 2009 — UBS client, Steven Michael Rubinstein of Boca Raton, Fla., pleaded guilty to filing a false tax return for tax year 2004. On April 1, 2009, Rubinstein was charged with filing a false tax return that intentionally failed to disclose the existence of a Swiss bank account maintained by UBS of which he was the beneficial owner and failed to report any income earned on that account.
April 14, 2009 — Robert Moran, of Lighthouse Point, Fla., pleaded guilty to a criminal information charging him with filing a false income tax return. Moran accepted responsibility for concealing more than $3 million in assets in a secret bank account at UBS in Switzerland.
Legal Actions to Date
Aug. 21, 2009 — Former UBS banker Bradley Birkenfeld was sentenced to 40 months in prison. Birkenfeld worked as a private banker for UBS AG and assisted an American billionaire real estate developer evade paying $7.2 million in taxes.
Aug. 20, 2009 — Hansruedi Schumacher and Matthias Rickenbach were indicted for conspiring to assist wealthy American clients conceal their assets by establishing sham offshore entities. Schumacher was an executive manager at Neue Zuercher Bank (NZB), a private Swiss bank. Rickenbach was a Swiss attorney who advised U.S. clients.
Feb. 18, 2009 — UBS AG, Switzerland’s largest bank, entered into a deferred prosecution agreement on charges of conspiring to defraud the United States by impeding the Internal Revenue Service (IRS).
Nov. 12, 2008 — Raoul Weil, a senior executive of a large Swiss bank, was charged with conspiring with other executives, managers, private bankers and clients of the banking firm to defraud the United States.
June 30, 2008 — The Justice Department filed papers seeking an order from a federal court in Miami, Fla., authorizing the Internal Revenue Service (IRS) to use a John Doe summons to request information from Zurich, Switzerland-based UBS AG about U.S. taxpayers who may be using Swiss bank accounts to evade federal income taxes.
Dec. 12, 2007 — Igor Olenicoff, president and owner of Olen Properties Corporation, pleaded guilty to filing a false tax return for tax year 2002 related to foreign bank accounts he failed to disclose to the IRS. According to Olenicoff’s plea agreement, during the years 1992 through 2004, Olenicoff owned, controlled and had signatory authority over financial accounts outside of the United States.
Ponzi Scheme Victims – Tax Guidance
[Stacie says: From the IRS website – some good reads – well if you think Rev Rulings can be considered a good read ]
The IRS provides two items of guidance to help taxpayers who are victims of losses from Ponzi-type investment schemes.
Revenue Ruling 2009-9 provides guidance on determining the amount and timing of losses from these schemes, which is difficult and dependent on the prospect of recovering the lost money (which may not become known for several years).
Revenue Procedure 2009-20 simplifies compliance for taxpayers by providing a safe-harbor means of determining the year in which the loss is deemed to occur and a simplified means of computing the amount of the loss.
For an overview of this guidance, see IRS Commissioner Doug Shulman’s March 17, 2009, testimony before the Senate Finance Committee on tax issues related to Ponzi schemes.
QUESTIONS AND ANSWERS
Note: the answer to Q3 was updated on April 8, 2009.
Q1. I invested my money directly in an investment that turned out to be a Ponzi scheme. How do I deduct my loss?
A. See Revenue Ruling 2009–9 and Revenue Procedure 2009-20.
Q2. I invested in a Ponzi scheme through an intermediary such as a partnership. How do I claim my loss?
A. Partnerships ordinarily flow through all of their items of income, loss and deduction to their partners and do not pay tax or receive refunds at the partnership level. The partnership should provide you with a statement (on Schedule K-1 or a substitute), separately stating flow-through items of the partnership, including the theft loss deduction, which you will then include on your own return. You may need to request an extension to file your return. The partnership should also advise you of its gross business receipts, which will help you determine whether you are eligible to carry back a 2008 theft loss as a net operating loss for up to five years instead of the normal three years for theft and casualty losses. See Revenue Procedure 2009-19.
Q3. I invested in a Ponzi scheme through a trust. How do I claim my loss?
A. The tax consequences for taxpayers with investments through trusts will vary depending upon the type of trust arrangement. Certain trusts, known as grantor trusts, do not ordinarily pay tax or receive refunds at the trust level. Instead, the items of income, loss or deduction of the trust appear on the grantor’s own individual tax return. The most common form of grantor trust is a revocable trust, but certain irrevocable trusts may also be treated as grantor trusts, depending on the grantor’s powers over the trust. If a trust is not a grantor trust, then it may pay tax or receive a refund at the trust level, depending on the distributions it makes to its beneficiaries. These non-grantor trusts will take the theft loss into account on their own returns, but beneficiaries will generally receive an indirect benefit from the loss, to the extent that the loss allows the trust to make greater tax-free distributions to the beneficiaries.
You may wish to consult a tax professional for assistance.
Stacie's Tax Stuff 