Ever since UBS agreed to hand over the names on thousands of undeclared offshore accounts, U.S. taxpayers (or non-taxpayers, as it were) have been rushing to the IRS to confess their sins. The deal: come clean of your own volition, and you’ll owe a significantly reduced penalty and you won’t have to go to jail.
That partial amnesty ends today.
What have we learned along the way? As it turns out, quite a bit about international tax dodging.
So far, more than 7,500 people have admitted to hiding money from U.S. tax authorities. Accounts have ranged in size from $10,000 to more than $100 million. Yes, the super-rich hide money overseas, but apparently so do people whose assets probably don’t warrant the effort (or the fees charged by “wealth managers”).
These people have money hidden everywhere. Uncovered accounts span 70 countries; Switzerland and the Bahamas are for people without imagination. The IRS now has a more systematic understanding of where to look for tax dodgers and as a result will be opening offices in Beijing, Panama City and Sydney.
Many tax cheats are doing what you’d expect—hiding foreign profits, trying to avoid the inheritance tax, keeping assets from an ex-spouse, squirreling away ill-gotten gains. Probably little need for sympathy there.
But plenty of people who have stepped forward claim they never knew they owed the IRS money. For example: a California businessman who opened an account at UBS when he took a job in the UK. Questions he asked of his Swiss bankers never got straight answers, he says. He never heard a thing about U.S. tax requirements. Now he realizes that he would have been much better off investment-wise if he hadn’t been paying for such expensive bankers to manage his money.
Then there are the heart-wrenching stories—the people who fled Nazi Europe. After surviving a concentration camp, one man opened a Swiss bank account with money his family had hidden in Budapest during the war. The Swiss banking system, with its devotion to secrecy, was the only one he trusted.
Though that’s not to say that plenty of other tax dodgers didn’t know exactly what they were doing.
Even while the offer of partial amnesty has been on the table, the IRS has gone after about half a dozen tax cheats with criminal charges. One man who has pleaded guilty spent more than a decade managing his accounts in Switzerland and the Cayman Islands; when he met with his Swiss bankers, they dressed as tourists to avoid detection.
Recently, one of his bankers told him that his accounts were safe from the IRS, and that the assurance would cost $45,000. The man paid the money. He shouldn’t have. On Oct. 3, the man heads to his sentencing where he could get up to three years in prison.