Last week the U.S. Justice Department asked a federal district court in San Francisco to…
In Addition to HSBC, Credit Suisse Also Being Investigated for Offshore Activities
On July 14, 2011, Credit Suisse received a letter notifying it that it is a target of a Justice Department investigation. A target letter is significant. It likely means that a considerable level of investigation has already been done and further criminal investigation is warranted. See Internal Revenue Manual, Part 9. Even before this stage a well-advised taxpayer proceeds with great caution.
Credit Suisse is unlikely to be the only institution in the IRS’s sights. It has been reported that U.S. authorities are conducting a broader industry inquiry. Credit Suisse points out that it has obligations under Swiss law, and those are not small. Credit Suisse says it will continue to cooperate with the U.S. authorities, subject to those rules.
HSBC is also being scrutinized. On April 7, 2011, the U.S. District Court for the Northern District of California issued an order authorizing the Internal Revenue Service (“IRS”) to serve a “John Doe” summons requesting information from HSBC regarding U.S. residents who may be using accounts at HSBC in India to evade federal income taxes. If HSBC produces these records, which is likely, it may be too late for U.S. taxpayers with undisclosed HSBC accounts to take advantage of the IRS Voluntary Disclosure Program for offshore accounts. The IRS says there are 9,000 high net worth Indian US residents who maintain at least $100,000 in their bank accounts in HSBC India but only 1,921 of them have disclosed details of their accounts. In a statement to a San Francisco court, senior IRS official Daniel Reeves said, “This indicates that thousands of US taxpayers of Indian origin who maintain more than $100,000 in accounts with HSBC, may have failed to disclose their HSBC India accounts to the United States Government.” He went on to say, “It is also likely that those taxpayers may have failed to report income earned on those undisclosed accounts.”
The 2011 OVDI is still pending and allowing U.S. account holders to come clean under the IRS amnesty policy. However, OVDI expires August 31, 2011, although it’s possible to ask the IRS for permission to extend the deadline for some materials until November 29, 2011.
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