IRS to get names of U.S. taxpayers banking with Wegelin & Co.

IRS to get names of U.S. taxpayers banking with Wegelin & Co. through a Connecticut based correspondent account with UBS.

On January 28, U.S. District Judge William H. Pauley III signed an order in Manhattan federal court that authorized the IRS to serve a summons on UBS, the largest Swiss bank. The summons demanded that UBS AG was to produce account information of U.S. taxpayers banking with Wegelin & Co, through a Connecticut-based correspondent account with UBS. These records will allow U.S. authorities to determine who held assets at Wegelin and other Swiss institutions using the UBS account. Wegelin pled guilty in Manhattan federal court on January 3, 2013, to conspiring with U.S. taxpayers and others to hide more than $ 1.2 billion in secret Swiss bank accounts and to conceal the income they generated from the IRS.

In this action, the Court granted the IRS permission to serve what is known as a “John Doe” summons on UBS. The IRS uses John Doe summonses to obtain information about possible tax fraud by individuals whose identities are unknown. This summons directs UBS to produce records identifying U.S. taxpayers with accounts at Wegelin and other Swiss banks that used Wegelin’s Correspondent Account. The John Doe summons targets a Stanford, Connecticut UBS correspondent account that Wegelin opened in the late 1990s. The account allowed Wegelin and other banks to launder U.S. taxpayers’ funds from their undeclared accounts in Switzerland.

The IRS has offered a series of voluntary disclosure programs to encourage taxpayers with undeclared foreign bank accounts to come forward. For now, the John Doe summons is not an event that would render a voluntary disclosure untimely. However, it is unclear whether that policy will remain in place. The IRS has stated Under FAQ 21 of the 2012 Offshore Voluntary Disclosure Program (OVDP) that certain groups of taxpayers “that have or had accounts at specific financial institution will be ineligible due to U.S. government actions in connection with the specific financial institution.” Thus, time might be running out for U.S. customers of Wegelin, and for all other American taxpayers who have not properly declared their foreign accounts.

Manhattan U.S. Attorney Preet Bharara said: “This summons is the latest step in our efforts to identify and prosecute U.S. taxpayers who think they can evade their legal responsibility to pay taxes by secreting their money away in anonymous off-shore accounts at Wegelin and other banks, and to recover the hundreds of millions of dollars that is owed to the IRS.”