U.S. Justice Department Sues HSBC India for Disclosure of Accounts Held by United States Taxpayers
The United States Department of Justice continues its vigorous efforts to open up foreign secret bank accounts. In its latest move, the United States Department of Justice, on behalf of the Internal Revenue Service has filed suit in San Francisco, California against HSBC India to require the disclosure of United States tax payers accounts. The Justice Department is committed to ensuring that all US tax payers meet their obligations to declare and pay taxes on foreign bank accounts. The IRS has announced that it is continuing to focus its attention on international tax evasion.
The Justice Department has already sued UBS Switzerland to get accounting information on United States tax payers.
United States citizens and residents are required to disclose the existence of offshore bank accounts which contain more than $10,000.00. The failure to disclose the foreign bank account and pay taxes upon the earnings subjects an individual to criminal charges ranging from tax evasion to failure to file the offshore reporting form known as an FBAR. These are serious felonies. The punishment for tax evasion carries a maximum of 5 years in prison for each tax year.
Documents filed by the government reveal that a grand jury returned an indictment in Newark, New Jersey charging an individual with conspiring to defraud the United States by using undeclared accounts in the British Virgin Islands and at HSBC India to evade income taxes. The government contends that employees of HSBC and its affiliates in the United States assured the defendant that accounts maintained in India would not be reported to the United States and that investments in HSBC could be utilized without paying U.S. income tax on interest earned on the accounts.
Unfortunately for the defendant in Newark, New Jersey these representations are not only false but subject the account holder to significant criminal and civil penalties in the United States.
The government's latest efforts to pry open the records of HSBC is another example of what IRS Commissioner Shulman described as part of the IRSs' attention on international tax evasion and its efforts to obtain information on those who are not complying with U.S. tax laws. The case also makes it clear that the IRS is not limiting its efforts to prying open HSBC bank accounts but also is seeking to go after any foreign bank that has a large number of U.S. tax payers' accounts.
This action against HSBC is a significant problem for people who have undisclosed accounts at HSBC, for upon discovery, the undisclosed HSBC account can result in prosecution by the U.S. government.
Anyone who has an undisclosed offshore account at HSBC should consider entering into the latest IRS Amnesty Program which will be closed on August 31, 2011. Even though the government is seeking to pry open the HSBC's records, the Amnesty Program (known as Offshore Voluntary Disclosure Initiative, OVDI) can still be utilized to avoid criminal prosecution and to significantly reduce civil penalties. Since the Amnesty Program ends on August 31, 2011, anyone with an undisclosed offshore account and especially those at HSBC, should quickly begin the process of entering the OVDI. Because of the sensitive nature of dealing with the Internal Revenue Service on these matters, anyone considering entering the OVDI should utilize an attorney who has an understanding of federal criminal tax matters as well as the Voluntary Disclosure Initiative.