Caught up in the ongoing IRS Swiss Bank Program investigation of undeclared foreign assets, Zurich Life Insurance Company agreed to pay the US $5.1 million to settle claims of offshore tax fraud.
The settlement comes as the Internal Revenue Service continues to reap settlements and penalty payments as the result of stepped up efforts to pursue companies and individuals who violate FATCA and FBAR reporting requirements.
The Report of Foreign Bank and Financial Accounts (FBAR) is required of all accounts with certain dollar sums in foreign accounts and instruments. The Foreign Account Tax Compliance Act (FATCA) requires foreign entities that hold value for American taxpayers to report that value to the IRS. When there is a failure to file on the part of taxpayer or entity, the IRS pursues either or both for value and fines. These tools have gutted Swiss foreign bank accounts as an opaque location to stash cash and assets.
In a press release, the Department of Justice notes, “From Jan. 1, 2008, through June 30, 2014, Zurich issued or had certain insurance policies and accounts of U.S. taxpayer customers, who used their policies to evade U.S. taxes and reporting requirements. In particular, Zurich had approximately 420 U.S. related policies, 127 with Zurich Life and 293 with Zurich International Life, with an aggregate maximum value of approximately $102 million, for which the U.S. taxpayer customers did not provide evidence that they had declared their policies to U.S. tax authorities.”
While some insurance policies do qualify for preferential tax treatment in the US, the Zurich policies did not. Increases in principal of these policies were unreported by Zurich and untaxed by the IRS.
An interesting feature of this story is that Zurich Insurance undertook a thorough compliance review of its pension, savings, and insurance services when the IRS initiated its Swiss Bank Program. At the same time, Zurich reached out to clients around the world who had potential tax exposure. In July 2015, Zurich self-reported to the IRS and provided its investigative documentation and research summaries to the agency.
This thorough handling of a potentially explosive tax problem and full disclosure to the IRS undoubtedly helped Zurich emerge with a minimal settlement of $5 million. This case amplifies our ongoing message—if you believe you are, or could be, in tax trouble at any level, contact an experienced tax lawyer as soon as possible. Knowledgeable legal advice can protect your future and possibly minimize other damages. Do not wait until the IRS knocks on your door.
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Serving national and international clients from offices in Chicago and Cleveland, our tax team at Robert J. Fedor, Esq., LLC can help you handle IRS tax challenges and tax litigation. When you need comprehensive tax advice locally or abroad, call 800-579-0997 or contact us.