On Wednesday, August 19, UBS (one of Switzerland’s largest banks) agreed to turn over information on more than 4,450 American clients suspected by the IRS of using Swiss accounts for tax evasion.  Due to provisions of a new tax treaty between the U.S. and Switzerland, it could be more than a year before the IRS has all the information it wants.  It is clear, however, that the IRS is stepping up its efforts against tax evaders who are using Swiss accounts in an attempt to hide assets.  You can read more about these IRS efforts in an August 20, 2009 New York Times article.

In February of 2009, UBS paid $780 million and admitted to criminal wrongdoing in selling offshore banking services that contributed to tax evasion by U.S. citizens.  And the U.S. Department of Justice has a number of criminal investigations pending against UBS clients.  Swiss bank accounts are not going to remain as secret as they once were. 

There are still valid reasons to have Swiss bank accounts.  Switzerland has traditionally provided a very stable political and economic climate.  Many of its banks have provided a very high level of personal client services and good money management.  Swiss accounts (like other offshore accounts) can certainly be part of a legitimate, lawful asset protection plan.  It may be more difficult for a creditor to reach assets in a Swiss account than in a U.S. bank account.

Recent enforcement actions by the IRS, however, are a clear reminder that you cannot use Swiss accounts (or any other offshore accounts) in order to evade U.S. tax obligations.  United States citizens are required to pay tax on income whether that income is received in the United States or abroad.  As I have discussed in other posts — and as I will continue to emphasize — legitimate asset protection does not involve unlawfully hiding assets in order to evade taxes.  In fact, the best asset protection plans essentially leave assets in relatively plain sight, and simply take advantage of applicable laws in order to make it more difficult for creditors to reach those assets.