HSBC Picked as the Next IRS Target – Will That Be One of Your Clients?

WALLINGFORD, CT, July 22, 2010 – Advisors working with clients who are sophisticated investors need to let them know that that they could be in the sights of the IRS.  This is especially true if those clients are invested with HSBC because it looks like the IRS has picked them as its next target.  “This may very well be the UBS situation all over again, and it has the potential to be worse,” warns Anthony Parent, founder of IRS Medic in Wallingford, CT.  This legal practice works with advisors and clients to resolve tough tax problems for businesses and individuals in the US and overseas.

“The business press has already got a hold of this issue.  We think this is just the beginning.  We’re expecting this to be another heavily publicized effort by the IRS to target US citizens and certain aliens with accounts in India and Hong Kong who have not reported to them to the IRS,” he says.

He points out that this may very well become an issue for your clients if they have accounts in a foreign country with aggregate values exceeding $10,000 if they haven’t filed a Report of Foreign Bank and Financial Accounts statement (FBAR).  “Under IRS rules, US citizens with a financial interest in (or authority over) financial accounts that meet these requirements must file the FBAR by June 30 of the following year,” Atty. Parent points out. “If they fail to do so, they could be subject to criminal penalties of up to ten years imprisonment; and fines that could outstrip the value of the account.”

By targeting HSBC, the IRS is sending a message that they will target all undisclosed offshore investments. “I think a lot of taxpayers developed a false sense of security.  They thought that the IRS was too busy focusing on Europe to be concerned with the Far East. This is not the case.  The IRS is looking for tax evasion globally.”

Parent suggests advisors have a duty to bring this information to appropriate clients and to remind them that there are ways to avoid this fate.  “The good news is that the IRS’ Voluntary Disclosure program is still available,” he says. “This is not the ‘special’ UBS program.  That ended on October 15, 2009.  But that doesn’t mean the IRS’ standard Voluntary Disclosure program is not available.  That’s still in effect.  In addition, depending upon the facts, penalties may be reduced to a non-punitive amount if the client works with experienced advisors who are familiar with the program.”

He urges advisors to remind their clients that the Voluntary Disclosure program will only help them if they submit to it before the IRS begins an investigation.  He also reminds advisors that their clients may be currently under investigation without knowing it.  “Once someone makes up their mind to avoid jail and disclose, it’s best to do it now. Right now,” he urges.

Most taxpayers with offshore accounts didn’t open them to abscond with taxes. Many opened them for legitimate reasons — they needed a bank account in the country for business they transacted there. But, out of fear or ignorance, they may not have disclosed this to their advisors.

”I think every advisor who has a client with close connections to another country must ask them about their bank accounts.  If you include an attorney in that discussion, that will help your client protect confidentiality.”

He underscores the need for immediate action with these words of caution: “When it comes to offshore accounts in Europe, no one is safe.  If we learned only one lesson from the UBS situation, it was that.  Americans with offshore accounts at the other end of the world at HSBC should be worried—even those who pay foreign taxes on those accounts. And that applies to all overseas account – those that were inherited, those in which the client has joint ownership, and even those that made no money or took a loss.  Your clients have to report them.  Those who do not report the existence of those accounts could be found guilty of tax evasion.  It’s up to each of us who work as advisors to these clients to make sure they understand and act on these matters.”

About IRS Medic

Anthony is the founder of IRS Medic at Parent & Parent, a practice of tax attorneys that works to resolve tough tax problems for businesses and individuals in the US and overseas.  These issues can range from unfiled taxes to audits, liens, penalties, other federal and state agency tax actions and business recovery.  Attorney Anthony Parent founded the firm in 2003 to help clients deal with difficult tax problems.  He combined an academic background in finance with a law degree to develop the foundations of the practice.

Media contact:

Andrea Obston aobston@aomc.com

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