Judge Authorizes IRS to Seek Bank Records From UBS

Judge Authorizes IRS to Seek Bank Records From UBS

The IRS  is within its rights to request financial records from UBS of U.S. taxpayers suspected of hiding their income in accounts with Swiss bank Wegelin, a court ruled.

U.S. District Judge William Pauley granted the Internal Revenue Service a motion to issue a “John Doe” summons – which requests information about possible tax fraud committed by individuals whose identities are not known – on UBS. Following the guilty plea and subsequent closure of Switzerland’s oldest bank Wegelin, which admitted to helping U.S. clients skirt their U.S. tax law obligations, Pauley said that the IRS request was valid, as many UBS taxpayers may have hidden their income at Wegelin and other Swiss banks.

Following the ruling, a UBS spokesperson that the bank would comply with the request, and offer up information on U.S. clients. However, it noted that it would only provide U.S. records, not Swiss ones, to the federal tax agency, according to Reuters.

Although UBS was previously absolved of its own tax law violations in 2009 after it admitted to helping Americans evade taxes and agreed to a $780 million settlement, its association with Wegelin has put it back in the spotlight. Wegelin pleaded guilty on January 3 to helping U.S. clients hide income in secret accounts, and became the first foreign bank to be indicted by the U.S. A spokesman for the bank also raised eyebrows and make other banks nervous when he admitted that facilitating tax evasion was a common practice among many financial institutions. The 271-year-old institution agreed to pay $57.8 million in fines.

Wegelin is just the latest bank on the list of Swiss institutions the IRS is examining in connection with tax evasion as it seeks to crackdown on the misuse of offshore accounts and close the federal tax gap.