Nowhere to Hide: Hell hath no fury like Uncle Sam's IRS spurned.

We already know that Uncle Sam is jealous when it comes to your US citizenship, but did you know he holds a grudge too? As just one example, Albert Cambata, a former U.S. citizen—now a citizen of St. Kitts and Nevis—, was prosecuted and plead guilty to one count of filing a false tax return almost decade ago, in 2007 and 2008.[1] Evidently, Mr. Cambata opened a Swiss bank account in 2006, received $12 million to that account, and then failed to report the interest income in 2007 and 2008.[2] In subsequent years, this money was then transferred between various accounts in three different Swiss banks.[3] So what makes Mr. Cambata’s case so interesting? First, there is usually a six-year statute of limitations for the government to prosecute for filing a false tax return.[4] However, this time period is tolled, or paused, for the duration that the person under investigation is outside of the U.S.[5] Thus, the U.S. was able to prosecute Mr. Cambata for crimes that occurred in 2007 and 2008 because he is an expatriate that lived in Switzerland since 2007.[6] Second, it appears the crackdown on offshore tax evasion, especially relating to the Swiss banks, is producing fruit.[7] All three of the banks that Mr. Cambata used were Swiss bank branches; so it is a relatively safe bet that those banks have been cooperating with the IRS to some extent. Third, this case serves as a warning to all expatriates or former U.S. citizens that just because you may have cut ties with the U.S. does not mean that Uncle Sam has forgotten about your break-up.

It is true that the days of hiding money from the IRS are rapidly waning, if not already behind us. In this age of digital information, about 100 to 140 governments are coordinating to exchange tax information on everyone, every year, regardless of whether they pay taxes or not.[8] This program is set to be phased into effect through 2018.[9] Indeed, the IRS has already performed an exchange of tax information with an unspecified number of countries on September 30, 2015.[10] Bottom line: if you break up with Uncle Sam he will hold a grudge, and, if the relationship (citizenship) is ongoing, Uncle Sam surely won’t stand for any secrets. Tread lightly.

–By Tony Nasser, Esq., Barnes Law

 Tony Nasser is associated with Barnes Law, licensed to practice law in California.

The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] https://www.justice.gov/opa/pr/former-us-citizen-pleads-guilty-tax-fraud-related-swiss-financial-account

[2] Ibid.

[3] Ibid.

[4] 26 U.S.C. § 6531; DOJ Criminal Tax Manual, § 7.01.

[5] Ibid.

[6] https://www.justice.gov/opa/pr/former-us-citizen-pleads-guilty-tax-fraud-related-swiss-financial-account

[7] See https://www.irs.gov/uac/Offshore-Tax-Avoidance-and-IRS-Compliance-Efforts; http://www.jdsupra.com/legalnews/doj-s-latest-offshore-tax-case-shows-90445/

[8] http://www.telegraph.co.uk/finance/personalfinance/expat-money/11511126/No-hiding-place-for-expat-tax-evaders.html; http://www.thinkadvisor.com/2015/10/09/expats-beware-fatca-tax-data-exchange-is-up-and-ru

[9] Ibid.

[10] http://www.thinkadvisor.com/2015/10/09/expats-beware-fatca-tax-data-exchange-is-up-and-ru