The term Swiss bank account conjures up visions of wealthy individuals stashing cash where no one would know about it. Things have changed with the recent signing of an agreement of cooperation between Switzerland and the United States.
Under the agreement, starting on January 1, 2014, Swiss financial institutions must register with the IRS and comply with reporting and withholding rules applicable to foreign financial institutions (FFIs). They must request from each account holder identified as a U.S. account (one held by 1 or more U.S. persons) the appropriate tax identification number of the holder. Swiss FFIs must start certain reporting in 2015.
Even without this agreement, which helps the IRS with compliance on reporting of income from Swiss accounts, U.S. citizens and residents are already required to report their worldwide income, including amounts from these accounts. Reporting includes:
Whether the new agreement will lead to more transparency on foreign holdings and, in turn, more reporting of foreign income, remains to be seen.
Test for determining deductibility of IRA deductions. Active participants in employer retirement plans are subject to IRA deduction phase-out rules if adjusted gross income exceeds certain threshold.