The U.S. tax system is a pay-as-you-go system, but most individual employees do not actually pay as they go. Instead, the responsibility falls on employers to withhold federal taxes and FICA taxes from employees. Federal income tax, as well as taxes used to fund Medicare and Social Security, are supposed to be taken out of an employee's paycheck. Employers have to file tax returns and pay the IRS with money that has been withheld, as well as make required employer contributions (employers pay half of a worker's Social Security taxes).  

Swiss banks used to be a good place for people to put their money offshore without worrying about the U.S. government finding out about it. This was because Switzerland had strong banking privacy laws. Now, however, the U.S. has been aggressively going after banks in Switzerland and many banks have chosen to participate in the Swiss Bank Program, which provides amnesty from criminal prosecution and reduced penalties if the bank pays a fine and turns over account details from U.S.-affiliated individuals.

The Panama Papers is the name given to a leaked database of the Panama law firm, Mossack Fonseca. The law firm is the fourth largest offshore firm worldwide and its focus is on incorporating offshore businesses and opening offshore accounts. The Panama Papers which were leaked include extensive details, including the names of accountholders and information on how corporations were created and how money was moved.

The United States government and governments worldwide have been cracking down in recent years on offshore accountholders who are not reporting their offshore investment income or paying taxes on the income.  There have been numerous settlements with Swiss Banks through which the Department of Justice has gleaned extensive information on offshore banking practices. Now, however, the unauthorized release of 11 million documents, which is being called The Panama Papers, has revealed a treasure-trove of information about offshore banking practices.

Bank J. Safra Sarasin AG allegedly helped to facilitate tax evasion by U.S. citizens. The Swiss bank helped U.S. clients title their offshore accounts in the names of Panama corporations and it falsely signed IRS forms certifying these accounts were owned by Panama entities so U.S. taxpayers wouldn't have to report them. The bank also helped set up nominee entities for U.S.-connected accounts which were undeclared. When the bank came under suspicion for these and other efforts at aiding in tax evasion, it helped U.S.-connected accountholders transfer money to other offshore banks in Israel, Liechtenstein and Hong Kong.