Monday, November 24, 2008

Offshore Accounts Investigations by IRS

Offshore Accounts a Risky Business

As reported by Reuters today, some of the rich clients of UBS are rolling over and trying to make good with the U.S tax authorities after the IRS cracked down and had a former UBS banker indicted.

The WSJ characterized it as a sign that the U.S. efforts to battle offshore tax evasion is having some effect.

Whether the tax authorities will ultimately be successful or not, lawyers are the winners so far. The UBS clients are hirin tax attornies and scramblin to cover their collective through the Internal Revenue Service (IRS) voluntary disclosure program which would give them amnesty.

The amnesty program allows U.S. citizens to avoid criminal prosecution if they acknowledge evasion and agree to pay taxes and penalties.

Recently U.S. and Swiss governmental authorities have increased discussions with UBS with the threat of releasing information on the holders of offshore accounts held by U.S. taxpayers.

It's thought that UBS had as many as 20k United States citizens utilizing their private banking services to minimize their taxes.

The IRS is pondering a bulk settlement that would speed up the process for former and current UBS clients to seek amnesty.

The settlement would likely be something like the 2003 landmark offshore credit-card and tax-fraud deal only leveling harsher punishment. The reason may be that the Swiss government could be excluded from any such deal where US citizens voluntarily came forward and gave up their bank secrecy by giving up their own private bank information.

The threshold in Switzerland which defines tax evasion fraud is more narrow than in the United States. As a result, the Swiss will not engage in exchanging account data with foreign authorities unless they can prove tax fraud.

U.S. authorities have requested UBS release information on thousands of offshore accounts at UBS in order to conduct their investigation.

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