Tax Lawyer's Blog

Linda Beale reports that the Swiss Parliament has ratified the U.S.-Swiss agreement providing for the release of  U.S. account-holder information on about 4,500 accounts:

It is likely that the names will start flowing very soon, which moves the ball back to the U.S.  The voluntary disclosure program that provided some assurance of limited penalties has ended.  But voluntary disclosure may still be the better decision for anyone who might be among the revealed accounts.  Not only are the penalties for non-reporting rather draconian, since multiple year failure to disclose can lead to multiple year penalties that well exceed the amount in the account, but there is a potential for civil and criminal charges.  A taxpayer who comes forward may be able to forestall the worst, but a taxpayer who is discovered without having come forward likely will get little leniency.

[In an article titled Taxpayers may have 'mere hours' to reveal UBS accounts, Bloomberg.com] quotes fellow tax lawyer and ABA Standards Committee officer Scott Michel (Caplin & Drysdale, DC) who got two calls today from panicked taxpayers hoping to be able to disclose accounts before the IRS gets their name. May they scramble quickly–perhaps it will not only save them some of the money in their account but also teach them some much-needed humility.

This is a significant victory for the U.S., and hopefully,, together with FATCA’s passage, the beginning of the death knell for banks in banking secrecy jurisdictions serving as accommodation parties to U.S. taxpayers’ evasion of taxes.

I agree with Linda that it’s a good thing that the U.S. government has finally been able to put a dent in the foreign secret banking industry which for decades has been helping U.S. tax cheats defraud the U.S. government. I also agree with her that taxpayers who have not availed themselves of relief under the voluntary disclosure program are likely to have the full weight of the Department of Justice (DOJ) come crashing down on them once their names are disclosed.

I’m afraid it’s now too late for a UBS investor who failed to avail himself of the voluntary disclosure program by the deadline of October 15, 2009 to obtain relief under that program. It would be naive to expect the DOJ to give him leniency for coming forward voluntarily at this late date since it would be obvious to everyone that he had done so only after the disclosure agreement had been ratified by the Swiss and the disclosure of his name and account information to U.S. authorities had become imminent.

The DOJ would be right to view any last-minute attempt to participate in the voluntary disclosure program as evidence that the taxpayer had every intention of continuing his fraudulent practices had the disclosure agreement not been ratified by the Swiss and his name not been disclosed to the IRS.

Having said that, I still recommend that a taxpayer who has hidden his assets in offshore accounts and has failed to report all of his income on his federal tax returns come forward voluntarily. It is always preferable to comply with the tax laws before the IRS expends it’s time and money to find you and force you to comply. Coming forward voluntarily, even if it is not part of an official amnesty program, will decrease the likelihood that the taxpayer will be charged with a tax crime.

Before you come forward voluntarily, however, you should consult with an experienced tax lawyer.

Lastly, unlike Professor Beale, I don’t care a whit about the level of humility of these tax scofflaws. All I want (and all Ms. Beale should want) is that they make full restitution to the American taxpaying public and refrain from stealing from it again.

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