Taxing Dilemma for UBS Clients: Confess to IRS, or Wait and See?
As the Internal Revenue Service and a major Swiss bank continue to litigate over just how many names of secret UBS AG account-holders must be turned over to federal authorities, United States residents who have been illegal evading taxes by hiding assets offshore face a difficult dilemma.
If they come forward and confess to the IRS, as many are doing under a clemency program that will end on Sept. 23, they are likely to face substantially less onerous consequences than if the IRS comes to them, the Wall Street Journal (sub. req.) reports.
The holder of a $1 million Swiss account that earned $50,000 annually in interest from 2003 to 2008 might be asked to pay $386,000 in tax and penalties, plus interest, under the clemency program, the newspaper recounts. By contrast, a taxpayer who didn’t come forward could be hit with $2.3 million, plus interest, plus a criminal prosecution, according to the IRS.
But for those tempted to roll the dice and wait and see what the IRS does, their more risk-averse counterparts in crime may be providing some shelter, according to the newspaper. Busy with the voluntary disclosure cases—there were 400 last week alone, four times as many as during all of 2008—the agency presumably could be distracted from its criminal crackdown on tax evaders. And by volunteering information it’s possible that UBS account-holders who didn’t report income will be worse off than if they’d said nothing.
“These taxpayers reasonably fear that applying to the program could supply the agency with a roadmap it would not otherwise have,” partner Barbara Kaplan of Greenberg Traurig tells the newspaper. “They worry that they could wind up both rejected for clemency and helping the IRS case against them.”
Earlier coverage:
ABAJournal.com: “US Clients of UBS Mull Options as Feds Press Swiss Bank to Name More Names”
ABAJournal.com: “1st US Client Charged in UBS Swiss Bank Records Probe Pleads Guilty”
