File before September 23 to Reduce Penalties and Avoid Possible Criminal Prosecution on Undisclosed Accounts

U.S. persons having offshore accounts that are not disclosed to the IRS are subject to significant penalties, along with possible tax, interest and criminal sanctions. Earlier this year, the IRS announced an initiative that significantly lowers the penalties for voluntarily divulging undisclosed offshore accounts. This program, which ends Sept. 23, 2009, applies only to taxpayers with legal source income who have not already been identified by, and who fully cooperate with, the IRS.

Under this initiative, an eligible taxpayer pays all taxes and interest for the prior six years, plus reduced penalties. Taxpayers who voluntarily disclose under this plan can avoid criminal prosecution. The arrangement provides taxpayers certainty and consistency regarding resolution of their situation.

Recent IRS Settlement with UBS

Those who fail to come forward with undisclosed accounts by the September 23 deadline face potentially significant civil tax and penalty exposures and potential criminal prosecution. On Aug. 19, 2009, the US Justice Department announced a settlement with UBS whereby the IRS will receive information on thousands of US holders' of UBS foreign accounts. This information relates not only to bank accounts, but also custody accounts holding investment assets and offshore company nominee accounts through which an individual indirectly held beneficial ownership in the accounts. If, prior to applying for the voluntary disclosure program, an individual's information is obtained by IRS through the UBS settlement, then the individual is no longer eligible for the voluntary disclosure program.

Act before September 23

We currently represent a number of clients that have taken advantage of the voluntary disclosure program and, over the years, have dealt with a substantial number of voluntary disclosures in civil and criminal tax matters. Taxpayers with unreported offshore income, accounts assets or entities should immediately discuss with their tax advisors the options available to resolve the issue, including taking advantage of the September 23 voluntary disclosure program.