On Tuesday, November 16, 2010, after receiving more than 4,000 names of suspected tax evaders, Internal Revenue Service closed legal proceedings against UBS, a Swiss bank that the IRS alleged had assisted United States taxpayers in efforts to hide assets and income. UBS denied liability and was required to turn over the names of its United States investors under a settlement agreement entered into with the United States government. IRS Commissioner Doug Shulman has indicated publicly that the UBS litigation was only the beginning of a broad IRS effort to pursue foreign banks and promoters in both Switzerland and in other alleged tax haven countries.
Formal Voluntary Disclosure Program Closed
In connection with the UBS litigation, the IRS offered investors a limited opportunity to come forward under a voluntary disclosure program. This formal voluntary disclosure program, which was offered by the IRS during 2010, has now closed and the reduced penalties available under the program are no longer available. However, the IRS' general voluntary disclosure policy remains in place and, in certain, limited instances, taxpayers may be able to limit exposure to civil and criminal penalties by entering into a voluntary disclosure prior to being discovered by the IRS. Now that the formal voluntary disclosure program has ended and large number of names have been released, it is very likely that people discovered by the IRS will be subject to comprehensive audits and criminal investigations.
For any taxpayer with an undisclosed foreign investment account, whether it is with UBS or any other foreign institution, quick action should be taken to assess the risks and potential benefits of a voluntary disclosure or other action. Depending on the specific facts and circumstances that apply in a given case, a variety of protective measures may be available to taxpayers. Waiting for a comprehensive audit and criminal investigation is not a recommended option