UBS Targets Come Into Focus

November 20, 2009

The IRS has released the selection criteria for identifying holders of accounts with Swiss bank UBS under a U.S. settlement agreement with the Swiss government negotiated in August. Under the agreement, UBS will turn over information concerning approximately 4,450 accounts for investigation. IRS Commissioner Doug Shulman also recently announced that about 14,700 taxpayers had come forward to disclose offshore assets under a reduced penalty program, nearly twice as many as Shulman had estimated on Oct. 15, when the program ended.

 

The August settlement agreement represented a compromise between the two governments over a contested “John Doe” summons in U.S. v. UBS AG, a case filed in the U.S. District Court for the Southern District of Florida. Generally, the selection criteria cover U.S.- domiciled UBS clients who directly or beneficially owned undisclosed custody accounts or banking deposit accounts exceeding 1 million Swiss francs (about $982,000 at current exchange rates) at any time during 2001 through 2008 and about whom the U.S. government has a reasonable suspicion of tax fraud. Any U.S. persons (regardless of domicile) who beneficially owned offshore company accounts of any size during those years and whom the U.S. suspects of committing tax fraud will also be identified under the selection criteria.

 

Where a U.S.-domiciled account owner has submitted false documents or purposely masked his or her identity, the threshold account size for owned undisclosed custody accounts or banking deposit accounts will be reduced to 250,000 Swiss francs. Account holders who have engaged in acts of “continued and serious tax offense,” which include failure to provide a Form W-9 for at least three years, and whose account generated revenue of at least 100,000 Swiss francs per year, will also be identified.

 

Despite the expiration in October of the IRS’ reduced penalty initiative for failure to disclose foreign accounts on Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), Shulman urged taxpayers with offshore accounts to continue to come forward under ongoing voluntary disclosure rules that can reduce the likelihood of criminal prosecution. See “Voluntary Disclosure to the IRS: A Viable Option,” JofA, March 08, page 40, and articles at the JofA FBAR Resources page. 

 

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