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Swiss Disclosure of UBS Accounts
 
 

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Introduction
The US government has successfully negotiated an agreement that will force the Swiss bank UBS to disclose information on an estimated 4,450 accounts to the IRS. In addition, the Swiss government has agreed to the institution of a procedure to process and respond to additional IRS requests for information, from any and all Swiss banks, so long as such requests are “based on a pattern of facts and circumstances that are equivalent to those of the UBS AG case.”  
 
UBS Detail
The 4,450 UBS accounts reportedly had, at one time, a combined total value of $18 billion. The IRS refused to disclose the criteria used to select the UBS accounts for which it would be requesting disclosure. Pursuant to the agreement, the IRS will submit a treaty request to the Swiss government describing the accounts for which it requests disclosure. Thereafter, the Swiss government will direct UBS to initiate procedures to release the information to the IRS. The requests and corresponding releases of information will occur on a rolling basis. Under the procedure, UBS will notify an account holder prior to making the disclosure, and the first round of such notifications is expected to reach account holders in the coming weeks. Other account holders may not receive a notice for several months.  
 
Tax and Penalty Implications for Account Holders
The IRS plans to examine all the acquired information for potential civil and criminal tax violations. US individuals with unreported income will likely face taxation of that income, plus penalties for underreporting (ranging from 20% to 75% of the underreported amount), plus interest. If such individuals also failed to file Reports of Foreign Bank and Financial Accounts (Form TD F 90-22.1 or “FBAR”) disclosing such offshore accounts to the US government, they may face an additional penalty of up to $100,000 or 50% of the value of the account at the time of the violation (whichever is greater). The IRS may also recommend certain cases to the Department of Justice for criminal prosecution, where violators could face up to 10 years in prison and a fine of $500,000. Individuals that take advantage of the IRS’s voluntary disclosure program (described below) can limit their civil and criminal exposure to penalties.  
 
IRS Voluntary Disclosure
The IRS unveiled a new program for voluntary disclosure on March 26, 2009, whereby taxpayers would have the option of coming forward to the IRS in exchange for a reduction in penalties. Under the voluntary disclosure program, the taxpayers must fully comply with IRS investigation and turn-over significant amounts of information concerning their offshore accounts. In exchange, the IRS will assess taxes and accuracy penalties (20%) for the past 6 years (2003 through 2008), and in lieu of all other penalties (including the FBAR penalties), the IRS will agree to assess a penalty equal to 20% of the value in each undisclosed foreign bank account, such value being determined in the year with the highest aggregate account value. Certain facts may warrant an even further reduced penalty structure.
 
The deadline to participate in the IRS’s voluntary disclosure program is September 23, 2009, and there is currently no planned extension. The IRS urges individuals to take advantage of the program prior to the deadline.  It may only be a matter of time before all Swiss account information is released to the IRS.   


CIRCULAR 230 DISCLOSURE
THE DISCUSSION OF TAX CONSIDERATIONS WAS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED BY ANY TAXPAYER, FOR THE PURPOSE OF AVOIDING TAX PENALTIES THAT MAY BE IMPOSED BY THE INTERNAL REVENUE SERVICE.  ANY TAX ADVICE CONTAINED HEREIN WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED BY THE WRITTEN ADVICE. EACH PARTY SHOULD SEEK ADVICE BASED ON THE PARTY’S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.     

 

 

 





 

 

 

 

 
 
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