By Mark A. Berman, Esq.

Last year, the IRS initiated a special voluntary disclosure program for U.S. taxpayers with undisclosed foreign bank accounts, offshore investment accounts, and other income-producing assets outside the United States. The response was overwhelming. Perhaps spurred by the February 2009 agreement by Swiss bank UBS to admit selling illegal offshore banking services that had enabled U.S. taxpayers to evade U.S. taxes, and its August 2009 agreement to turn over to the IRS the names of thousands of its American clients, almost 15,000 U.S. taxpayers voluntarily disclosed their offshore accounts, seeking both to avoid possible criminal prosecution for tax evasion and to benefit from the program’s reduced civil penalty provisions.

The application period for voluntary disclosure program for offshore accounts is now closed and many U.S. taxpayers who failed to act quickly enough are asking: “Now what?”

From the IRS, the taxpayers can expect increased enforcement:

• The IRS has added revenue agents and tasked them with responsibility for reviewing not only the disclosures the IRS has received also to seek out taxpayers with undisclosed accounts;
• The government will continue to put pressure on UBS and other Swizz banks to compel them to disclose the identities of U.S. taxpayers with Swiss accounts; and
• Enforcement is likely to extend beyond Swiss banks to encompass other countries around the world viewed as tax havens for U.S. taxpayers.

From the taxpayer’s perspective:

• There is a continuing legal obligation to disclose foreign accounts and assets on an annual basis by, among other things, filing an FBAR (IRS Form TD F 90-22.1, “Report of Foreign Bank and Financial Accounts”); and
• There remain incentives to take advantage of the IRS’s general voluntary disclosure program which encompasses disclosure of foreign and off-shore bank accounts.

If you have undisclosed assets overseas, including signature authority over accounts from which you do not personally benefit, you should examine your compliance posture, and the disclosure options available to you, with counsel.

*** IRS CIRCULAR 230 NOTICE: Any tax advice provided in this communication is not intended or written to be used or relied upon, and it cannot be used, relied upon, or referred to by any taxpayer: (1) for the purpose of avoiding tax penalties that may be imposed by law upon the taxpayer; or (2) in any marketing or promotion of any tax transaction or planning. Any taxpayer should seek advice based on his/her particular circumstances from an independent tax advisor with respect to any federal tax transaction or matter referenced in this communication.