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UBS Settlement: Russian Roulette for offshore investors?

August 20, 2009

The IRS will settle for getting the names of 4,450 of the 52,000 or so UBS Swiss bank account holders it was seeking as a result of this week's settlement with UBS. That might not seem like that many, but criminal tax attorney Jack Townsend thinks that might be enough for now:

The agreements do not state the criteria that will be used to identify the 4,450 (approximate) that UBS will disclose. Without the criteria, UBS' U.S. account holders will not know whether they have drawn the black bean. Each UBS U.S. depositor who has not already joined in the IRS' voluntary disclosure program will not have certainty that his name and account(s) will not be picked. It is true, that the letter UBS is required to use to notify the account holders who draw the black bean will notify the account holders that they can still get in the program. But, the program only lasts through September 23, 2009, and it appears that the picking of names will extend beyond that date.

So taxpayers wavering on whether to jump on board the IRS offshore account amnesty have to wonder if they will win a bullet should they choose to play Spin the Revolver instead of coming clean. Mr. Townsend adds:

Also, an essential part of the voluntary disclosure program and the names that get targeted by this round of UBS turnovers will be to learn the identities of the as many of the U.S. taxpayers' enablers that the U.S. can then bring to justice -- at least the most abusive of the lot. There will be lots of tentacles into U.S. lawyers, financial advisors and others who, like ordinary tax shelter promoters, raked off their share of the taxes that should have been paid to the Government.

So even if someone with an undisclosed Swiss account doesn't lose this round of Russian Roulette, it might go badly if one's financial advisor starts singing to shorten his own Club Fed vacation. Even if you didn't use UBS, can you be sure that the fellow who helped you stash money offshore didn't also have UBS ties?

TaxGrrrl has similar thoughts.

Tags: FBAR.Federal Tax Crimes blog.tax crime.TaxGrrrl.TaxProf.