U.S. Tax Dodgers Brace for UBS Fallout

Bank's Disclosure of Accounts Could Prod Some Wealthy Americans To Come Clean

(CBS/AP)  An agreement by a major Swiss bank to disclose the identities of thousands of Americans suspected of hiding assets has U.S. tax advisers bracing for a stampede of wealthy tax dodgers looking to come clean.

The U.S. and Switzerland finalized an agreement Wednesday in which the Internal Revenue Service will receive details on 4,450 UBS AG accounts suspected of holding undeclared assets from American customers.

The agreement pierces Switzerland's famed tradition of banking secrecy, and is expected to prod thousands more UBS clients in America to voluntarily disclose their financial details to the IRS, lest they be pursued later.

"What this does is creates an overwhelming incentive for virtually every one of those account holders to come forward," said Peter Zeidenberg, a litigation partner at the law firm DLA Piper in Washington. "If there had been a steady stream, there is now going to be an absolute flood."

A day after UBS agreed to divulge client names, Switzerland sold its stake in the bank for a $1.1 billion profit.

The disclosure agreement is part of the Obama administration's stepped-up efforts to go after wealthy tax dodgers hiding assets in offshore accounts, an initiative that promises to yield many more prosecutions, IRS Commissioner Doug Shulman said.

UBS has an estimated 52,000 accounts held by U.S. customers. The IRS chief said the 4,450 accounts being identified were the ones most suspected of containing undeclared assets. Many of the rest are held by people who have complied with the law and paid their taxes, Shulman said.

The IRS long has had a policy that certain tax evaders who come forward before they are contacted by the agency usually can avoid jail time as long as they agree to pay back taxes, interest and hefty penalties.

In March, the IRS began a six-month amnesty program that sweetened the offer with reduced penalties for people with undeclared assets. Shulman said the response has been unprecedented, though he declined to say how many people have applied.

Tax advisers at several U.S. firms said they already are seeing many more customers with undeclared assets seeking information about their legal options.

It is not illegal for Americans to have overseas accounts, but they must pay U.S. taxes on the money. Also, there are special reporting requirements for accounts of more than $10,000.

Robert McKenzie, a Chicago-based lawyer who represents dozens of American clients of Swiss banks, said some will still try to avoid the taxman.

"Some will say, 'Let's wait and see if I get a letter,"' said McKenzie. However, he said, waiting too long "is really playing a game with the devil."

Shulman said UBS customers are free to take advantage of the disclosure program as long as they come forward before the amnesty program expires Sept. 23 - and before the IRS receives their name from UBS.

"The letter they receive from the bank will not disqualify them from coming forward to the IRS under our voluntary disclosure program," Shulman said. "But once the Swiss government sends us the name, all bets are off."

The Swiss, known worldwide for keeping bank accounts secret, said UBS had no real choice in turning over the names.

Justice Minister Eveline Widmer-Schlumpf told a news conference in Bern that the deal lifts the threat of criminal prosecution against UBS, which not only would have endangered the bank's existence but would have dealt a severe blow to the Alpine nation's economy.

"There was no alternative to this solution," she said.

Rep. Richard Neal, D-Mass., chairman of the House Subcommittee on Select Revenue Measures, said the agreement is only "a small step forward in the broader effort to crack down on tax avoidance worldwide."

"Information sharing and international enforcement face serious obstacles," Neal said in a statement. "And it is costing the American treasury billions of dollars each year."

The agreement includes several measures favorable to the Swiss - and gives the clients a chance to get right with the IRS.

Instead of releasing the names directly to U.S. authorities, UBS will turn them over to the Swiss Federal Tax Administration. Account holders will then be able to appeal their release to the IRS before Switzerland's Federal Administrative Court.

However, U.S. authorities will be notified of the appeals, giving them access to information about account holders. It is expected to take several months for the first names reach the IRS, and court proceedings could prolong the process.

[dumascracks]

I love it, most of these people was hiding drug money, this is going to be one of the biggest drug busts in History!!

[chonder2]

Anybody whant to guess which corporation Senator Phil Gramm will move to next? I sure would like to see him drug before a Congressional hearing and explain how all those FINANCIAL DEREGULATION bills he wrote are working out right now!!!

[fariborzzak]

The Gov. does not have enough power to do that.

[mrjustice1]

THESE SELFISH INGRATES WHO MADE THEIR FORTUNES IN AMERICA, OWE AMERICA!

The least they can do is pay their share of taxes and put back something into the country and/or community from where they became successful.
Their intentionally hiding revenues, monies, assets, etc, is often indicative of unlawful, wrongful, or improper (trans)actions in the first place. Free enterprise should not be interpreted as

'whatever one can get away with'
or
'the law of the jungle'

and not having responsibilities or obligations.

Prosecution with severe punishment, and seizure of assets, moneys, properties, personal possessions, etc, from many who willfully evade paying their dues would be the correct approach to deal with such matters.

In cases of massive schemes or scams that destroyed the finances and lives of their victims, or weakened America's and community effectiveness to govern due to lack of funding, charges of treason should be applied, and lifetime prison sentences should be meted out to these unconscionable criminals!

[wmsshields]

Will they get as good a deal as the Hon. Mr. Treasury Secretary Tim Geithner?

[Void_Master]

You see, what's laughable is that the people getting caught are pikers. They acted stupidly. Had they converted their funds from U.S. dollars to something else, they would never have got caught. I guarantee you that the true tax-dodgers did just that and they are not sweating this thing.

[Void_Master]

by MiddleClassWorker August 20, 2009 4:06 PM EDT

This isn't debt. It's money that they were legally required to pay taxes on. Time to pay up, just like the rest of us.

***

Aaaa, yes it is debt. The U. S. is the only industrialized nation on Earth that says that not paying taxes is a criminal matter. All others call it a civil matter.

As far as "time to pay up just like the rest of us," well NO.

The fact that the rest of you tolerate such crap from the government does not oblige me to be that stupid.

[retiredgustav]

You are so right, Al Capone should have never gone to jail!

[afmcalax]

Wow .. I see comments like these and finally realize there is a serious brain shortage in the land of Republicans. Now there is sympathy for rich, tax cheats. I have never seen so many people with so little defend the rights of the rich and powerful to not just earn what they don't deserve, but then to play by different rules when they are asked to pay their share back to society. There are some people that just need to be cut out of the discussion and it appears that Void_Master is one of them.

[sjc_1]

The Republicans support the greedy rich because some day they hope to be the greedy rich. They are wage slaves to them and get by on what ever small crumbs "trickle down", grovel at their feet and worship the money that they walk on.

[Benton09]

Who's going to run the banks and the oil companies after their CEO names appear on the list.......wait......what am I saying, CEO's have a get out of jail card (and a get out of paying taxes card too.) Silly me, that was the OLD America I knew....long gone now.....

[specialty8]

I bet half of his administration and congress are bitting bullets right now.

[credibility2]

I hope Obama goes after the many tax-dodging sport's and entertainment buddies of his. Offshore tax havens should also be stopped.

[not_fooled_by_Righties]

What a ******* ******* you are!

[gramto8]

Excuse me, but this article is ABOUT tax havens! Maybe you should go back to school and get a little reading comprehension tutoring.

[Void_Master]

Debtors' prison is prohibited by the U. S. Constitution. Just one more example of the the government ignores its own rules.

[MiddleClassWorker]

This isn't debt. It's money that they were legally required to pay taxes on. Time to pay up, just like the rest of us.

[dumascracks]

this is drug money also, CASH in BAGS

[msjan2158]

how about the government do something simiar with all the deadbeat dads out there that avoided paying child support for so many years?!! i could use some help like that, since the child support collection folks are ineffective

[sjc_1]

We might see some wealthy people doing the perp walk right to a cell next to Bernie's. These people should be exposed, tried, convicted and sentenced. They knew what they were going, it was deliberate and premeditated.

[mjvwsr]

Yes, I'm sure quite a few members of the nobama administration are worried.

[sjc_1]

I would be willing to bet that most of the people with these accounts are lifelong Republicans. It fits the M.O. rob people of their honestly obtained earnings from doing productive activities and go hide it in Swiss accounts. True to form behavior for these criminals.

[ianlou]

I would bet that many of these accounts were opened during the Bush years when our federal Tax laws openly professed that only little people pay taxes.