By Robert W. Wood, Esq.
Wood LLP, San Francisco, CA
In 2009, UBS paid $780 million to the IRS and upended Swiss banking forever by handing over Americans. Many other banks have followed suit, some quietly, some not. IRS amnesty programs in 2009, 2011 and today have offered a limited form of relief. But generally, Americans caught in this pickle have had no choice.
Disclosure and penalties are vastly better than the alternative. And discovery by the IRS is looking more and more likely. Merely closing a foreign bank account does not solve disclosure problems. See Wood, "Is Closing Foreign Bank Accounts An Alternative To Disclosure?" Forbes.com (4/7/12). For those who don't step forward, the IRS and Department of Justice (DOJ) are making clear that they have even more resources at their disposal.
In fact, Kathryn Keneally, Assistant Attorney General for the Tax Division of the DOJ recently told a group of tax advisers at an NYU program that the way UBS was handled is no model. Famously, UBS at least alerted account holders ahead of time that their names would be disclosed to the IRS. Now, said Ms. Keneally, account information is flooding in from many sources, often with no advance warning.
She made ominous statements noting that prosecutions would be forthcoming where there was no indication that the federal government was pursuing a particular institution or account holders. She delivered a stern warning that failing to come into the offshore disclosure programs is dangerous. Although she declined to identify particular programs, she noted her expectation that FATCA would ramp up worldwide transparency.
Here's a refresher on what's most important:
For more information, in the Tax Management Portfolios, see Blum, Canale, Hester, and O'Connor, 947 T.M., Reporting Requirements Under the Code for International Transactions, and in Tax Practice Series, see ¶7170, U.S. International Withholding and Reporting Requirements and FATCA.
© Robert W. Wood 2012
Originally published by Forbes.com.