US Taxpayers Disclose Foreign Bank Accounts Under Amnesty Program

IRS officials said Tuesday, more than 14,700 U.S. taxpayers disclosed billions in offshore bank accounts in 70 countries. That was possible under a voluntary Internal Revenue Service program allowing most to avoid criminal prosecution as long as they pay what they owe.

Photo: US Taxpayers Disclose Foreign Bank Accounts Under Amnesty Program

A flood of people came forward in the last days before the amnesty program expired Oct. 15, IRS Commissioner Doug Shulman said. The final total far surpasses the number who disclose offshore accounts in a typical year — about 100 — and comes amid a broad U.S. crackdown on international tax evasion at Swiss bank UBS AG and other institutions.

"To put it simply, this is a historic milestone for the nation's hardworking taxpayers," Shulman said in a conference call from Washington.

The total in taxes, interest and penalties collected from those in the voluntary disclosure program will be in the "billions of dollars," Shulman said. The disclosures involved accounts on every continent but Antarctica.

Taxpayers flocked to the amnesty program after the U.S. reached an agreement in August with the Swiss government and UBS to obtain names of 4,450 U.S. taxpayers believed to be hiding assets in secret bank accounts. Earlier this year, UBS paid a $780 million penalty under a deferred prosecution agreement filed in a Florida federal court that included disclosure of an additional 150 names, The Associated Press reports.

It was also reported, the Internal Revenue Service on Tuesday made public a document it gave the Swiss government earlier this year to help it track down tax evaders. Part of a deal in which the Swiss are to hand over 4,450 UBS AG (UBS) account holder names, it details what to look for--including "a scheme of lies"--when digging for tax fraud.

Still, the document probably won't make a big difference to anyone with an unreported account at this point, tax lawyers say. Americans who have not yet stepped forward to disclose an account at any Swiss bank "know they are doing something wrong, and given the events of 2009, it's unbelievably unlikely that the IRS won't find them," says Asher Rubinstein, a partner at law firm Rubinstein & Rubinstein, LLP.

The momentum, he adds, is "clearly in the IRS favor."

IRS Commissioner Doug Shulman, on a call with reporters, called the document a "critical component" of the agreement with Switzerland, which was forged last summer. It has helped tax authorities home in on accounts in three areas of particular interest: those that represent the most egregious examples of tax evasion; those that would have been especially hard for U.S. authorities to discover, and--last but not least--the biggest accounts, The Wall Street Journal reports.

Meanwhile, the criteria for granting assistance state that where there is a reasonable suspicion of "tax fraud or the like," the agreement covers "U.S. domiciled clients of UBS, who directly held undisclosed custody accounts and banking deposit accounts in excess of 1 million Swiss francs ($992,600), at any point in time between 2001 and 2008."

It also covers "U.S. persons, irrespective of their domicile, who beneficially owned offshore company accounts, established or maintained between 2001 and 2008," when there is a reasonable suspicion of "tax-fraud or the like."

In both categories, further investigations are underway to establish whether tax fraud has been committed, the Swiss justice ministry said.

The term tax fraud, as defined in the agreement, extends to fraudulent conduct -- such as the construction of a scheme of lies, or the submission of incorrect or false documents -- that might result in the concealment of assets and the underreporting of income.

Where such conduct is established, the qualifying threshold is lowered to include holders of accounts containing assets of CHF250,000, the Swiss Justice Ministry said.

In addition, accounts that generated, on average, revenue of more than CHF100,000 a year for a period of at least three years, may also be reported to U.S. authorities, The Wall Street Journal reports.