It was a question posed to US taxpayers by the IRS in the wake of the UBS scandal: do you feel lucky?
The US offered US taxpayers the opportunity to voluntarily disclose offshore bank accounts as part of an amnesty program earlier this year. The choice? Come forward now and escape criminal prosecution or take your chances later.
It turns out that a number of US taxpayers didn’t feel quite so lucky. IRS Commish Doug Shulman has announced that more than 14,700 taxpayers came forward under the voluntary disclosure program. The disclosures were in the billions and covered accounts in 70 countries.
The number is higher than originally projected due to the numbers of taxpayers who made disclosures in the run up to the deadline. The deadline for disclosures had initially been September 23 but was extended to October 15 after input from tax professionals who were still fielding questions about the program from taxpayers.
UBS and the feds separately reached a settlement where UBS, in addition to a significant fine, agreed to release the names of over 4,500 US account holders at the bank. So far, only a handful of names has actually been released: at least two of those account holders have been sentenced to prison for their activities.
The remaining names will be disclosed over the next 10 months. Under the agreement, UBS will release the names of those account holders where there is a reasonable suspicion of “tax fraud or the like.” Generally, that includes high dollar accounts and accounts where there is a lot of movement of assets or complicated schemes. There will be a procedure for appeals available in Switzerland.
ABC News is reporting that lawyers are already whining that their clients were misled by UBS about the extent of the banking secrecy. I suspect that means that lawsuits will be filed. That is, of course, how we like to solve problems in the US. It is *always* someone else’s fault, right? If the lawyers are smart, any such suits would do well to land in Switzerland and not in the US. Beyond the whole “juries likely don’t have sympathy for rich people who hide their money” issue, lawsuits based on the misdeeds of plaintiffs are not usually successful. Of course, that hasn’t stopped people from trying before…
For now, it’s a waiting game for UBS clients. The question is: do you feel lucky… now?
I know from personal work experience that a good deal of the additional filers were part of hedge fund structures: — individuals who had technical filing requirements because the IRS would view them as having “control of” or signatory authority over a foreign bank account. Also, the Big 4 interpreted the amnesty to apply to other foreign filings (such as form 5471); apparently there’s a raging debate between two divisions of the IRS (LMSB and SB/SE) as to whether the amnesty applies to 5471 filings or anyone other than individuals. LMSB says no, SB/SE says yes.