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FBAR Reporting and Expired Voluntary Disclosure Program

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    So… You missed the FBAR Voluntary Disclosure Program deadline of October 15th 2009. What options are available to you now?

    Let me start by informing you that the IRS is absolutely incensed by the fact that only 7,500 people made voluntary disclosures under its FBAR Voluntary Disclosure Program. They have publicly stated that they are on the warpath and looking for taxpayers who did not take advantage of the program to make examples out of.

    To understand why the IRS is so upset, you need to understand that for the last couple of years the IRS has been hiring highly qualified personnel including experienced Tax Attorneys and CPAs gearing up for a massive effort to increase FBAR compliance. The IRS estimates that there may be as many as 1 million U.S. taxpayers who may be required to file an FBAR in any given year. They speculate that there may be less than 20 percent compliance in this area and thus consider this fertile ground for IRS enforcement.

    The really bad news here is that thousands of UBS account holders who didn’t take advantage of the IRS deal will probably get letters from UBS AG warning them that they could be in the IRS’s sights; their names are being provided by Switzerland to U.S. tax authorities under a tax-evasion settlement between the countries with the Justice Department. Even if they fight disclosure in Swiss courts, their records will almost certainly be turned over to the IRS eventually – see the calendar of events still to come in the UBS litigation.

    Calendar of Events Set Forth in 8/19/9 Agreements between the United States, Switzerland, and UBS AG

    Aug. 19, 2009 U.S., Switzerland, and UBS come to an agreement.
    Aug. 31, 2009 IRS makes treaty request under the income tax treaty between the US and Switzerland.
    Nov. 17, 2009 The criteria used to identify the account holders that are subject to the treaty request will be revealed no earlier than 90 days from the signing of the agreement.
    Nov. 29, 2009 UBS will send notifications to all remaining identified taxpayers and Swiss Federal Tax Administration (SFTA) will disclose the first 500 taxpayers to the IRS no later than 90 days from receipt of the treaty request.
    Dec. 31, 2009 The IRS will withdraw the summons with prejudice for accounts not described in the treaty request
    Feb. 27, 2010 UBS will give SFTA a second group of taxpayers no later than 180 days from receipt of the treaty request.
    May 28, 2010 UBS will give SFTA the last group of taxpayers no later than 270 days from receipt of the treaty request.
    Aug. 24, 2010 The IRS will withdraw the summons with prejudice for accounts described in the treaty request no later that 370 days from the signing of the agreement.
    Aug. 26, 2010 SFTA will disclose all remaining taxpayers to the IRS no later than 360 days from receipt of the treaty request.

    If you find yourself in the group of people who had an account with UBS and failed to make a Voluntary Disclosure by October 15, 2009, you realistically have no choice but to make a voluntary disclosure, without the benefit of the favorable terms included in the FBAR Voluntary Disclosure Program that expired October 15, 2009, before your information is turned over to the IRS or you run a serious risk of criminal prosecution and jail time. Moreover, if you closed your account seeking to avoid detection, UBS supposedly will also be turning over the names of US taxpayers who closed their accounts as well. Closing your account in light of the UBS litigation will certainly be used as evidence against you, should the IRS choose to criminally prosecute you

    The really – really bad news is that the special terms that existed with the FBAR Voluntary Disclosure Program that expired October 15th 2009 are no longer available and no one knows for sure if the IRS will at some point in the future roll out a similar version of the program which would almost certainly not contain terms that were as advantages as the original program that has since expired.

    The really bad news is that rumor has it, that the Service is preparing to mass produce the methodology it used to go after UBS and will be serving John Doe summonses on hundreds of Financial Institutions that have been advising clients that they can invest in “tax havens” such as Switzerland and not pay any income tax on the earnings from the account in an attempt to identify Taxpayers that are in violation of the FBAR rules. The IRS has been gathering intelligence from those that turned themselves in before October 15, 2009 and is allegedly currently looking at several hundred banks in 70 countries.

    Further, the press has reported, and the government has confirmed, that other persons affiliated with banks in “secrecy” jurisdictions throughout the world have stolen customer data and may be approaching the IRS and other law enforcement agencies seeking whistleblower rewards in a similar manner as led to the original suit against UBS.


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