On February 19, 2009, the U.S. Department of Justice filed papers seeking to have a federal court in Miami compel Switzerland-based UBS to turn over to the Internal Revenue Service (IRS) the identities of as many as 52,000 owners of UBS bank and securities accounts.
Persons holding UBS accounts may be concerned about whether they reported the existence of these foreign financial accounts to the IRS as required and correctly reported the U.S. income tax associated with the accounts. After the lawsuit was filed, the commissioner of the IRS suggested that taxpayers could voluntarily disclose the existence of those accounts and if necessary make corrective back filings with the IRS, and that, if done quickly, taxpayers could qualify for treatment under the IRS’s Voluntary Disclosure Policy, which is designed to give more lenient treatment to taxpayers who voluntarily come forward to satisfy their tax obligations. The court proceedings in Miami are expected to move quickly, with the Department of Justice signaling that it is committed to an accelerated resolution of the case.
There are, however, potentially serious ramifications associated with such disclosures. Taxpayers, therefore, may be caught between a rock and a hard place, and should consult their tax lawyer quickly to determine the best course of action.