Reactions to the IRS UBS Deal
To every action there is a reaction. In physics, the reaction is opposite and equal to the action. But in economics, the reaction may be explosive and gargantuan in comparison with the action. We are talking about last week's deal between the IRS and UBS bank of Switzerland that brought closure to the long-running high profile dispute triggered by the bank's strategies in abetting about 52,000 Americans maintain accounts with them without paying taxes on their money. The agreement was for UBS to disclose an unspecified number of names and information out of these 52,000 individuals. Sources are divided as to the actual number with some saying it would be 4,000 to 5,000 while others say as many as 8,000 names would be revealed. This settlement between the IRS and UBS has spawned a ripple effect that is gaining momentum in the US and beyond.
As it stands, one of those names has already agreed to enter a guilty plea to tax evasion. John McCarthy gained notoriety for being the first person to be publicly named in this fiasco. He has admitted to siphoning out more than $1 million into his UBS account under the name of his Hong Kong based company, COGS Enterprises Ltd. without filing a FBAR (Foreign Bank and Financial Accounts Report) form to the authorities. He is due to make his initial court appearance on September 16th.
In the US, the IRS has offered an amnesty to the tax dodgers in the form of its Voluntary Disclosure program. Under this program, those who have dodged taxes like McCarthy can turn themselves in for a likely lighter penalty. But if they hush up and the IRS contacts them, there will be severe repercussions for the taxpayer. So the message from the IRS is 'own up and come to us before we get to you'. This amnesty offer will not last forever. It closes on September 23rd. it has been reported that federal prosecutors have already been building criminal cases against some wealthy clients of UBS.
Meanwhile, the US crackdown of UBS clients has spread beyond the boundaries of the country. The IRS has presented in court details of how the bank and other advisers like Swiss lawyers have helped Americans transfer their funds into UBS accounts using foreign companies such as the one set up in Hong Kong by John McCarthy. For the first time, plea agreements pertaining to the case give a clear picture of the modus operandi of the tax evasion moves by the bank.
In a related development, some Swiss financial experts have criticized the agreement stating that the loser is Switzerland, in particular the Swiss banking sector. In their evaluation, with the precedent set by the successful attempt of the IRS to get UBS to divulge information of its clients, now other countries like Germany and Italy will follow suit. The result would be a severe compromise of the Swiss private banking system.
Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.
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