If you're reading this, something about your tax situation has you worried. That's fair — the IRS is intimidating until you know how the rules actually work. I'm Darrin Mish, a Tampa tax attorney. I've handled cases like yours for 32 years. Let me walk you through it.
The IRS UBS settlement that compels the Swiss bank to divulge details of 4,450 of its American depositors suspected of tax evasion might be seen as a major victory by the IRS, but is it really? The total number of tax dodgers is said to be 52,000. This is the number of American clients the bank says that it has and the total number originally sought by the IRS. With the settlement netting less than one tenth the total number of American accounts, is it possible that some tax evaders will not be caught by the IRS? It does not take a brains surgeon to know the answer to that one.
Furthermore, under the terms of the settlement, UBS will hand over identities of the account holders to a Swiss panel set up to review the information and subsequently decide which to hand over to the IRS. Again, there are likely to be many accounts of tax dodgers that will slip through the cracks.
A major contributing factor that undermines the efforts to nab all the tax evaders is the differences in tax laws between the US and Swiss. Tax evasion and tax fraud are both crimes under US law whereas tax evasion is not illegal under Swiss law; only tax fraud is, which includes activities such as making false declarations and hiding the identities of owners of offshore accounts by signing documents falsely. Although the Swiss have agreed to expand their definition of tax fraud in order to comply with the IRS’ demands, how and to what extent remain ambiguous.
Nevertheless, the deal does include a sealed document that specifies that the criteria to decide how the 4,450 depositors’ accounts were chosen would be revealed November 17th. But it is obvious that the details of the criteria would not be made public knowledge so that the tax dodgers themselves would be kept in the dark as to whose accounts are to be handed over to the IRS. Disclosing too much of the details of the criteria would cause those whose accounts do not meet those criteria but who still have not paid taxes on their assets to see no need to turn themselves in to the IRS.
It is hoped that by not disclosing too much of the criteria, it would catalyze as many tax cheats as possible to voluntarily divulge details of their offshore assets to be taxed under the ongoing IRS Voluntary Disclosure program that runs until September 23rd. In fact, the existence of such a program is testament to the fact that many tax cheats are unlikely to be caught through the IRS UBS agreement.
In the final analysis, while the IRS scores a major victory in their battle to catch tax evaders, in actual fact, it may be more of a case of ‘the ones that got away’.
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