After Flood of Voluntary Disclosures, IRS Extends Deadline for Taxpayers to Reveal Overseas Income

September 21, 2009 by David S. Seltzer

As a South Florida tax evasion criminal defense lawyer, I was surprised and pleased to see that the Internal Revenue Service has extended its voluntary disclosure program for taxpayers with unreported overseas income. The program was to have ended this Wednesday, September 23 -- but the extension adds 22 days, for a deadline of October 15. IRS officials told the Wall Street Journal Sept. 21 that the extension comes at the request of numerous tax professionals, who wanted it for clients who need extra time to enroll in the program. In fact, the article said, the program has become hugely popular, flooding tax professionals and tax attorneys with phone calls. According to the IRS, the program has more than 3,000 takers since it was announced in March, up from 88 participants in all of 2008.

The voluntary disclosure program was a response to a complicated dispute between the IRS and giant Swiss bank UBS. After discovering that UBS had actively and knowingly helped American taxpayers avoid reporting income to the IRS, the agency launched criminal and civil cases against the bank. Those cases were settled with the disclosure of names of thousands of taxpayers who may not be in compliance with the law. The IRS has promised to thoroughly investigate any names it receives, but also set up the voluntary disclosure program to allow taxpayers to come forward on their own. In doing so, taxpayers can avoid extremely high fines and back taxes -- which are often higher than the income in dispute -- and potential criminal prosecution with prison time. By contrast, voluntary disclosers are unlikely to be prosecuted and face only back taxes, interest and penalties of 5% to 60% of the unreported income.

According to the Wall Street Journal, the approach of the original Sept. 23 deadline was one reason why taxpayers have increasingly stepped forward. Another reason is that UBS has begun sending letters notifying American accountholders that it intends to disclose their names to the IRS. Because the voluntary disclosure program is not available to people who are subject of an active criminal investigation, this provides a strong motivation to confess now. An attorney also told the newspaper that many accountholders don’t have access to the disputed money at the moment anyway, another strong motivator.

As a Miami tax evasion criminal defense attorney, I strongly encourage taxpayers whose names might be revealed by UBS to take advantage of the extended deadline. In fact, because the IRS has promised, and demonstrated, that it will go after tax scofflaws using any overseas bank, I believe it may be in the best interests of taxpayers with these accounts to get their houses in order now. Tax advisors told the newspaper that taxpayers of all kinds have gotten the UBS letters, including people with relatively small accounts and people whose history doesn’t indicate intent to evade taxes. And even for taxpayers who have not gotten the letters, the voluntary disclosure process takes time; taxpayers must document their income, fill out paperwork and sometimes attend an in-person interview with the tax agency.

Smart taxpayers frequently hire a Fort Lauderdale tax evasion defense lawyer like me to make sure their rights are protected throughout the disclosure process. I can help clients identify what income they must disclose and make sure to document and disclose it properly, and represent clients in any in-person interview the IRS may request. Perhaps most importantly, I can negotiate with the agency to get the best, fairest possible penalty for my clients. The penalties imposed by the IRS do vary; penalties are generally lower for people who inherited their accounts or relied in good faith on UBS advice that has been revealed to be corrupt. However, to take advantage of the voluntary disclosure program, it’s vital to start now to avoid missing the new Oct. 15 deadline. To learn more at a free, confidential consultation, please call me from anywhere within Florida at 1-866-ARRESTED or nationwide at 1-866-685-3421, or send a message through my Web site.