Under an IRS voluntary disclosure program that allows U.S. taxpayers to come clean about secret foreign bank accounts and avoid possible prosecution, over 14,700 Americans have now admitted to hiding assets overseas, the IRS and the Justice Department announced today.
"The message to American taxpayers is clear: the era of bank secrecy and hidden assets is over," U.S. Deputy Attorney General David W. Ogden said in a statement.
The once-secretive Swiss bank sent letters to thousands of its American customers in early October, informing them "your account with UBS appears to be within the scope of the IRS Treaty Request" and that under a new agreement between the U.S. and Switzerland, UBS would provide names and account information to U.S. authorities.
In August, the two countries signed a historic agreement to obtain information from UBS to identify information on up to 4,450 accounts. U.S. officials believe the accounts could hold up to $18 billion, and they applauded the move as a major step in lifting the shroud of Swiss banking secrecy and uncovering potentially billions of dollars stored in accounts there by wealthy U.S. account holders who could be dodging U.S. taxes.
"We'll be receiving an unprecedented amount of information on taxpayers who have evaded their tax obligation by hiding money offshore at UBS," IRS Commissioner Dan Shulman said after the agreement was signed.
While significant, the list of 4,450 names was considerably less than the IRS and Justice Department initially sought.
U.S. authorities say UBS abandoned its secrecy policy after it faced possible prosecution itself for running a highly profitable business that allegedly helped U.S. citizens evade taxes by hiding their money in secret accounts through the bank.
UBS entered into a deferred prosecution agreement with the Justice Department in February, agreeing to pay $780 million in criminal fines for offering tax haven accounts for U.S. clients. Around the same time, the IRS said in litigation in a Miami federal court that it believed there were as many as 52,000 undeclared accounts maintained by UBS.
At least one UBS official has been convicted on tax charges and two others are awaiting trial.
Tax lawyers told ABC News last month that the letters sent out by UBS to its U.S. customers set off a wave of panic.
"Panic, crying, hysteria," said Florida tax attorney Martin Press, who represents several dozen former UBS customers.
"The Swiss tax haven as we've known it is dead," said Press.
Scott Michel, a Washington, D.C. lawyer who represents more than 300 former UBS account holders, said many of his clients were "quite angry."
"They were brought into this by UBS and sold a bill of goods by UBS," said Michel. "In their view, they were betrayed by the bank in terms of having their information turned over."
While not officially called an amnesty program, the IRS said those voluntarily disclosing their secret foreign accounts will likely avoid criminal prosecution, but be required to pay tax, interest and a penalty. The penalty will include the forfeiture of one-fifth of the amount held in the foreign accounts.
"Some of our cases range as high as something over $100 million," Michel said.