IRS: Offshore account holders told fess up to lower penalties

— -- Trying to lure wealthy Americans to disclose assets hidden offshore, the IRS on Thursday announced a six-month program that offers lower penalties to those who come forward and pay taxes due on the secret holdings.

The offer includes clients of UBS, the Swiss banking giant that last month gave federal investigators the names of American owners for about 300 accounts in a continuing federal court showdown.

Along with lower tax penalties, those who comply are expected to avoid criminal prosecution.

"This is a chance for people to come clean on their own," said IRS Commissioner Douglas Shulman. "For taxpayers who continue to hide their heads in the sand, the situation will only become more dire."

Under the plan, owners who disclose foreign accounts would pay:

•Back taxes and interest for a minimum of six years.

•A 25% delinquency penalty for each year in which tax returns weren't filed, or a 20% accuracy penalty for years in which returns were filed but income from offshore accounts wasn't included.

•A penalty equal to 20% of the highest aggregate value at any point during the last six years for all previously secret foreign accounts.

Until now, the IRS could impose penalties of at least 50% for all years in which an account wasn't disclosed. In some cases, that could exceed the value of the offshore holdings.

The IRS said those already under criminal investigation for tax evasion are too late to qualify. But the agency said UBS account holders not part of such a probe would be eligible.

Robert McKenzie, a lawyer for more than a dozen American clients with UBS accounts, predicted the program would prompt more disclosures because it would enable evaders to compute their liability "almost to the penny" — which wasn't possible before. The IRS said the number of Americans who have disclosed foreign accounts has more than doubled this federal fiscal year over 2007-08.

The announcement comes amid a U.S. legal battle to get owners' names for 52,000 UBS accounts in which Americans held at least $14.8 billion. UBS, which admitted helping U.S. clients evade taxes, maintains that turning over the information would violate Swiss banking secrecy laws.