21 Sep IRS Extends Deadline To Disclose Secret Foreign Accounts
The IRS program for voluntary disclosure of secret foreign bank accounts has been extended to October 15, 2009. Several months ago the IRS announced a program to allow voluntary disclosure of foreign bank accounts by US Citizens who had failed to previously disclose them. This program is important to some taxpayers since the failure to file what is often call the FBAR (Foreign Bank Account Report) or IRS Form TDF 90-22.1 can result in extremely high financial penalties and even criminal sanctions.
Through years of political and legal pressure, the IRS has finally managed to break down the wall of secrecy at a major Swiss bank, Zurich and Basel headquartered UBS AG. This bank, that claims roots back into the 19th Century, formerly called Union Bank of Switzerland, has agreed to provide what the IRS calls an “Unprecedented Amount of Information” about accounts held by US Citizens. The famous Swiss bank secrecy is no longer any protection, at least with respect to UBS, for holders of undisclosed foreign bank accounts and the untaxed income they may provide. The US government will submit a treaty request to the Swiss government describing the accounts for which it is requesting information. The Swiss government will then enact legislation requiring the bank to reveal information about the accounts and their owners.
The voluntary disclosure program first requires the taxpayer to report any undisclosed accounts to the criminal investigation division of the IRS. They will be pre-cleared for waiver of criminal penalties if there is no ongoing criminal investigation. The disclosing taxpayer must then agree to pay a reduced fine equal to 20% of the highest bank balance over the past six years, file amended tax returns to report foreign income, and make arrangements to pay the tax. Disclosure was originally required by September 23, 2009, and has now been given a “one time” extension to October 15, 2009. The IRS explains the program in a detailed publication of frequently asked questions.
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