Wealthy tax cheats: Time to fess up to the IRS?
So if you do have offshore deposits with UBS (UBS), or had them in the past, you need to decide whether or not to fess up. If you don't and get caught you can face stiff penalties and even criminal charges. In a previous settlement the IRS got about 250 names from UBS and so far, three have pleaded guilty in federal court. Since the IRS only has enough funds to prosecute about 1,000 criminal tax cases each year, wealthy tax evaders wonder if they should play the odds or take advantage of the IRS amnesty program in effect until Sept. 23. If they wait and aren't among the names turned over, they can avoid the taxes and penalties completely.
Attorneys who spoke with the Wall Street Journal on this issue indicated that of the people they've talked with about this issue only one in five decide to file under the amnesty program. Even with amnesty the penalties can be stiff. If you do confess you could pay 40 percent or more of the total account value in taxes plus penalties and interest. In addition legal fees can range from $20,000 to $50,000 or more depending on the complexity of the case.
But, if you decide to wait and hope your name doesn't pop, you will face even greater penalties if you lose the game. Congress has authorized massive penalties on offshore tax evaders. One example cited by the Journal estimates you could pay $2.3 million in taxes and penalties on a $1 million account.
You also must remember that there is no statute of limitations for tax fraud. Each year you file your taxes you are committing a felony if you don't report an offshore account.
Yet coming forward can also be risky. The IRS does reserve the right to deny an application. If your name is on the list they have, you could get rejected. Essentially, the IRS has taken the position that you must apply for amnesty before they get your name. So, if you think your name could be on the list UBS will turn over, you may want to apply for IRS amnesty before the IRS gets the list.
Lita Epstein has written 25 books including The Complete Idiot's Guide to Tax Breaks and Deductions.