Federal law requires annual disclosure of foreign bank accounts and the failure to file IRS Form TDF 90-22.1 commonly called the FBAR (Foreign Bank Account Report) can get you a huge fine or even a jail sentence. But wait! For a limited time only, the IRS is allowing a voluntary disclosure of previously undisclosed accounts in foreign banks. If you are not already under investigation for a criminal offense, you will be permitted to file reports for the last six years, amend your tax returns, and pay a much reduced civil penalty.
This ”Voluntary Disclosure” program, announced by the IRS in June, has been so popular that a new deadline for compliance has been announced. Disclosure was originally required no later than September 23, 2009. The September deadline has now been given a “one time” extension to October 15, 2009.
After years of legal and political pressure, the IRS has finally managed to break down the wall of secrecy at a major Swiss bank. This Summer, UBS AG (formerly called Union Bank of Switzerland) a bank that claims roots back into the 19th Century, folded its cards on the bank secrecy issue. UBS has agreed to provide what the IRS proclaims to be “Unprecedented Information” about accounts held or maintained by US Citizens. The US government must first submit a treaty request to the government of Swizerland detailing the types accounts it wants to know about. In what appears to be a pre-arranged agreement, the Swiss government will pass legislation abrogating Swiss banking laws and directing UBS to disclose the requested information.
Under the IRS voluntary disclosure program, the account holder must first report any undisclosed accounts to the IRS criminal investigation division for pre-clearance. Once it is determined that there are no ongoing criminal investigations, the account holder will be permitted to file the missing FBAR reports and amend tax returns without the fear of criminal prosecution. The disclosing taxpayer must agree to pay a 20% penalty based on the highest bank balance over the past six years and any additional tax, penalty and interest due on the amended tax returns. The IRS has published information about the program on their website. A lengthy article with answers to frequently asked questions about Voluntary Disclosure of Secret Foreign Bank Accounts is available.
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