According to the principal deputy attorney general for policy and planning at the Department of Justice (DOJ) Tax Division, Caroline D. Ciraolo, the DOJ is preparing for an intense crackdown on offshore tax evaders and people hiding assets overseas. Stating that taxpayers should come forward as soon as possible, Ms. Ciraolo said that “Time is of the essence” and “come in now, or face the consequences”.

Ms. Ciraola, a featured speaker at the Federal Bar Association Tax Advice & Controversy Conference, stated that the government’s investigations has extended far beyond Switzerland to several other countries including Barbados, Israel, India, Liechtenstein, Luxembourg and others. She stated that just because there may not yet be any public disclosures should not be interpreted as inaction on the part of the Government. She continued that information is being received and analyzed from a large number of sources. This includes information being turned over by several Swiss banks to avoid prosecution for their roles in the offshore activities. This, in turn, is being used to start new investigations and to target new taxpayer “misconduct”. They are “looking at everything they receive”.

Our experience in preparing offshore voluntary disclosures has shown us that the required forms contain questions about who assisted in setting up accounts both here in the United States and abroad, the advice given, the dates and places of meetings, any “facilitators” and so forth. This also is being reviewed by the IRS for “leads” as to other banks and persons of interest.

To avoid possible criminal penalties and civil fraud penalties, taxpayers should consider participating in one of the different offshore voluntary disclosure programs and to do so sooner than later. As more time passes, the penalties are becoming stiffer. Last July, the IRS announced that anyone with an account at or with so-called “listed” banks or persons, such as UBS (the list can be viewed at the IRS website), would now have to pay a 50% offshore penalty instead of the usual 27 ½% penalty. To make things worse, this 50% penalty would apply to all of the taxpayer’s offshore accounts even if the others were at non-listed banks. Prior to the 27 1/2 %, the penalty was 25%. So as time passes, the sanctions are getting potentially worse.