Changing the game for off-shore withholding and disclosure

Over the last 18months, the offshore activities of United States taxpayers have been the subject of considerable attention, both in the media and from U.S. policymakers. This scrutiny included the highly visible criminal indictment against international banking titan UBS. The motive behind the criminal indictment was to compel UBS to disclose the identities of thousands of U.S. account holders.

On the heels of the UBS enforcement activity, the Internal Revenue Service (IRS) launched a voluntary disclosure program designed to encourage U.S. taxpayers to disclose offshore accounts that had not previously been disclosed. Participating in the voluntary disclosure program allowed U.S. taxpayers to avoid criminal prosecution and potentially reduce the draconian civil penalties that are imposed for failing to disclose an offshore account. During the process, the IRS informally suggested that foreign offshore accounts that are subject to taxpayer disclosure might include a