At the end of August, the United States and Switzerland signed an agreement that will give the United States significant access to information regarding United States persons with Swiss accounts, going back at least until July of 2008. As a result, many taxpayers who had closed their accounts over the past few years and thought they were “ahead of the game” are now consulting with tax lawyers to determine whether they should do a form of a voluntary disclosure.

Some delinquent taxpayers have done what’s called a “quite voluntary disclosure,” whereby they amend prior tax returns and file delinquent Foreign Bank Account Reports, but they do not formally enter the Offshore Voluntary Disclosure Program, on the hope that they will get away without paying its Draconian penalties.

Reports from practitioners and sources within the IRS indicate that the IRS, over the past few months has developed a system to detect many “quite voluntary disclosures” which could result in severe civil penalties (far worse than the penalties in OVDP) as well as criminal prosecution.

Joseph Septimus is a tax and trusts and estate attorney with the law firm of Kostelanetz & Fink, LLP, and can be reached at (212) 808-8100 or [email protected]

(Joseph Septimus – YWN)