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Announcement in Dispute Between the IRS and Swiss Bank UBS

On November 17, 2009, The Internal Revenue Service (IRS) announced the criteria that UBS will use to choose which additional 4,450 account holders' names will be revealed to the IRS pursuant to an August 2009 settlement agreement. The criteria focus on U.S. resident citizens who held UBS foreign accounts from 2001 to 2008 with either extremely high balances or particular indications of fraud or concealment. The names will be passed to the IRS via the Swiss tax authorities.

President Obama has not concealed that he views offshore tax havens as harmful to U.S. financial stability, especially in these dire economic times. Under his leadership, the Internal Revenue Service (IRS) and Justice Department (DOJ) have taken aggressive steps to crack down on Americans seeking to shelter their income from U.S. taxation.

By keeping their money and securities in overseas accounts hidden by foreign bank secrecy laws, many taxpayers have avoided reporting income earned on these funds, which normally would be subject to federal taxation. According to the IRS Web site, "[o]ne authority has estimated the annual revenue loss [from offshore tax havens] to the U.S. at a minimum of $70 billion."

Switzerland was a logical target for this effort with its legendary banking secrecy laws. UBS, the biggest bank in Switzerland, has been the object of a series of U.S. government civil and criminal lawsuits to force the bank to disclose thousands of American account holder's names suspected of tax evasion. In a February 2009 deferred prosecution agreement related to charges it conspired to defraud the U.S. by impeding the IRS, UBS paid $780 million and made public the names of some account holders, a number of whom are already facing criminal tax charges.

The government lawsuits against UBS have gone hand in hand with a temporary amnesty program that enticed 14,700 taxpayers to voluntarily reveal unreported overseas accounts held by UBS and other foreign financial institutions to the IRS. The amnesty program will still collect from taxpayers high penalties, back taxes and interest, but will forego criminal prosecution in most cases. The amnesty effort will likely bring billions of additional dollars in tax revenue.

Persons with assets in UBS overseas accounts concerned about whether they may owe taxes or face potentially stiff civil or criminal tax penalties, or whether their names may be revealed to the IRS should consult with a knowledgeable criminal defense attorney as soon as possible. It is important to understand potential legal obligations or liabilities and to get legal advice regarding the most effective course of action.

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