Deadline Day

Confession is good for the soul—and for the wallet and for hopes of staying out of prison. But for wealthy Americans who have stashed their cash in offshore accounts, confession has a deadline, and that deadline is today.

The IRS has given Americans with offshore accounts designed to avoid taxes until today to confess and face lighter penalties. The IRS has advised taxpayers or their representatives to call their local IRS Criminal Investigation office by 5 p.m. today or have documents postmarked by the end of the day. They’ll probably avoid prosecution but will face civil penalties of up to 50 percent of the account’s value for every year it was open.

Go beyond today and you could be facing the full wrath of the tax authorities, which could include criminal prosecution and even heavier civil penalties.

You’ll be taking your chances that your name and account won’t crop up among those U.S. authorities have forced out of normally secretive Swiss bankers.

So far, thousands of Americans have not been willing to take that chance. And tax lawyers have said their phones have been ringing off the hooks with clients on the other end of the line looking for help in cutting a deal with the tax authorities.

“We’re seeing a flood of people,” Scott D. Michel, a tax lawyer in Washington, told the New York Times. Three-hundred-fifty clients of his firm, Caplin & Drysdale, were preparing to take their confessions to the IRS earlier this week.

“It’s been bedlam here,” Martin Price, a tax lawyer in Ft. Lauderdale, Florida, told Portfolio.com earlier this month. “We’ve had a rash of people come forward who have received letters from UBS and want to get into the voluntary-disclosure program.”

So far, at least 3,000 people have come forward as part of the amnesty program.

The current push began with an agreement with the Swiss Bank UBS and Swiss banking authorities to settle a long-running dispute between the U.S. and the bank over Americans hiding their wealth overseas. UBS agreed to turn over the information on 4,450 accounts held by Americans as part of the deal.

American authorities had initially sought 50,000 names.

But the deal they made has been the wedge to drive those with overseas accounts to come to the government for the partial amnesty.

“The whole point of the 4,450 is to make 20,000 nervous,” John Coffee, professor at Columbia Law School, said at the time of the settlement. “The U.S. government really wants to intimidate people into entering the voluntary program.”

But the effort doesn’t stop with UBS clients. It’s part of a broader push by members of the G-20 nations to push tax havens like Switzerland to give up information about accounts to tax authorities.

The Organization of Economic Cooperation and Development has published a grey list of countries that act as tax havens to shame those countries into more cooperation with tax authorities. Leaders of the G-20 agreed in Pittsburgh earlier this month to use countermeasures against those countries if they don’t cooperate by March 2010.

So that’s the international deadline.

But your deadline, if you happen to have a little money tucked away in the Caymans or Switzerland, is now, or at least 5 p.m. today.

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Kent Bernhard Jr. is News Editor of Portfolio.com