Depending on what they have already told the Internal Revenue Service about their accounts, individuals are mostly at ease or deeply nervous about the prospect of civil and criminal penalties.
And, many are turning to tax advisers for help decoding the latest developments in a case that has taken dramatic turns in recent days.
Over the weekend, the U.S. Justice Department, the Swiss government and UBS revealed they are in talks to settle the case and asked a federal court in Miami to delay a highly anticipated hearing set for Monday. This followed a week of high-profile maneuvers by UBS and the Swiss government.
"It is King Kong versus Godzilla and they decided to take a time out," says Bryan Skarlatos, a partner at New York law firm Kostelanetz & Fink.
The IRS crackdown, months-long, has targeted people who hold U.S. securities in offshore accounts but don't declare the accounts or pay taxes on income from the securities.
Scott D. Michel, an attorney at Caplin & Drysdale in Washington, D.C., says many clients are trying to sort through all the back and forth. The message to be taken from the most recent news, he adds: Any account holder who hasn't already come forward under a voluntary disclosure program at the IRS should do so immediately. The program, which has attracted many individuals since the tax evasion case began months ago, can offer participants leniency.
If UBS discloses names and information as part of a settlement, the IRS will "generally not accept a voluntary disclosure from anyone on that list," says Michel.
Further, he adds, a settlement in this case "could come any day and be accompanied by disclosure." So, unless the IRS gives everyone until Sept. 23, the expiration date for a settlement initiative now in place, the window for voluntary disclosures may be closing fast for many.
Skarlatos says that, generally, account holders who have already made a clean breast to the IRS are sleeping soundly; others, who haven't yet come forward, are on tenterhooks.
Most people with UBS accounts are very concerned, Skarlatos adds, while those with other Swiss bank accounts are less worried because they figure they still have time to come in even after the UBS case settles.
"It is interesting to see how people handle the risks involved," says Skarlatos. "Some can live with the uncertainty and others get very, very scared."
In February, the DOJ sued UBS for access to some 52,000 accounts belonging to its U.S. clients, widening a probe that initially had targeted an estimated 19,000 accounts.
A day earlier, the agency announced a settlement with UBS in which the bank agreed to pay $780 million in fines and give names and account information for a group of clients to avoid prosecution. Swiss authorities said that group numbers between 250 and 300 clients.
Last week, some tax attorney predicted federal prosecutors would take a hard line at the (now delayed) hearing on Monday. The U.S. is likely to make it clear it expects UBS to comply with the summons, they said, and is prepared to lower the boom on the company if it doesn't.
Indeed, the Justice Department in court papers on Sunday said if the court orders UBS to comply but the bank doesn't, it would ask the court to declare UBS in contempt and to impose unspecified sanctions, The Wall Street Journal reported.
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