What the IRS wants, the IRS gets.

Just Thursday, it was announced that the federal government would soon be able to drop its legal action against UBS now that Swiss authorities have turned over more than 2,000 names of Americans who had secret offshore accounts at the Swiss bank.

While this is great news for UBS, which is trying to repair its image with a new ad campaign, it’s not so fabulous for the clients whose names may be on the list. (Nor is it great for Swiss banking secrecy laws and those of other countries.)

As Dow Jones reported Thursday: “Switzerland said it had worked through all of the 4,450 sets of data, handed over roughly half to the U.S., and was talking to officials there about how to conclude the agreement. Switzerland said the remainder of the data—believed to be most of the 4,450 cases—will be handed over by this fall.”

This was the statement from UBS. It said: “UBS is pleased to learn that the SFTA has completed its administrative assistance process relating to approximately 4,450 UBS client account files within the deadline set in the treaty with the U.S.. . .The delivery by the SFTA of all remaining account information to the U.S. Internal Revenue Service (IRS) continues. The withdrawal by the IRS with prejudice of the remainder of the John Doe Summons as provided for in the treaty is expected to occur soon.”

So for UBS the worst is over because the IRS is ending its case against the firm and only a data dump remains.

But for the clients, it’s another story. And, for them, the headaches have just begun. Approximately 18 are facing criminal charges and some have pled guilty.

But what about the rest? What does this latest hand0ff of data mean for those clients who haven’t come forward and are on the latest list going to IRS? Well, it means they better get moving.

“It’s just a matter of time before the U.S. finds you,” warns Kevin Packman, a partner in the private wealth services group at law firm Holland & Knight. Packman, whose specialty is international private wealth and compliance, has helped 150 or so clients with offshore accounts reach settlements with the IRS.

“If you had an account at UBS and you are among the 4,450 things can get ugly pretty quickly,” Packman says. How ugly? “On the most extreme end it could mean jail,” he says. But the monetary penalties aren’t pretty either. They could be as high as 50% of the account balance for each year (under Foreign Bank Account Reports or FBAR) plus 75% of the omitted tax for each year (under civil fraud charges). And, don’t forget, you still have to pay the actual taxes.

All that, plus having your name splashed over the mainstream media—without even getting a reality show.

“Voluntary disclosure remains a great option,” Packman says.

The IRS had set up a settlement program but that closed last year.  “My problem with the settlement program,” Packman says, was that under that approach “all taxpayers were created equal. If you intentionally evaded tax it was great. You got minimum penalties and no jail.”

However, if you just made a mistake out of sheer ignorance, it was a lousy deal. That’s because prior to the UBS case, that kind of taxpayer could have worked out a much lesser penalty.

Packman, who works out of his law firms South Florida offices, says he has seen a number of clients who didn’t intentionally evade taxes. “We have a number of taxpayers who’ve come to the U.S. to avoid things in their home country like a dictator or increased crime,” he says. Although they intended to return to their home countries, the years passed and they stayed in the U.S. but weren’t filing the proper tax documents for funds left behind in their homeland.

Then there are the taxpayers who are U.S. citizens by birth but their parents aren’t and money is in an overseas account. Also, there are those American expats who studied abroad and stayed and didn’t file the proper tax returns.

Packman also has a number of clients who are Holocaust survivors or heirs of those survivors who kept money in Swiss bank accounts for “security and safety,” he says. 

“If you just have to pay money that’s a pretty good result at this point,” Packman says. But, now that the settlement program is over, “it really will be facts and circumstances,” he says.

As for financial advisors, there is nothing improper about an advisor telling a client to have overseas investments, Packman says. Investing is a global phenomenon now. According to the 2010 Capgemini World Wealth Report, high-net-worth individuals “overall had proportionally more invested outside their home regions by the end of 2009 than they had a year earlier.”

Nevertheless, Packman cautions, “taxpayers should not be taking legal advice from a banker.” With new treaties and whistleblowers and even new laws like the Foreign Account Tax Compliance Act, Packman says, it “will make it impossible for a U.S. taxpayer to have foreign investments and the U.S. not to know about it.”