The Internal Revenue Service last month announced limits on tax penalties, hoping to coax people with secret offshore bank accounts to come in from the cold. Yet the rules, which may still result in huge penalties, are scaring many back into the shadows.

The new penalty limits have come as the agency continues a crackdown on offshore accounts through a high-profile investigation involving thousands of people with Swiss bank accounts managed by UBS AG. The goal is to collect taxes on U.S. securities held in the accounts.

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