Offshore account holders wait for the knife to fall, says Raife Neuman, tax planner for Bonner & Partners Family Office. The question is: How sharp it will be?

As I’ve written before, the Obama administration has given offshore tax avoiders a chance to come clean; but for some, the door is closing quickly. At issue is the IRS crackdown on individuals holding US securities in offshore accounts who don’t pay taxes on their earnings.

It was a nice little gig until the IRS took advantage of the dire economic situation and started shaking down Swiss bank UBS. The IRS is demanding that UBS turn over the names of US citizens with fabled Swiss bank accounts.

While waving its big stick at UBS, the IRS gave individuals the opportunity to come forth with their accounts themselves – accompanied by a penalty, of course. The implied threat is that if you don’t disclose “voluntarily” and the IRS eventually gets your name, it will come after you with guns a blazing.

A big hearing on the matter was scheduled on Monday. But it didn’t go through. This increased speculation that UBS is close to caving to the IRS. This from the Wall Street Journal :

It’s a roller-coaster ride for Americans with Swiss bank accounts who are caught up in the tax-evasion case against UBS AG. 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 said 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 focused on 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.