Nardone Law Group’s experienced tax attorneys, located in Columbus, Ohio, routinely advise taxpayers about U.S. tax reporting obligations regarding foreign financial accounts and the importance of reporting previously undisclosed foreign accounts. The Internal Revenue Service offers various programs that allow taxpayers to disclose offshore accounts and resolve any tax and penalty obligations. The Offshore Voluntary Disclosure Program (OVDP) and the Streamlined Filing Compliance Procedure Program (SFCP) offer taxpayers who have undisclosed foreign accounts a way to become compliant with the U.S. tax laws. Due to recent IRS enforcement efforts in the offshore area, it is important for taxpayers with undisclosed foreign assets or accounts to consider voluntary disclosure in order to minimize their penalty amount, and reduce their chances of criminal prosecution.
Eligibility for Voluntary Disclosures
The Offshore Voluntary Disclosure Program (OVDP) and the Streamlined Filing Compliance Procedure Program (SFCP) are available to U.S. taxpayers who have undisclosed foreign accounts and assets and wish to become compliant with federal tax law. However, certain events make these programs unavailable to particular delinquent taxpayers. As an example, if the IRS has initiated a civil or criminal examination for any year, regardless of whether it relates to undisclosed foreign financial assets, the taxpayer will not be eligible to participate in the OVDP or any of the streamlined procedures. Further, once the IRS has served a “John Doe” summons, made a treaty request, or has taken similar action and has obtained information that provides evidence of a specific taxpayer’s noncompliance with the tax laws or reporting requirements, that particular taxpayer may become ineligible for one of the voluntary disclosure programs. For this reason, a taxpayer concerned that a party subject to a “John Doe” summons, treaty request, or similar action will provide information about him to the IRS should consult a tax attorney as soon as possible. Currently, the IRS is utilizing “John Doe” summonses to identify Americans with undisclosed foreign accounts in Belize.
Use of “John Doe” Summonses to Investigate Undisclosed Accounts in Belize
On September 15, 2015, the U.S. Department of Justice filed a petition in federal court in Miami seeking permission to issue summonses to help the IRS identify Americans with undisclosed accounts at Belize Bank International Limited, Belize Bank Limited or Belize Corporate Services between 2006 and 2014. The U.S. District Court for the Southern District of Florida in Miami granted the IRS’ petition the next day authorizing the IRS to serve “John Doe” summonses on Bank of America and Citibank, seeking information about U.S. taxpayers with accounts at the listed financial institutions in Belize. The court order gives federal investigators authorization to seek records of so-called correspondent accounts the Belize banks maintain at Bank of America and Citibank. The IRS already knew about these entities from the Offshore Voluntary Disclosure Program, but the correspondent accounts will help the IRS sort out which depositors did not come forward.
With normal summons, the IRS seeks information about a specific taxpayer whose identity it knows. In contrast, a “John Doe” summons allows the IRS to obtain information about all taxpayers in a certain group, even if the agency does not know their identities. In order to gain the judge’s approval to serve the “John Doe” summons, the IRS cited evidence gathered from five taxpayers who maintained undisclosed accounts through Belizean entities who subsequently confessed to having accounts to the IRS.
The IRS uses the information obtained from the correspondent accounts, as well as information it collects from whistleblowers, cooperating witnesses, and the Offshore Voluntary Disclosure database to reveal taxpayers who are hiding money abroad. In particular, the correspondent accounts of Bank of American and Citibank leave a trail the IRS can follow. The IRS obtains records of money deposited, paid out through checks, and moved through the correspondent account through wire transfers. While it may take a significant amount of time for the IRS to collect all of this information, it warns taxpayers to come forward voluntarily before it is too late.
Contact Nardone Law Group
Nardone Law Group represents businesses and individuals with federal and state tax issues, including identifying U.S. tax reporting and payment obligations related to foreign financial accounts and utilizing the Offshore Voluntary Disclosure Program or Streamlined Filing Compliance Program to come into compliance related to previously undisclosed foreign accounts. If you have unreported foreign income, or an undisclosed foreign account, asset or entity, you should contact an experienced tax attorney today. Nardone Law Group’s tax lawyers and professionals have vast experience representing clients before the IRS. Our experienced tax lawyers will thoroughly review your case to determine what options and alternatives are available. Contact us today for a consultation to discuss your case.