We previously posted DOJ / IRS Obtains Court Orders to Seek Offshore Account Data From 5 U.S. Banks!where we discussed that U.S. District Judge Kimba M. Wood of the Southern District of New York entered an order on Nov. 7, 2013, authorizing the IRS to issue summonses requiring:
In these actions, the Court granted the IRS permission to serve what are known as "John Doe" summonses on Mellon, Citibank, JPMorgan, HSBC, and Bank of America.
The IRS uses John Doe summonses to obtain information about possible tax fraud by individuals whose identities are unknown. The John Doe summonses approved today direct these five banks to produce records identifying U.S. taxpayers with accounts at ZKB, Butterfield and their affiliates, including other foreign banks that used ZKB and Butterfield's U.S. correspondent accounts at Mellon, Citibank, JPMorgan, HSBC, and Bank of America to service U.S. clients.
This includes the names of taxpayers who had an account with CIBC FirstCaribbean International Bank over an eight-year period ending Dec. 31 without disclosing it to the IRS. It is too soon to say how many U.S. citizens held undeclared accounts at FirstCaribbean or what penalties they may face, Justice Department spokeswoman Dena Iverson said Nov. 12, 2013. FirstCaribbean does not have any branches in the United States but it has what's known as a correspondent account with Wells Fargo that allowed U.S. citizens to do business with the bank.
The U.S. obtained the order from a judge Nov. 12, 2013.after an IRS revenue agent reviewed information from 129 people who voluntarily came forward to disclose offshore accounts and decided further scrutiny of FirstCaribbean was warranted.
“Our goal is to drive people into compliance,” said Carolyn Schenk, senior counsel with the IRS in Los Angeles. “We realize that we are not going to audit our way out of this problem.”
The private banking focus will therefore continue. Ms. Schenk announced that “in the near future you are going to see John Doe summonses again with regard to correspondent accounts here in the U.S. of multiple offshore banks.”
By issuing these John Doe summonses, we continue our joint efforts with the IRS to identify and hold accountable those who try to evade their legal responsibility to pay taxes."
The U.S. Internal Revenue Service is planning to broaden the use of subpoenas of documents in cases where the name of a taxpayer under investigation is not known.
Brian Stiernagle, program manager of the IRS Offshore Compliance Initiative, speaking at the Offshore Alert conference in Miami reiterated that the IRS is now going to target service providers that help facilitate offshore tax evasion both in the U.S. and abroad.
"International issues remain a major focus for the IRS, and we are continuing our efforts to fight tax evaders who use offshore accounts to skirt the law," said IRS Acting Commissioner Werfel. "These John Doe summonses for correspondent account records show our determination to pursue evaders using offshore accounts, even if the person hiding money overseas chooses a bank that has no offices on U.S. soil."
The IRS has also identified a number of abusive offshore service providers and consultants in the U.S. who help facilitate tax evasion and the agency will issue further summonses against them.
“These consultants are setting up structures, they are acting as nominees, providing mail forwarding services, all types of things with the goal of helping U.S. persons hide their assets,” Ms. Schenk said.
For a John Doe summons to be granted by a court, the IRS has to provide evidence that tax evasion by a class or group of unknown individuals may have occurred at a bank. In recent years, the information that forms a “reasonable basis” for suspecting tax evasion has come from two main sources: various offshore voluntary disclosure programs and whistleblowers.
Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. Willful failure to report a foreign account can result in a fine of up to 50 percent of the amount in the account at the time of the violation.
- Bank of New York Mellon (Mellon) and
- Citibank NA (Citibank) to produce information about U.S. taxpayers who may be evading or have evaded federal taxes by holding interests in undisclosed accounts at Zurcher Kantonalbank and its affiliates (collectively, ZKB) in Switzerland.
- Mellon, Citibank,
- JPMorgan Chase Bank NA (JPMorgan),
- HSBC Bank USA NA (HSBC), and
- Bank of America NA (Bank of America) to produce similar information in connection with undisclosed accounts at The Bank of N.T. Butterfield & Son Limited and its affiliates (collectively, Butterfield) in the Bahamas, Barbados, Cayman Islands, Guernsey, Hong Kong, Malta, Switzerland, and the United Kingdom.
The IRS uses John Doe summonses to obtain information about possible tax fraud by individuals whose identities are unknown. The John Doe summonses approved today direct these five banks to produce records identifying U.S. taxpayers with accounts at ZKB, Butterfield and their affiliates, including other foreign banks that used ZKB and Butterfield's U.S. correspondent accounts at Mellon, Citibank, JPMorgan, HSBC, and Bank of America to service U.S. clients.
This includes the names of taxpayers who had an account with CIBC FirstCaribbean International Bank over an eight-year period ending Dec. 31 without disclosing it to the IRS. It is too soon to say how many U.S. citizens held undeclared accounts at FirstCaribbean or what penalties they may face, Justice Department spokeswoman Dena Iverson said Nov. 12, 2013. FirstCaribbean does not have any branches in the United States but it has what's known as a correspondent account with Wells Fargo that allowed U.S. citizens to do business with the bank.
The U.S. obtained the order from a judge Nov. 12, 2013.after an IRS revenue agent reviewed information from 129 people who voluntarily came forward to disclose offshore accounts and decided further scrutiny of FirstCaribbean was warranted.
“Our goal is to drive people into compliance,” said Carolyn Schenk, senior counsel with the IRS in Los Angeles. “We realize that we are not going to audit our way out of this problem.”
The private banking focus will therefore continue. Ms. Schenk announced that “in the near future you are going to see John Doe summonses again with regard to correspondent accounts here in the U.S. of multiple offshore banks.”
By issuing these John Doe summonses, we continue our joint efforts with the IRS to identify and hold accountable those who try to evade their legal responsibility to pay taxes."
The U.S. Internal Revenue Service is planning to broaden the use of subpoenas of documents in cases where the name of a taxpayer under investigation is not known.
Brian Stiernagle, program manager of the IRS Offshore Compliance Initiative, speaking at the Offshore Alert conference in Miami reiterated that the IRS is now going to target service providers that help facilitate offshore tax evasion both in the U.S. and abroad.
"International issues remain a major focus for the IRS, and we are continuing our efforts to fight tax evaders who use offshore accounts to skirt the law," said IRS Acting Commissioner Werfel. "These John Doe summonses for correspondent account records show our determination to pursue evaders using offshore accounts, even if the person hiding money overseas chooses a bank that has no offices on U.S. soil."
The IRS has also identified a number of abusive offshore service providers and consultants in the U.S. who help facilitate tax evasion and the agency will issue further summonses against them.
“These consultants are setting up structures, they are acting as nominees, providing mail forwarding services, all types of things with the goal of helping U.S. persons hide their assets,” Ms. Schenk said.
For a John Doe summons to be granted by a court, the IRS has to provide evidence that tax evasion by a class or group of unknown individuals may have occurred at a bank. In recent years, the information that forms a “reasonable basis” for suspecting tax evasion has come from two main sources: various offshore voluntary disclosure programs and whistleblowers.
Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. Willful failure to report a foreign account can result in a fine of up to 50 percent of the amount in the account at the time of the violation.
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