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Federal Court Grants John Doe Summons Targeting Belize Banks

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    For our readers that have been following the recent developments with regard to the government’s war against offshore tax evasion, it is plainly apparent that individuals with accounts in Swiss banks are not safe. Whether it is the threat of prosecution by the U.S. or pressure by their own government, banks in Switzerland are handing over loads of information to the Department of Justice and the Internal Revenue Service regarding U.S. Taxpayers that have accounts with them. The apparent Swiss-centric approach to curbing secret foreign accounts may bring some comfort to those with accounts in other countries, but any perceived solace is surely misguided. Last week, a federal court granted “John Doe” summons affecting accounts in Belize, a move that signaled the global reach of the United States taxing authorities.

    According to an announcement made by the Department of Justice, a U.S. District Court Judge Ursula Ungaro granted “John Doe” summons that target overseas bank accounts at Belize Bank International Limited (BBIL) and Belize Bank Limited (BBL). The Justice department believes that some banks in Belize have offered services to Americans that have assisted U.S. Taxpayers in the hiding of assets (and investment income) offshore.

    A John Doe summons is a legal demand to produce documents with regard to individuals whose identities are unknown.  Thus in this situation, the United States doesn’t know who they are looking for when they request the information. Any evidence that is recovered while reviewing what is provided in accordance with the summons will be used to identify U.S. tax residents that may have undeclared foreign bank accounts.

    In addition to the summons pertaining to the accounts that belong to the Belize banks, the Justice Department was also granted summonses with regard to correspondent accounts maintained by Citibank. When a foreign bank is not able to maintain accounts in a particular country, they find a bank that is willing to open “correspondence accounts” for their customers. Thus, the Belize banks were able to establish correspondence accounts for their customers using Citibank accounts. The documentation that is produced through the summons process could provide the Justice Department and the IRS with a massive amount of ammunition in their war against tax evasion and reporting violators.

    The news of this round of John Doe summons is indicative of the U.S. government’s relentless effort to identify and prosecute any U.S. tax resident that fails to disclose the existence of a foreign financial account and report for U.S. tax purposes offshore income. According to federal domestic law, an individual must report any ownership interest or signature authority in a foreign bank account with a balance of $10,000 or higher. A taxpayer who is found to have willfully failed to follow Foreign Bank Account Reporting (FBAR) laws will face penalties that equal 50% of the high-balance in the foreign bank account (for up to a five year statute of limitations leading to a potential 250% offshore penalty on the undeclared foreign assets or accounts) and may face several years in a federal prison.

    The government has established one way for taxpayers to come forward and avoid the possibility of jail time. The Offshore Voluntary Disclosure Program (OVDP) offers taxpayers a deferred prosecution agreement if they agree to disclose their foreign bank account and pay back-taxes, interest, and penalties associated with the secret account. But the OVDP is time sensitive as taxpayers are typically disqualified if the IRS for any reason is already investigating an applicant. Thus, if a John Doe summons uncovered information about a hidden foreign account about a taxpayer and the IRS moved on the information, they would likely be disqualified from participating in the program.

    The tax law and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience assisting taxpayers with a variety of tax-related issues. Taxpayers with an undeclared foreign bank account are essentially sitting ducks and will eventually be targeted by the IRS and the Department of Justice. Our knowledgeable and effective team will zealously advocate for your physical and financial freedom. Ensure that you aren’t alone when the government comes knocking. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

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