Over the past two decades, the IRS has been overwhelmed by the sophistication and scale of foreign asset holdings of wealthy taxpaying Americans. But based on recent statements by the federal government and actions by agency officials, this trend is coming to an end. The IRS is using all of the new tools at its disposal to target U.S. taxpayers who hold foreign assets in countries like Panama.
Just a month ago, the IRS received the green light to issue special summonses to financial services companies doing business with U.S. taxpayer clients who utilized the Panamanian law firm Panama Offshore Legal Services. The information gained from the summonses will be used to mount investigations and cases against taxpayers who are suspected to have violated tax code provisions on overseas asset filing laws. Individuals or businesses that have concerns about the recent crackdown may choose to voluntarily disclose information about their holdings. If this process is conducted incorrectly, it could have serious ramifications for the honest taxpayer who just hopes to avoid an audit or for those that intentionally broke the law alike.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosurebefore the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, KovelCPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!
No matter the situation in which you find yourself, you deserve the advice of the professionals. The advice you get from the Tax Law Offices of David W. Klasing can make the difference between financial security and hefty IRS civil and live altering criminal penalties for intentional noncompliance. For an assessment of your finances and the status of your past and present compliance, speak to one of our dual licensed International Tax Attorneys and CPAs by calling (800) 681-1295 today or scheduling a consultation online here.
IRS Gets Approval to Pursue Information on U.S. Tax Evaders that Used Panamanian Law Firm
On Thursday, July 29, the U.S. District Court for the Southern District of New York (S.D.N.Y.) approved the IRS’ request for the service of 10 John Doe Summonses to be distributed to various large financial services corporations. The summonses target information on certain U.S. taxpaying people and entities that did business with Panama Offshore Legal Services (POLS). POLS is a Panamanian law firm that is alleged to have provided clients with assistance in creating and operating offshore tax evasion schemes.
POLS and its various associates are suspected to have advertised opportunities to conceal assets in offshore vehicles such as financial accounts and shell foundations and corporations. POLS allegedly offered their services with a guarantee of “100% anonymity, privacy, and confidentiality.” Through POLS and its affiliates, the IRS believes that at least several U.S. taxpayers utilized the firm’s offer of a “carefully designed corporate strategy” that would allow clients to “care for [their] loved ones free from probate, inheritance taxes, and other legal and tax problems.”
In response, the S.D.N.Y. ordered the distribution of several John Doe Summonses. A John Doe Summons is a legal tool that can turn over information from a corporation about large groups of identified individuals in connection with some suspected illicit activity. In this case, the John Doe Summons is being sent to various banks and other financial services companies that may have records on U.S taxpaying clients who did business with POLS.
These John Doe Summonses will be sent to 10 different entities: Federal Express Corporation; FedEx Ground Package System, Inc.; DHL Express; United Parcel Service, Inc.; the Federal Reserve Bank of New York; The Clearing House Payments Company LLC; HSBC Bank USA,, N.A.; Citibank, N.A.; Wells Fargo Bank, N.A.; and Bank of America, N.A.
How Does a John Doe Summons Affect Wealthy American Account Holders in Panama?
John Doe Summonses are controversial because they are so broad and effective. They achieve their goals by eliciting information from companies other than the one that they suspect to be involved in the improper scheme. These larger companies possess large swathes of information on U.S. taxpayers and have significant motivation to comply. Otherwise, they will be roped into the substantial IRS action, and no one wants that. As such, the government will obtain massive amounts of evidence on potential transgressors without needing the compliance of the small, Panamanian entity who promised “100% anonymity, privacy, and confidentiality” to its patrons.
The IRS is quickly bolstering its electronic capability in order to handle (data mining) the types of large data dumps that it acquires through John Doe Summonses. This allows the federal government watchdog to comb through information on potential tax evaders more efficiently than ever before. Any information that the IRS gleans on suspected evaders through the John Doe Summons may be used to mount civil and criminal investigations.
Because of their effectiveness, John Doe Summonses are not going away any time soon. They will be used to target wealthy U.S. taxpayers that utilize small, overseas entities to facilitate their foreign holdings with greater frequency in the coming months and years.
How to Protect Your Overseas Financial Holdings
One option that many concerned taxpaying individuals and small businesses utilize is the voluntary disclosure program. By voluntarily disclosing information that alters or amends your previous tax filings, you may benefit in the form of reduced or waived noncompliance penalties and even avoid an audit.
However, voluntary disclosure is not the best for everyone. Depending on the nature of the noncompliance and the information that the government already has, choosing to voluntarily disclose your financial information can backfire on you. You should never try to engage with the voluntary disclosure program without the help of a tax attorney who is familiar with the process and can advise you on your next steps.
Are You Concerned About IRS Investigations into Your Offshore Assets? We Can Help You Today
The Tax Law Offices of David W. Klasing has built a reputation around our fierce and discrete defense of our clients in the face of IRS actions. The fact is that you won’t know what our Dual Licensed Tax Attorneys and CPAs can do for you until you ask. Call (800) 681-1295 today to find out.
Questions and Answers About Foreign Tax Audits
- Does the Fifth Amendment apply to foreign accounts?
- How is evidence cultivated from foreign sources?
- How is tax loss determined?
- How might an FBAR audit be resolved?
- Is a penalty assessment ripe for judicial review?
- Overview of an administrative criminal investigation
- What is the process of an FBAR referral?
- Statute of Limitations raised during a FBAR audit?
- Precautions to be taken in the pre-audit phase
- Recent international tax and reporting prosecutions
- Foreign account, entity and investment prosecution
- Who collects restitution and penalties?
- International tax investigations are an IRS high priority
Questions and Answers about FBAR Compliance and Disclosure
- Potential charges for not participating in the 2014 OVDP
- How many tax returns will I amend for my FBAR filing?
- FBAR Voluntary Disclosure program end
- Can I make a voluntary disclosure after the deadline?
- Can I use IRS Voluntary Disclosure if I Can’t Pay?
- Potential reporting requirements and civil penalties
- What Happens if You Don’t Disclose Foreign Accounts
- Criminal charges if you refuse voluntary disclosure
- Characteristics of FBAR voluntary disclosures
- What is required to make a valid voluntary disclosure?
- 2012 Offshore Voluntary Disclosure Initiative Objectives
- What is an FBAR?
- Filed amended returns without making a Voluntary Disclosure
- Undisclosed foreign accounts: What exchange rate to use
- Why did the IRS announce the 2012 OVDI at this time?
- Should I consider making an offshore voluntary disclosure?
- Why to consider making a Voluntary Disclosure
- 2012 OVDI program vs. the voluntary disclosure practice
- Foreign bank account asset reporting/filing requirements
Questions and Answers about Offshore Voluntary Disclosure Initiative (OVDI)
- Why hire David W. Klasing to represent me in an audit
- 2011 Offshore Voluntary Disclosure Initiative FAQ
- Key Features of Initiative
- Eligibility For This Initiative
- 2011 OVDI Process
- Calculating The Offshore Penalty
- Statute of Limitations
- FBAR Questions
- Taxpayer Representatives
- Case Resolution
- What not to do!
- What to do!
- FBAR Reporting and Expired Voluntary Disclosure Program
- How the Law Offices of David W. Klasing Can Help
- Bank account overseas I didn’t report on my income tax
- Do I have to maintain information on overseas bank accounts
We Are Here for You
Regardless of your business or estate needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.
In addition to our main office in Irvine, the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad and Sacramento.
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