Tax Notes Today initially reported on a recent ALI webcast where current and former IRS officials provided insights into the future of tax enforcement. The esteemed Federal Tax Crimes Blog has also picked up coverage on this matter and has provided useful analysis and insight into the reports. In this blog we will attempt to better understand the likely direction of certain tax enforcement efforts and their potential impacts by further distilling the essence of the comments and remarks made while providing additional context. However the short takeaway here is that the IRS is likely to re-start its efforts to identify offshore credit card abusers and that those individuals who find themselves on the Swiss bank “leavers list” can expect to attract additional unwanted attention from the U.S. Department of Justice.
IRS to Take Additional Measures to Identify U.S. Taxpayers Holding Offshore Credit Cards & benefiting from Foreign Corporate Holdings
In 2003, the IRS unveiled its Offshore Voluntary Compliance Initiative (OVCI) for taxpayers who made use of offshore or foreign credit cards to conceal their true income from tax assessment. The program grew out of a “John-Doe” summons investigation that began in October 2000 and was intended to crack down on one particular abusive tax avoidance scheme. The “John-Doe” summons were served on credit card and financial businesses and taxpayers were encouraged to come forward and provide information about entities & individuals promoting this type of offshore tax avoidance scheme. The last day to apply for the original program was April 15, 2003, but the IRS has periodically offered similar programs to taxpayers. The Offshore Credit Card Program (OCCP), successor to the Offshore Voluntary Compliance Initiative, has not seen significant activity in recent years.
However, as reported by the previously cited sources, John McDougal stated that the IRS is considering using the John Doe summons once more to obtain offshore credit card information to further the IRS’ efforts to identify and build cases against individuals who engage in offshore practices that frustrates or defeats the assessment or payment of tax. While one commentator remarked that the previous programs had been more resource intensive and less productive than projected, Mr. McDougal stated that the IRS has an initiative in the works that would likely be made public in short order.
The Future of the Swiss Bank Program and Offshore Tax Enforcement
The Swiss Bank Program was announced in August of 2013 and has spearheaded an on-going effort to investigate and identify taxpayers who avoid or evade tax through the use of offshore accounts. The program was offered to Swiss banks that were not under investigation at the time of their entry to the program. Banks and other foreign financial institutes that entered in the program were subject to substantial penalties, making a full and complete disclosure of cross-border banking activities, agree to disclose the identity of U.S. account holders, and agree to a number of other conditions. Banks that entered into the program were eligible to receive a non-prosecution agreement.
During the discussion it was revealed that a new version of the Swiss Bank Program was unlikely. However, the agency was particularly interested in those individuals identified on the Swiss bank leaver list. The leaver list includes those individuals and entities that have left a Swiss bank for another foreign bank. Taxpayers who have engaged in such conduct should expect to face particularly harsh scrutiny.
Facing Tax charges for Offshore Tax Evasion?
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