The federal government is not messing around when it comes to targeting improperly concealed foreign assets. Offshore tax evasion schemes have plagued the IRS for years, but new tactics available to prosecutors are opening the door to more investigations, penalties, and even convictions for U.S. taxpayers.
Most recently, the Southern District of New York issued John Doe Summonses to uncover information about potential tax evaders who used a Panamanian law firm suspected of assisting in creating vehicles for concealing taxable foreign income generating assets from the U.S. government. These summonses will turn over evidence on potentially hundreds of U.S. taxpayers who may have intentionally fallen out of compliance with the federal tax code. If the recent IRS activity worries you, there are steps that you can take to defend yourself if you act fast. However, attempting to take these steps without the assistance of the professionals could put you in a worse situation than where you started.
The Tax Law Office of David W. Klasing is here for all of your tax needs. Our dual-certified tax attorneys and CPAs have years of experience standing up to the IRS on behalf of our personal and small business clients. To hear more about our services, call us at (800) 681-1295.
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!
In late July, the U.S. District Court for Southern District of New York (S.D.N.Y.) ordered multiple John Doe Summonses to be issued to several businesses in the financial services industry. The summonses will seek information concerning taxpayer clients who used a certain offshore law firm. That law firm, Panama Offshore Legal Services, has drawn the ire of the Southern District for their suspected assistance of U.S. taxpayers involved in illegal offshore tax evasion schemes.
Panama Offshore Legal Services (or “POLS”) is a Panamanian law firm that allegedly offers services to U.S. taxpayers that would assist them in concealing assets held in offshore entities and accounts. Associates of the POLS group offer assistance in creating corporations, foundations, and financial accounts with “100% anonymity, privacy, and confidentiality.” One group member allegedly advertises that their “carefully designed corporate strategy allows you to care for your loved ones free from probate, inheritance taxes, and other legal and tax problems.” The IRS has already identified at least one U.S. taxpayer who used POLS or their associates to further an offshore tax evasion scheme.
This information was enough to provide grounds for the S.D.N.Y. to grant the IRS’ request to use a legal tool known as a John Doe Summons. A John Doe Summons is used to obtain information about possible violations of internal revenue laws by individuals whose identities are known. In other words, the IRS will send a John Doe Summons to a company that is not under suspicion in order to discover information in their records about people or entities that are under suspicion.
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.
The John Doe Summons is a new but effective tool in the IRS’ war chest. Essentially, the IRS can force companies with extensive records on large groups of people to cough up information on certain clients identified in the summons, whether the IRS knows about specific tax indiscretions or not. This allows the IRS to conduct massive civil & criminal investigations on multiple targets through one action.
Since everything these days is recorded digitally, the information dump yielded by a John Doe Summons can be examined quickly and thoroughly for any evidence of tax code impropriety. All of this information can be used against U.S. taxpayers in civil or criminal cases that the IRS decides to levy. In the case of criminal tax evasion, there is no statute of limitations, so they could reach as far back as possible in the collected data.
Though controversial, John Doe Summonses are becoming commonly used tools by IRS officers. This is not the first use of this weapon, and it will not be the last. By targeting the large corporations who are not directly involved in the evasion schemes, the government avoids hinging its case on the cooperation of a smaller, overseas firm that might otherwise fight them along the way in the name of their clients. John Doe Summonses save the IRS time and money. They are not going away any time soon.
The best option for many U.S. taxpayers who are concerned about the federal government’s efforts to crack down on individuals or businesses with offshore holdings is called voluntary disclosure. The voluntary disclosure program exists to provide taxpayers who fear that their past filings may be flawed or incomplete to amend those filings by providing additional information without being prompted by an audit.
However, depending on the nature of the transgression, voluntary disclosure may fail to help or even hurt the honest taxpayer. Further, the government may already have information on your noncompliance, which would make any disclosure much less effective. If you utilized a firm such as POLS that is already under investigation, it is safe to assume that you are already on the government’s radar. In this case, there are other steps that you should be taking that will help shore up your defenses for when the government comes knocking on your door.
No matter what your tax situation may be, the dual-certified tax attorneys and CPAs at the Tax Law Offices of David W. Klasing are ready to assist you. If you have concerns, your best bet is to contact us today for an evaluation. We can be reached at (800) 681-1295.