January 30, 2017

Last week, a U.S. District Court authorized the IRS to summons a taxpayer with access to information about clients’ undisclosed foreign financial assets. Given the IRS’ increasing efforts to discover hidden foreign accounts, The Wolf Group encourages U.S. taxpayers with foreign accounts to take this latest development into consideration in determining whether their foreign accounts are reportable.
The Issue
Thus far, the U.S. District Court has granted the IRS the authority to serve eight different “John Doe” summons on several foreign financial institutions. These institutions are tied to a Panamanian entity that had been issuing debit cards to individuals who the IRS believes may have been using the accounts to evade their U.S. tax obligations. As a result of the summons, the IRS used data-mining methods to obtain additional information on such accounts.
The Wolf Group’s Perspective
The aforementioned John Doe Summons that was issued constitutes a public disclosure event. If a public disclosure event occurs before the taxpayer enters an amnesty program such as the Offshore Voluntary Disclosure Program (OVDP), then the taxpayer will be subject to a 50% miscellaneous offshore penalty (instead of 27.5%). Taxpayers that have or may have issues related to these transactions should immediately seek the guidance of a tax advisor with significant experience in US international tax issues and voluntary disclosure practices. The utilization of the OVDP or the Streamlined Filing Compliance Procedures is the first line of defense against substantial civil penalties and criminal prosecution.
The Wolf Group has assisted hundreds of clients in making voluntary disclosures of unreported foreign accounts in order to avoid the draconian penalties that may be assessed by the IRS. Please contact our New Client Lead, Fan Chen, at 703-652-1737 or at fanchen@thewolfgroup.com to learn how we can help with U.S. tax compliance complexities