On May 1, 2019, the Department of Justice (DOJ) announced that it had successfully petitioned a federal court to permit the Internal Revenue Service (IRS) to serve “John Doe” summonses upon several major banking institutions in the United States. Legal documents often use “John Doe” or “Jane Doe” when referring to people whose true names and other identifiers are unknown to law enforcement. The previously sealed John Doe summonses sought information about Finnish residents holding accounts in the United States. While most people have heard the terms “extradition treaty,” few are aware that the U.S. government has tax treaties with many foreign governments. DOJ previously obtained a similar order for the Netherlands in 2017. Foreign governments are increasingly requesting tax information directly from U.S. citizens who hold accounts or conduct business overseas, while also using tax treaties provisions to obtain financial information about accounts held in the U.S.
The U.S. government has long known that taxpayers hide offshore assets often using offshore trusts and corporate service providers to open bank accounts, create legal entities, and serve as nominee officers. The service simply provides debit or credit cards to the taxpayer to access the funds. Since 2001, the U.S. government has enlisted the help of foreign governments in uncovering offshore assets and has provided reciprocal information about foreign citizens holding money in U.S. based accounts. This, in part, led the IRS to offer various incentives to U.S. taxpayers to repatriate assets to the U.S. and remedy back tax delinquencies. However, the Offshore Voluntary Disclosure Program is over, but you should still worry If you have unreported money overseas or held in cryptocurrency.
We have previously reported that the IRS used data analytics to uncover $10 billion of tax fraud in 2018, but the IRS and DOJ have powerful tools found in federal law and various tax treaties at their disposal. Federal courts have permitted U.S. authorities to issue John Doe summons on U.S. financial institutions and on former bastions of financial secrecy requiring them to provide information about U.S. residents hiding money. Now foreign governments are using their legal authorities to obtain similar information. Several criminal and civil statutes prohibit U.S. taxpayers from hiding assets overseas to shield them from U.S. authorities overseas, and prohibit foreign taxpayers from hiding assets in the U.S. We continue to see foreign governments seek information from U.S. businesses about tax liabilities, and we continue to see IRS audits increase.
As we have advised in the past, you should not speak to a government agent without a lawyer. This applies equally to criminal and civil government authorities conducting an IRS audit. It is imperative to retain counsel experienced in criminal and civil investigations to navigate the perils you face when you learn the IRS is investigating you for hiding money overseas. If you believe you are under investigation, or if you are an attorney or accountant with a client under investigation, contact the Law Offices of Horwitz & Citro, P.A. immediately. Call (407) 901-5852 to request a free initial consultation with an experienced criminal defense lawyer.