The IRS adds many banks and financial institutions each month to the tens of thousands of tax and finance sources worldwide who have agreed to provide information directly to the IRS regarding the account balances and activities of US taxpayers overseas. Recently, the IRS aggressively expanded its tactics, issuing a summons to a US bank for information about a US taxpayer’s account information in a foreign (offshore) branch of that US bank in order to gain access to offshore bank records. The IRS is searching for evidence in this case, that would prove a US taxpayer kept financial resources offshore in an effort to evade US taxes.
This is a new tactic in an ever-increasing effort to intimidate the world banking and investment community to accept FATCA, and willingly agree to provide information to the IRS. The IRS issued an administrative summons to UBS AG’s Miami Florida branch, demanding information about a US taxpayer with accounts in UBS AG’s Singapore branch. This is an attempt to open a side door into the closed markets of Singapore, with whom the US has no income tax treaty or information sharing agreement under FATCA.
The use of administrative summons’ worked well with Swiss Institutions, and it appears the IRS has stepped up plans to expand this strategy to Singapore and other areas of the world. It appears that in this case a cooperating Swiss Bank may have provided information about an account that was closed in Switzerland after funds were transferred to the bank in Singapore. The IRS is taking a hard line on those with undisclosed income, assets, investments and bank accounts in any foreign country.
These accounts and assets should have been declared on the IRS FBAR form and income tax returns should reflect accurate and full disclosures including the payment of associated taxes. The IRS has offered voluntary disclosure programs such as the OVDP to encourage US taxpayers to come into compliance with FATCA and FBAR regulations. Those who refuse to do so face draconian penalties that may exceed their actual cash-on-hand, as well as criminal prosecution and jail time for tax evasion.
The IRS is increasing pressure and taking more aggressive tactics to gain access to offshore bank records. If you have offshore income, assets, investments or bank accounts we invite you to contact us for a free and substantive consultation at 866-631-3470. Ask about the protections of the attorney-client privilege and how this valuable defense allows you to fully disclose your information to our experienced international tax attorneys in complete confidence.