Over 14,700 voluntary disclosures were made under IRS’s special offshore voluntary compliance program that ended on October 15, 2009. The IRS Commissioner stated that it will be mining these disclosures for information to identify “financial institutions, advisors, and others who promoted or otherwise facilitated US persons hiding assets and income offshore and attempted to shirk their tax responsibilities at home.”
On December 2, 2009, the Department of Justice announced that it has filed papers seeking a federal court order authorizing the IRS to serve a “John Doe summons” on the Stanford Group Company (SGC) and related entities to provide documents identifying those U.S. taxpayers holding foreign accounts at or through SGC from 2002 through 2009. SGC, a Texas corporation, is a securities broker dealer that is part of the Stanford Financial Group, a privately held global network of independent, affiliated financial services companies that is run by Robert Allen Stanford. One service provided by SCG was the placement of funds in accounts at Stanford International Bank (SIB), an offshore private bank in Antigua.
The government asked the U.S. District Court for the Northern District of Texas in Dallas to let it serve the John Doe summons on Ralph Janvey, the court-appointed receiver for Stanford and related entities. Based on a declaration of IRS Revenue Agent Daniel Reeves, filed with the court in support of the petition, the IRS has evidence volunteered from a U.S. taxpayer that account statements and Form 1099s from Stanford-controlled entities did not include interest or income generated from SIB accounts or certificates of deposits. The information sought in the John Doe summons will allow the government to review each taxpayer’s income to determine if there are any understatements or misstatements of income as well as to verify if Stanford’s U.S. clients properly filed Reports of Foreign Bank and Financial Accounts (FBARs). The bank’s financial papers show total deposits of $8 billion in 2008. The government wants information from Janvey on any U.S. clients who had accounts through Stanford units from 2002 through 2008.
This new “John Doe” summons case indicates that the government’s enforcement action against UBS was not a one-hit wonder, but rather a first step in the government’s effort to eradicate opportunities for U.S. taxpayers to hide assets offshore. The Stanford case is the next step in the offshore enforcement process.
As further evidence of government’s intent, the IRS announced that its newly set up unit to catch rich tax cheats hiding their wealth in complex business entities is rapidly taking shape with the hiring of hundreds of employees. The IRS declared that “hundreds” of people have already been hired to staff the new unit. The high-wealth unit is focusing on trusts, real estate investments, privately held companies and other business entities controlled by rich individuals. Tax authorities in Japan, Germany and the United Kingdom have also created similar units and they may cooperate with the IRS. The IRS is also opening new criminal offices in Beijing, Panama City and Sydney to focus on funds flowing out of Europe and into Asia, in part because of a heightened focus on international enforcement in Europe. The IRS goal is to get those up and running before September 30, 2010.
Former IRS Attorneys of Holtz, Slavett & Drabkin can assist you with resolving your tax problems, including offshore financial accounts, and compliance with the IRS requirements. You can reach us at (310) 550-6200.
Copyright (c) 2009 Igor S. Drabkin. All Rights Reserved.