In a sign that the U.S. tax authorities are expanding their fight against secret offshore bank accounts, on September 16, 2015, a federal district court in Miami, Florida, granted a petition of the U.S. Department of Justice to issue IRS summonses to two Belize banks, seeking identity of American taxpayers with bank accounts in those Belize banks. The IRS is seeking information about Americans who had a relationship with Belize Bank International Limited or Belize Bank Limited between 2006 and 2014, and who may have failed to report their offshore bank accounts.
Under the Bank Secrecy Act, American taxpayers are required to report foreign bank accounts, exceeding $10,000 in aggregate, every year, in a special form called Report of Foreign Bank and Financial Accounts (FBAR). All the accounts in which U.S. taxpayers have financial interest, or have a signature authority over, must be reported on an annual basis. The penalties for failing to file an FBAR are significant, and may include criminal charged of up to five years in prison and a $250,000 criminal fine, or civil penalties reaching 50% of the account value. The IRS and the Department of Justice have been aggressively pursuing foreign banks in order to find out identity of secret U.S. account holders. One tool the government has used in this effort is the “John Doe” summons, which is authorized under Internal Revenue Code section 7609, and which allows the IRS to seek information about taxpayers, even when it does not know their names. The IRS used this tool in 2008 to discover information about Americans with undeclared offshore accounts at the Swiss bank UBS. This tool is now being used to identify U.S. account holders in the two Belize banks.
If you have any questions about foreign bank account requirements, offshore account enforcement, or Offshore Voluntary Disclosure Program, please call Former IRS Attorneys of Holtz, Slavett & Drabkin at (310) 550-6200 to schedule a consultation.