Court Authorizes IRS to Issue Summonses for Records Relating to U.S. Taxpayers with Offshore Bank Accounts

A number of U.S. taxpayers with beneficial ownership and control over funds held in accounts at Zurcher Kantonalbank and its affiliates (collectively, ZKB) in Switzerland, and The Bank of N.T. Butterfield & Son Limited and its affiliates (collectively, Butterfield) in the Bahamas, Barbados, Cayman Islands, Guernsey, Hong Kong, Malta, Switzerland, and the United Kingdom, have admitted failing to report income earned from their offshore accounts on their federal tax returns.  The IRS has reason to believe that other U.S. taxpayers who held or presently hold similar accounts at ZKB, Butterfield, and their affiliates have done the same in violation of federal tax law.  In December 2012, three employees of ZKB were indicted for conspiring with U.S. taxpayers and others to hide at least $423 million from the IRS in secret Swiss bank accounts.

On November 7, 2013, U.S. District Judges in the Southern District of New York entered orders authorizing the IRS to issue summonses requiring Bank of New York Mellon (Mellon) and Citibank NA (Citibank) to produce information about U.S. taxpayers who may be evading or have evaded federal taxes by holding interests in undisclosed accounts at ZKB; and requiring Mellon, Citibank, JPMorgan Chase Bank NA (JPMorgan), HSBC Bank USA NA (HSBC), and Bank of America NA (Bank of America) to produce similar information in connection with undisclosed accounts at Butterfield.

In these actions, the Court granted the IRS permission to serve what are known as “John Doe” summonses on Mellon, Citibank, JPMorgan, HSBC, and Bank of America.  The IRS uses John Doe summonses to obtain information about possible tax fraud by individuals whose identities are unknown.  The John Doe summonses direct these five banks to produce records identifying U.S. taxpayers with accounts at ZKB, Butterfield and their affiliates, including other foreign banks that used ZKB and Butterfield’s U.S. correspondent accounts at Mellon, Citibank, JPMorgan, HSBC, and Bank of America to service U.S. clients.

The information that the banks are required to turn over to the IRS will provide information about individuals using financial institutions from Switzerland to the Cayman Islands to Hong Kong to avoid their U.S. tax obligations.  As the U.S. government is continuing its commitment to uncover and identify taxpayers who tried to hide money overseas as a way to avoid federal taxes, U.S. taxpayers still holding accounts who have not come clean should come forward and do the right thing before it is too late.

Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide.  U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year.  Willful failure to report a foreign account can result in a fine of up to 50% of the amount in the account at the time of the violation and may even result in the IRS filing criminal charges.

If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider participating in the IRS’s Offshore Voluntary Disclosure Initiative (OVDI).  Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law.  Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in San Francisco, Los Angeles and elsewhere in California qualify you for OVDI.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.