IRS Actively Seeking US Tax Dodgers Abroad!


According to Bloomberg (subscription required) The Department of Justice Tax Division is ramping up an intense crackdown on offshore tax evasion, and people hiding assets overseas should come forward as soon as possible, an agency official said March 6, 2015. Caroline D. Ciraolo , principal deputy assistant attorney general for policy and planning at the division said:

“Time is of the essence,”
“Come in now or face the consequences.”

Speaking at the Federal Bar Association Tax Law Conference, Ciraolo said the government’s reach has extended far beyond Switzerland to jurisdictions including:

• Israel,
• India,
• Liechtenstein,
• Luxembourg and
• Barbados

and hasn’t yet revealed its hand in numerous investigations.

“The lack of public disclosure should be in no way viewed as inaction,” she said.

The DOJ official said the government is using the information it is receiving from a host of sources to open new investigations and target new misconduct. That includes its program for Swiss banks to turn over a broad range of data and pay hefty fees to avoid prosecution, she said, adding, “We are looking at everything we receive.”

This is consistent with the Government’s stated position at a recent International Tax Conference in Miami, which I attended, where IRS officers were present for questions and answers.

These officers included David W. Horton, director, international individual compliance; Kelly R. Jackson, special agent in charge of criminal investigation; and W. Robert Abramitis, senior counsel, which was also posted in The Gleaner.


The IRS team said that FATCA has been successful so far. They said they have collected US$6.5 billion and they reasonably believe that as much as US$100 billion per year could be collected. They are working with other countries that would like to use the US model to improve their tax collection. The IRS will be working closely with the Organization for Economic Cooperation and Development (OECD) to implement Global FATCA; and also that the forms to request information from financial institutions would be standardized so that all countries would use the same forms, making it easy on the financial institutions.

The IRS reasonably believes that FATCA can work, and given that the law has the effect of forcing compliance by every country, ultimately, everyone will benefit.


The team said that FBAR is different from FATCA and the requirements are also different. While FATCA is reported on the tax returns, FBAR is an informational submission that must be filed with the Treasury Department if you have more than US$10,000 in financial assets overseas. So, for FATCA, the financial institutions and the foreign governments will report to the IRS directly, but for FBAR, the taxpayers must self-report to the United States Treasury Department by June 30 each year.


The IRS officers said they have a special interest in foreign corporations, i.e., corporations organized outside the United States. They are interested in shareholders with at least 10 per cent ownership and directors of these foreign corporations. Foreign corporations are very important because that is where the big bucks are. They want US citizens and green card holders who are 10 per cent shareholders and directors (in said corporations) to provide information from the following sources annually: articles of incorporation, listing of directors, annual returns for the company filed with the registrar of companies and financial statements. While this information is filed for informational purposes only, the foreign corporations should file a tax return with the IRS. You should note that the requirement applies to partnerships and trusts also.


The IRS said a record number of Americans have given up citizenship recently and some may have done so with the intent to get around FATCA. But the news is bad, because every one of those citizens will be thoroughly investigated with a view to seeing if they are trying to evade taxes.

The IRS said that people with a certain amount of assets will be treated as if all the assets were sold and will be taxed as at the day when citizenship was given up. This will also apply to long-term green card holders. Also, if one has given up citizenship and spends more than 30 days in the United States in a calendar year, he may be taxed as if he were a citizen.


The IRS has named about a dozen banks worldwide that are considered bad and if you have an account in one of those banks and failed to comply with your filing and tax-reporting obligations, you are very likely to have a problem with the IRS.


There is a program to help citizens and green card holders become compliant with their tax obligations without facing a penalty. This can be achieved by filing three years of tax returns and six years of FBARs returns, and paying all taxes and interest, if you live outside the US. But if you live in the US, there is a five per cent penalty calculated on the highest balance of financial assets for the last three years. You must certify under penalties of perjury that you were not trying to evade taxes. The IRS said the break could be withdrawn at any time, so people should jump at the opportunity to be compliant.


The IRS said it can tell when people enter and exit the country, and lying on immigration forms and tax returns is a federal offence. There is a website that can be used to tell whenever people enter and exit the United States. The number of days spent in the US may be important as follows:

For citizens, if you spend more than 330 days outside the US per year, you will not be required to participate in Obamacare, or the number of days spent abroad will affect the amount of foreign earnings you may be able to exclude from income, hence paying low or no tax to Uncle Sam. For green card holders, you have immigration issues, as well as tax issues if you spend more than a specified period outside the United States.


The IRS has said there are several scams going on with respect to FACTA; and taxpayers should note that the IRS does not communicate via emails. Therefore, I suggest that you should not communicate your tax or financial information by phone, Internet or fax to anyone, including your accountant, lawyer or tax preparer, as you don’t know who may be zooming in on your information. Go the old-fashioned way by face-to-face meeting or use a courier service.

The IRS said people may be able to run, but they can’t hide. The IRS said it is going to have agents all over the world, as they are going to work closely with foreign governments through the information exchange program and the financial institutions.

Also, they said they would be using Internet searches and social media like Facebook and LinkedIn to find tax dodgers, along with whistle-blowers. There will be Global FATCA, where other countries will be following the IRS path. They are proposing one standard form that will be used to get information from financial institutions worldwide. So, if China wants information from Swiss banks, it will use the same forms to make the request as Jamaica or France.

The idea is to make it easier for the banks to retrieve information. So, we may be looking to one tax system if the OECD has its way and tax evasion worldwide may very well be a thing of the past in a few years’ time, and the full compliance with the IRS requirements is the best way forward.


The Department of Justice’s greater concern is over funds that originated in the U.S. as opposed to funds that were always offshore. Thus, U.S. profits and gains diverted to offshore accounts garner more attention on the criminal side than do foreign gifts or inheritances that were deposited into offshore accounts.

Reliance on professional advice, once a defense, now has become evidence that the advisor and taxpayers were co-conspirators.

IRS is following transfers of funds by so-called “leavers.” Who moved funds from UBS in 2009 and 2010 and views that foolish conduct as significant evidence of willfulness.


Preclearance of names is now taking much longer than when the Program first opened because IRS has much more data to go through in order to check a name.

Valuations of included non-financial assets: IRS generally allowing no discounts (minority interest or lack of marketability) from fair market value as it views the inclusion of the value as “rough justice.” Any reasonable good-faith estimate of value is acceptable.


The IRS continues to see no value in offering examples of what sort of conduct it would view as willful or non-willful. Each determination is very fact specific and there is a large body of case-law is applicable. Thus, the call is up to the attorney. Nothing more will be forthcoming from IRS on the question of non-willfulness.

• Willful is one of those “know it when you see it” things.

• Ask yourself: Are you nervous about having no protection from criminal indictment, or about having to pay the civil fraud penalty or draconian FBAR penalties? If not, Streamlined is OK.

Size of the account does matter but is not determinative other than at the extreme ends of the spectrum (very small being an indicator of non-willful conduct and very large being a strong indicator of willful conduct).

If joint returns were filed both spouses must file under the Streamlined Process because a joint return must be amended with a joint return. That is because the tax is assessed on the return and not under a closing agreement as in the OVDP (where one or both spouses can enter).

There is no acknowledgment of filing returns under the Streamlined Process because it is just a process for filing tax returns. Aside from the penalty relief it is just like filing a normal return.
Streamlined returns are not treated as ordinary returns. You are filing under threat of criminal prosecution if you do not meet the test of being non-willful, and of other charges if your Non-willfulness Certification is false or leaves out negative facts that make it misleading or if the returns you file are in any way false or misleading.

IRS cashing of your check or sending a bill for additional interest is not an acknowledgment that your returns pass muster in the Streamlined Process. Your return can still be selected for audit later on and there is no process by which one can request an early audit.

Taxpayers with accounts at listed banks can go Streamlined if non-willful.

Practitioners stated that some are submitting names preclearance even if they intend to go Streamlined, just in case evidence of willfulness is discovered. The IRS people discouraged this tactic.

The reason is that the accounting and investigative work in reviewing statements for the Streamlined may turn up evidence of willfulness. If names are submitted you will probably have 50 days before the OVDP Letter is due. During that time you should have a better idea if you can, in fact, certify non-willfulness.

You can also pull transcripts to ascertain if an audit has been commenced. But, the transcript may show an audit code before the audit has commenced. It is the sending of the audit notice and due process rights letter that commences the audit and disqualified a taxpayer from the Streamlined Process, not the entering of the code in the system.

The key element for IRS in ultimately agreeing or disagreeing with the non-willful certificates is when the taxpayer learned of the filing requirements.

There is no OVDP special rule for PFICs in the Streamlined Process.

Upfront Rejections from Streamlined are due mainly to the Certification on its face being insufficient and not reciting specific facts supporting the non-willful assertion. The IRS is not rejecting applicants merely because it disagrees with the conclusion that the conduct is non-willful.

The taxpayer no longer has to be otherwise tax-compliant to file returns under the Streamlined Process. The returns filed can be delinquent returns.


IRS is screening for amended returns filed outside the OVDP or Streamlined Process. So, taxpayers taking this route may expect an audit.

May be applicable to persons if not worried about criminal charges or willful FBAR penalties and feel strongly that reasonable cause is present.

Do You Have Unreported Foreign Income? Your Information Is Scheduled To Be Reported To The IRS By March 31, 2015!

Want to Know if the OVDP Program is Right for You?

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Original Post By:  Ronald Marini

Mr. Marini concentrates his practice in Representation before the IRS and All Other Tax Authorities, IRS Collections, Offers in Compromise, Installment Payment Plans, Appeals, Sales Tax Audits, International and Tax Law, Asset Protection and Estate Planning.

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  1. SwissTechie says:

    The US is welcome to “thoroughly investigate” me. By doing so, it will learn that I renounced due to national origin discrimination caused by US policy in violation of US law. From such, it will find more evidence showing that FATCA is criminal against US expats since it leads to discrimination by forcing banks to treat people differently according to their place of birth.

  2. Suzanne says:

    Where do you get your figure that FATCA has brought in $6.5B so far?

  3. Anon says:

    Also, if one has given up citizenship and spends more than 30 days in the United States in a calendar year, he may be taxed as if he were a citizen.

    No. This is the old section 877 rule, and was swept away entirely in 2008 by 877A and the exit tax. Anyone renouncing after June 2008 has the same US tax residency rules as any other non-resident alien.

  4. T Dott says:

    From the article:
    “The IRS said a record number of Americans have given up citizenship recently and some may have done so with the intent to get around FATCA. But the news is bad, because every one of those citizens will be thoroughly investigated with a view to seeing if they are trying to evade taxes.”

    Really? The IRS is going to thoroughly investigate every single one of the numerous Canadian citizens who recently gave up US citizenship? Well, good luck with that. I’d imagine that as far as bang for the buck goes, the likelihood of finding a less worthy target is slim to none.

  5. Chuckle says:

    “The IRS said a record number of Americans have given up citizenship recently and some may have done so with the intent to get around FATCA. But the news is bad, because every one of those citizens will be thoroughly investigated with a view to seeing if they are trying to evade taxes.”

    Well, if one considers that countless names are missing from the so called “name and shame list”, the us treasury dept. and the irs aren’t even aware of who is renouncing, much less being in a position to “thoroughly investigate every one”.

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