On July 30, 2021 we posted Court Orders Fedex, CitiBank & Others to Give the IRS Panama Offshore Account Info! where we discussed that in the case of In the Matter of Tax Liabilities of John Does, case number 1:21-mc-00424-GHW, a federal judge said that he will allow the IRS to obtain from couriers and financial institutions, including FedEx and Bank of America, records of individuals who may have used Panamanian offshore service providers to hide assets, the U.S. Justice Department said on July 29, 2021.
U.S. District Judge Gregory H. Wood, of the Southern District of New York, approved Internal Revenue Service summonses to seek the information from financial institutions including Citibank, Wells Fargo Bank and couriers including FedEx Corp. and UPS Inc.
The IRS is investigating taxpayers who may have used Panama Offshore Legal Services, which is part of a collective of related entities known as the POLS Group, to facilitate concealing income and assets from U.S. tax authorities between 2013 and 2020. The government has been seeking information from other entities, including MoneyGram Payment Systems, through a in Minnesota to investigate those who may have violated U.S. laws by hiding taxable income and assets.
POLS is a Panamanian law firm that advertises services including the creation of foundations and corporations as well as offshore financial accounts while promising clients "100% anonymity, privacy and confidentiality," according to the DOJ."
A U.S. person that has a financial interest in, or signature authority over, a foreign financial account must file a FinCEN Form 114 (Report of Foreign Bank and Financial Accounts, commonly referred to as an FBAR) when the aggregate value of their foreign financial accounts exceeds $10,000 at any time during the calendar year. (Instructions to FinCEN Form 114)
In addition, U.S. individuals who have a financial interest in, or signature authority over, a financial account in a foreign country or who have received a distribution from, were a grantor of, or a transferor to, a foreign trust, must report that interest on Part III, Schedule B, Form 1040. (Instructions to Schedule B (Form 1040))
To encourage U.S. taxpayers to report their offshore accounts and assets, the IRS offered several versions of an Offshore Voluntary Disclosure Program (OVDP). The OVDP allowed U.S. taxpayers to voluntarily disclose foreign accounts or entities used to evade U.S. taxes in exchange for reduced penalties. The last OVDP closed on September 28, 2018.
The Minnesota court in this case found that the IRS satisfied the three statutory prerequisites for issuing a John Doe summons:
- First, the IRS's investigation concerns an ascertainable group of people. (Code Sec. 7609(f)(1))
- Second, the IRS provided information showing that there is a reasonable basis for believing that U.S. individuals using POLS's services may fail or have failed to comply with any provision of any internal revenue law. (Code Sec. 7609(f)(2))
- Third, the information the IRS sought on those using POLS's services, including their identities, is not readily available from other sources. (Code Sec. 7609(f)(3))
The court also found that the information the IRS sought to summon was narrowly tailored to information pertaining to the failure or potential failure of the group to comply with internal revenue laws. (Code Sec. 7609(f))
Finally, the court noted that the IRS provided evidence that POLS accepts payments for its services via wire transfer from MoneyGram and that POLS customers are directed to make payments through MoneyGram.
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Read more at: Tax Times blog