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If You Have a Foreign Account, The IRS Is Serious…

Updated: Apr 11, 2021

About four years ago, the Internal Revenue Service went on a mission to get taxpayers, who put their money overseas to pay taxes. As a United States citizen, resident alien, or anybody that can file Form 1040, you are taxed on worldwide income. So if you’re overseas, you work for somebody, and you’re paid in the currency of a foreign country, you must remit taxes to the United States. What some people were doing, was taking money from the United States, that was taxable, and hiding it overseas in foreign bank accounts. These foreign countries, never reported that your money was there, to the Internal Revenue Service. A small number of taxpayers, beat the system by having bank accounts overseas. How they would do this, was that they would deposit money in these foreign bank accounts, and in return they would receive a foreign debit card, so they can access their money. This went on, for many years. About four or five years ago, the Internal Revenue Service put pressure on foreign countries to report information to them. Today, there’s $250,000 penalty plus 5 years in prison, if you fail to report a foreign bank account. In short, the IRS is serious about the reporting of foreign accounts.

This morning, is I was doing my research. I ran across an article that I found interesting. The Internal Revenue Service is now targeting US tax cheats by summonsing records from shipping and financial service providers. Basically, what the IRS is doing, with the help of the DEA is serving John Doe notices to Sovereign, trying to find out what American citizens are shipping overseas. Sovereign offers a variety of services to clients, including, for example, the formation and administration of anonymous corporations and foundations in Panama and offshore entities, the maintenance and operation of offshore structures, mail forwarding, the ability of virtual offices, re-invoicing, and the provision of professional managers, who appoint themselves directors of the client’s entities while the client retains ultimate control over the assets What they’re looking for, is money. Because wire transfers, are reported to the Internal Revenue Service, taxpayers have gotten smart, and have decided to start using shipping services to get their money to foreign bank accounts.

John Doe summonses are used by the Internal Revenue Service to target individuals who are suspected of tax fraud but whose identities are not readily available and thus not specifically identified. These John Doe summonses direct Sovereign to produce records that will assist the IRS in identifying US taxpayers from 2005 through 2013 that used Sovereign services to establish, maintain, operate, or control:

  • any foreign financial accounts or other assets;

  • any foreign corporation, company, trust, foundation, or other legal entity; or

  • any foreign or domestic financial account in the name of such financial entities.

Through this process, the Internal Revenue Service expects to identify Sovereign’s US clients who may be avoiding or evading taxes.

This is just one of the many things the Internal Revenue Service is doing, to hunt down foreign assets. The IRS is serious. If you have foreign accounts, REPORT THEM!

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