The IRS expands overseas tax recovery and conducts global audits

The IRS expands overseas tax recovery and conducts global audits. The federal government, which is facing a huge fiscal deficit, has been gradually increasing its efforts to crack down on overseas tax avoidance in recent years. Previously...

In the past, the IRS and the Department of Justice's tax department focused on investigating the problem of Swiss banks and other similar banks in Switzerland providing tax evasion services to wealthy Americans, and required the Swiss government to authorize the handover of the names of U.S. customers of Swiss banks. Some taxpayers who did not declare foreign accounts to the IRS would face the risk of prosecution.

The U.S. Internal Revenue Service announced the Foreign Account Tax Compliance Act (FATCA) at the end of December last year, requiring all non-U.S. financial institutions with "U.S. source income" to report to the IRS the income information of customers with U.S. citizens, green cards, and residents. The new FATCA law stipulates that foreign financial institutions (FFIs) must sign an agreement with the IRS before the end of June 2013 to assist the United States in overseas tax inspections.

According to FATCA, if overseas financial institutions do not cooperate with the US government's overseas tax inspections, they will be regarded as uncooperative financial institutions. Once financial institutions deemed uncooperative in 2014 sell US dollar assets (such as US government bonds, funds, real estate, etc.), they will be fined a high 30% penalty.

Officials from the Department of Justice recently stated that the federal court will authorize the Internal Revenue Service to issue a subpoena to obtain the bank records of Canadian Imperial Bank of Commerce’s First Caribbean International Bank (Canadian Imperial Bank of Commerce’s First Caribbean International Bank), and the Internal Revenue Service will track down whether any American taxpayers have secret accounts at the bank. This move shows that the IRS will open a new front in countries other than Switzerland to pursue overseas tax evasion, and will also spread its targets to foreign banks that do not have branches in the United States.

The Department of Justice stated that a federal court in San Francisco recently approved the government's issuance of a subpoena to Wells Fargo & Co. to investigate the correspondent account of First Caribbean International Bank (FCIB) at Wells Fargo. FCIB, headquartered in Barbados, has 18 branches in the Caribbean but no branches in the United States.

Court documents indicate that the IRS is targeting U.S. taxpayers who had accounts with the bank from 2004 to 2012.

IRS officials pointed out in court documents that FCIB can transfer deposits to accounts in the United States or overseas through Wells Fargo accounts. Officials said the obtained FCIB bank records will be able to trace U.S. taxpayers who opened secret accounts at the bank.