How DOJ Finds Foreign Assets Hidden From IRS (New 2024)

How DOJ Finds Foreign Assets Taxpayers Hid From the IRS

How DOJ Finds Foreign Assets Hidden From the IRS

The international tax lawyer specialists at Golding & Golding want to update a prior article we had written for our main website about the dangers U.S. taxpayers face when they try to hide foreign assets from the U.S. government. Of course, some taxpayers will be able to hide their foreign assets and avoid the prying eyes of the U.S. government for a lifetime. Other taxpayers are not so lucky and sometimes the Internal Revenue Service, Department of Justice, and other government organizations may work together to try to uncover assets that a taxpayer may have hidden overseas. This article is a supplement to our prior article, ‘How IRS Finds Your Offshore Hidden Bank Accounts (5 Ways)‘ and offers three (3) more specific methods the US government is using to find foreign assets and accounts.

Plea Agreements with Foreign Bank Personnel

Over the past few years, many foreign financial institutions as well as employees of those institutions have entered into deferred prosecution and other types of agreements with the U.S. government to avoid prosecution. As part of these agreements, Foreign Financial Institutions oftentimes have to agree to provide taxpayer information to the U.S. government. By doing so, these Foreign Financial Institutions are providing a road map to the Department of Justice as to how certain U.S. Taxpayers have opened foreign accounts under different names (such as nominee entities) and how the Foreign Financial Institutions have worked with the U.S. person to avoid detection by the IRS. One common method used is the numbered bank accounts which are common in Swiss financial institutions.

Foreign Bank Client Purge

Another phenomenon that has been happening with several foreign banks overseas is that at some point they just determined that it is not financially feasible to work with US clients any longer. By having US clients, many of these foreign institutions are required to do more extensive reporting to the US government that they simply do not want to do. As a result, oftentimes they will simply cancel the taxpayers’ account and sometimes they will even report the information to the IRS so that they can have a clean slate. In this type of situation, the bank is not formally under investigation or even subject to a deferred prosecution agreement but still finds it in its own best interest to report the information and make a clean break from having US clientele.

OPR Enforcement of Tax Preparers

Another method that the Internal Revenue Service and other government organizations are using to detect hidden assets of U.S. taxpayers abroad is by auditing and investigating the tax preparers who they believe are actively working with taxpayers to hide foreign assets (aka OPR or Office of Professional Responsibility investigation). In an all too common situation, a tax preparer may recommend to a client to quietly disclose foreign accounts without going back and fixing for the prior years. Moreover, they work with the clients to cherry-pick which foreign accounts they will report versus the ones that they do not report. Once these tax preparers are investigated and because there is no attorney-client privilege with an accountant, oftentimes to try to save their own hide the accountant will give up taxpayer information and let the government know where the foreign assets are being hidden.

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.