This is a follow-up to the post we did a week ago on the IRS’s use of a procedure called a John Doe summons to seek information about undisclosed offshore accounts.
As we noted, the IRS has been using this procedure to get various companies to give up the identities of account holders whom the IRS suspects of tax evasion through foreign accounts. If a federal judge agrees, a John Doe summons can be used to get at such information, even though the names of the taxpayers are not known.
In this post, we will update you on the latest example of this. It involves accounts at two companies based in Belize and their affiliates. This week, a judge allowed the IRS to proceed with John Doe summonses to get records from Bank of America (BOA) and Citibank about accounts with the Belize-based entities held by U.S. taxpayers.
The information the IRS seeks includes information about correspondent accounts involving BOA and Citibank.
Use of John Doe summonses further strengthens the IRS’s hand in offshore account enforcement. This is because a John Doe summons has a scope that is considerably broader than a regular summons.
A regular summons is aimed at learning more about an already known taxpayer. A John Doe summons, however, is aimed by finding out the identities of all taxpayers who meet specified criteria.
To be sure, a federal judge has to sign off on the request for a John Doe summons in order for it to take effect. But every time such a request is granted, it adds to the pressure felt by holders of offshore accounts that may not be in compliance with all of the reporting requirements.