IRS and DOJ are Reviewing and Scrubbing Offshore Accounts Data to Build Civil and Criminal Cases

During the June 24, 2016 Tax Controversy Conference held at New York University, officials from both the Department of Justice (DOJ) and the Internal Revenue Service (IRS) emphasized their focus on analyzing the avalanche of data received on offshore financial assets and accounts.

Since the IRS launched the offshore voluntary disclosure programs over six years ago, there have been several versions. More than 50,000 people have participated in all forms of the programs, which have generated approximately $7 billion in taxes, interest and penalties. Yet, the IRS’s efforts did not stop here. It is reviewing and scrubbing the enormous amount of offshore accounts and assets information disclosed to it by foreign financial institutions pursuant to the Foreign Account Tax Compliance Act (FATCA).

Generally, beginning in 2015, most non-U.S. banks began to turn over detailed offshore account information of U.S. persons to the IRS. It has always been said that it is just a matter of time before the IRS identifies a taxpayer with undeclared foreign accounts. It looks like that time is coming sooner rather than later. The DOJ clearly stated during the June 24 conference that they were reviewing “every single account” that was identified to them, and they were also reviewing the matching information on the FinCEN 114 (aka FBAR).

Thus, having one or more undeclared offshore accounts is ever more dangerous for U.S. persons now, although it is not too late to address the issue. It is always better to voluntarily come into compliance than wait for the folks with badges from IRS or DOJ to knock on the door.