How Does the IRS Find Foreign Bank Accounts in 2019 (5 Examples)
As the IRS continues to make Offshore and Foreign Account compliance key enforcement priorities, one common question we receive is – How Do IRS Agent Find Foreign Accounts?
With the recent creation of several International Tax Enforcement Groups, coupled by renewed interest in FBAR compliance, along with FATCA enforcement — there are 5 main ways the IRS located unreported foreign accounts (assets, investments and income).
How Does the IRS Find Foreign Bank Accounts
These are 5 common methods the IRS used to locate and discover Foreign Accounts:
One of easiest ways for the IRS to discover your foreign bank account Is to have the information hand fed to them from various Foreign Financial Institutions. In accordance with FATCA (Foreign Account Tax Compliance Act), more than 110 different foreign countries and more than 300,000 foreign financial institutions are actively reporting us account holder information to the IRS.
In other words, the IRS not have to do anything, since the majority of large and small institutions from most FATCA compliant countries around the world are already reporting to the IRS.
If you’re a fan of our blog, then you know we are not huge fans of whistleblowers – unless of course it is to protect the Interests of the underrepresented. Usually, it Is just a “tattle-tale” — someone who’s looking to get out of trouble for something they did, by getting you in trouble.
And, since under the new/updated Whistleblower rules, FBAR balances can now be considered as part of the reward someone can claim for ratting you out — you have to be careful when not reporting foreign accounts (and the company you keep)
This is always a danger. The IRS can Audit you for any number different reasons. In recent years, with the introduction of FATCA, and renewed interest in FBAR penalties (which are lopsided and extreme in nature), if you’re under audit you have to be careful.
This is especially true if you are in an eggshell audit or reverse eggshell audit. If you provide the agent with inaccurate and/or intentional misrepresentations or omissions — it may take a turn for the worse.
Therefore, if you’re under audit — and especially if you receive an audit notice and you have unreported for undisclosed foreign bank accounts – you need to be careful before making any representations or statements to the IRS.
IRS Voluntary Disclosure/Amnesty by a 3rd Party
Here’s a common example: David decides he wants to get into tax compliance by entering the voluntary disclosure program. David has co-ownership of certain accounts with other individuals he partnered with for his business.
David’s partners are not so keen on getting into compliance and are trying to fly below the radar hoping that the foreign country they picked would not report the foreign accounts. David on the other hand, is very concerned about getting in criminal trouble – since all partners were aware of the reporting requirement.
Therefore David makes the leap to get into compliance. Unfortunately as part of the compliance process, David has to identify the names of the joint account holders, which can lead to problems for the partners.
J-5 & Coinbase Subpoena
Bitcoin and cryptocurrency in general has been all the rave, although it seems to be subsiding as of lately.
The United States is a member of J5 which is an international task force designed to combat and reduce offshore evasion, with an emphasis placed on cryptocurrency.
In addition, the IRS issued a summon/subpoena to Coinbase. And, even though Coinbase tried to fight it, in the end they relented and turned over upwards of 14,000 Account holders names to the IRS.
While the internal Revenue Service and financial crimes enforcement unit (FinCEN) have not formalized specific reporting requirements the cryptocurrency, it is safe say that if you have your crypto currency in an account or other type of Financial institution (as opposed to personal wallet), the IRS may enforce foreign bank account reporting rules against you.
What Can You Do?
If you have unreported offshore/foreign income, assets, accounts, or investments — the best thing is generally to try to get into IRS Offshore Compliance though voluntary disclosure/tax amnesty before it is too late and you lose the right to disclose.
Golding & Golding, A PLC
We have successfully represented clients in more than 1000 streamlined and voluntary disclosure submissions nationwide, and in over 70-different countries.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
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Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.