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IRS Actively Investigates Foreign Accounts, Voluntary Compliance in 2018

IRS Actively Investigates Foreign Accounts, Voluntary Compliance in 2018 (Golding & Golding)

IRS Actively Investigates Foreign Accounts, Voluntary Compliance in 2018 (Golding & Golding)

IRS Actively Investigates Foreign Accounts, Voluntary Compliance in 2018

Over the last year, we have spoken with many individuals who are under FBAR or FATCA audit, examination or investigation by the US government for not properly disclosing therefore in accounts, assess come investments, or income to the United States.

Common questions we receive about IRS FBAR or FATCA Investigation:

  • What is an FBAR?
  • What is FATCA?
  • Why do I have to report my foreign money to the IRS?
  • What happens if I did a Quiet Disclosure?
  • What are the penalties?
  • Will I Go to Jail?

Reporting Foreign Accounts & Assets

Ever since the introduction of FATCA (and even the years preceding the introduction of FATCA), the United States has made the reporting of foreign assets and other information to the IRS the key enforcement priority. 

The IRS has the right to issue extensive fines and penalties against any individual that it believes did not properly report disclose foreign money to the United States government.

While under most circumstances, and prior to receiving an Audit/Examination Notice a person can simply submit to one of the approved IRS amnesty programs (OVDP, Streamlined, Reasonable Cause), once a person is under audit or examination they lose the right to submit to the program?

Why Can They No Longer Submit to IRS Amnesty?

The main reason why being under audit or examination means a person loses the right to enter an IRS Amnesty program is because the idea is that Amnesty allows a person to get himself or herself into compliance voluntarily before the IRS learns of the information.

In other words, the IRS would not know even know about the foreign/offshore money or information unless you told them. Therefore, they offer some benefits to you actively volunteering yourself into compliance.

If you are already being audited come examines, or investigated, then the IRS already knows about the information (and/or you have a duty to being truthful with the Audit) and therefore they do need you to voluntarily comply in order for them to obtain information… and Amnesty is no longer an option.

Who is Auditing/Investigating You at the IRS?

This is very important. If you received an IRS audit notice, then chances are it is just a regular audit. And if it is a regular audit, then the best thing you can do is hire and experienced International Tax Attorney to represent you. 

The goal of hiring an experience attorney will be:

  • To assess what the IRS knows?
  • Determine whether it s an eggshell or reverse eggshell audit
  • Try to protect you from making intentional misrepresentations
  • Try to avoid a referral to the IRS Special Agents

Did The IRS Special Agents Contact You?

If you have already been contacted by the IRS special agents, then it is absolutely 100% crucial that you do not engage in any communications with the Special Agent until you have lawyered up

The IRS special agents represent the criminal arm of the IRS and even though they may not make it entirely clear that it is a criminal investigation when they first interact with you, if special agents are questioning you in the IRS believes your FBAR/FATCA violations may be willful or criminal in nature.

Will I Go To Jail?

Oftentimes, even if the IRS could pursue criminal charges against you they do not always do so — especially if you’re able to cough up enough bread to make the IRS go away. And in many instances, even if the IRS Special Agent wants to refer you for criminal prosecution, if you were able to miraculously pay off your tax debt and make the penalty amounts disappear before charges have brought against you — you able to negotiate an alternative to criminal prosecution.

With that said, the U.S. Government does prosecute thousands of people each year for tax fraud related matters, and since they to limit their cases too ones in which they know they can win, if the IRS decides to pursue a criminal prosecution against you — you may find yourself in a pretty tough spot.

How do I know I am already under investigation?

Typically, if you have a hunch or otherwise you have a sense that something seems off, you should be a bit careful on how you operate regarding your foreign money. 

The IRS employs many different tactics to try to discover your information without you knowing.

Common IRS Investigation Techniques

It is becoming more and more clear that the IRS, Department of Justice and the U.S. Government as a whole have made Federal Tax Crimes involving Tax Evasion and Tax Fraud that involve Foreign Income and Offshore Accounts a key enforcement priority.

Typical IRS Criminal Tax Investigations include:

  • Offshore Tax Evasion
  • Offshore Tax Fraud
  • Offshore Money Laundering
  • Offshore Structuring

If you committed one of these types of Offshore Tax Crimes and are audited by the IRS, you have to be very careful. That is because you may not know the extent of the information the IRS already has against you, which may lead to a referral to the Criminal Investigation Division (CID) of the IRS.

Moreover, when an IRS Audit ends and depending on the strategies or tactics used by the specific agent who examined you,an IRS Investigation or inquiry by the IRS Fraud Division may start before you even know it.

The following is a brief summary of the common key tactics the IRS may use in trying to build a case against you, and/or moving your civil audit to a criminal investigation.

Contacting Your Bank Manager

It is safe to say the IRS would have no legitimate reason for speaking with the manager at the bank that you currently use, unless the IRS is trying to build a case against you.

Otherwise, why would the Internal Revenue Service take the time to go visit your bank manager? Oftentimes, when the IRS agent visits your bank manager, it is to begin comprehensive research on issues such as transfers, moving money offshore, and other matters related to your bank account.

They may want to know how often you come to the bank, and how often you request cash as opposed to other transfers. They may also want to know if there any other non-primary individuals on the account, accessing your information and if there are other accounts that the IRS may not know about yet.

Showing up at Your Home, Unannounced

When a person is not cooperating with the IRS, or consistently avoids appearing before the IRS, the IRS can get frustrated. One way the IRS relieves its frustration is by visiting by a person’s residence to try to put pressure on them.

This can be done for two main reasons: The first reason is to put some pressure on the individual to let them know that the IRS is aware of where person lives and that the situation is not going away so quickly. Second, is so the IRS can monitor how the person reacts after the IRS appears at their home. For example, as a result of the IRS visiting their home unannounced, in a person begins making significant transitions or transfers of money from one location or account to another – it may help the IRS pursue a criminal investigation.

Showing up at your Employment or Place of Business

This is a little more intense, and is usually not protocol unless a person owns their own business. We have had many clients tell us, in the pre-criminal investigation phase that the IRS showed up at their place of business to ask themselves – and other employees – various questions.

Of course, other individuals at the place of employment not required to speak to the IRS if they are not under subpoena or summons. Nevertheless, oftentimes people are so scared that when the IRS approaches, that they feel like they have to answer the question — and do. The employees mistakenly believe that by simply answering the questions it will make it go away – usually, the reverse happens and it just gives the IRS more ammunition to go after you.

Sudden Stopping of Communication From the IRS

If you are ever in an audit and the audit ends, but you are unable to obtain a closing letter or any other documentation from the IRS it may be cause for concern. That is because when a civil audit is stopped either abruptly (or with a little more tact), before it seems like the audit is complete, it is because the IRS agent believes there is a criminal issues

In a civil situation, the IRS is absolutely prohibited from asking further questions. That is because in a criminal setting, a person has a right against self-incrimination. A civil audit is not a criminal investigation, and therefore the agent does not have the right to ask criminal type questions.

Interviewing your CPA

If the IRS believes the CPA has information regarding a potential criminal tax matter, the IRS will send them a summons and bring their own “court reporter” with them to a question-and-answer session.

While the CPA has the right to counsel, it is important to understand that if the IRS is taking these types of actions against people on your behalf, then chances are the IRS is at least trying to put together all the evidence he can to determine whether there may be a criminal issue at play.

Danger of Non-Compliance

When a person receives an audit notice, they are not required to appear at the audit. In other words, Counsel may represent them at the audit. Oftentimes, this may be a good idea but it is important to be using counsel who fully understands the complexities of not bringing the client to the audit, but still providing sufficient information to the auditor to appease the auditor.

Oftentimes, the IRS agent wants to see the individual in-person. This does not mean the person should appear, but counsel should at least have the following in preparation for the hearing:

  • A Full understanding of the case
  • A Knowledge of the underlying facts
  • All the necessary documentation
  • A multi-step plan to facilitate compliance without the client getting in harms way

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.


International Tax Lawyers - Golding & Golding, A PLC

International Tax Lawyers - Golding & Golding, A PLC

Golding & Golding: Our international tax lawyers practice exclusively in the area of IRS Offshore & Voluntary Disclosure. We represent clients in 70+ different countries. Managing Partner Sean M. Golding is a Board-Certified Tax Law Specialist Attorney (a designation earned by < 1% of attorneys nationwide.). He leads a full-service offshore disclosure & tax law firm. Sean and his team have represented thousands of clients nationwide & worldwide in all aspects of IRS offshore & voluntary disclosure and compliance during his 20-year career as an Attorney.

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.
International Tax Lawyers - Golding & Golding, A PLC

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