When is a John Doe Summons Authorized (Case Examples)

What Is an IRS John Doe Summons (Are You at Risk?)

What is a John Doe Summons?

In general, when a summons is issued, it is issued to a specific person who is identified to receive the summons. Sometimes, when the IRS or DOJ launches a criminal investigation for matters such as fraud or evasion, they may not yet have a specifically identifiable person that they could identify on the summons — but they do have information that may lead to the identity of a person or class of individuals who have committed a crime. In some situations, the IRS may be authorized under Internal Revenue Code section 7609 to pursue a John Doe Summons. This code section provides the government with an opportunity to issue a summons against an entity for example seeking information regarding a certain group of individuals or entities affiliated with the company — without having to identify a specific person in the summons. The John Doe Summons has become more common in recent years, with an emphasis on offshore tax evasion, cryptocurrency, and general fraud matters. Let’s look at a few examples and recent cases:

International Tax and FBAR Violation Allegations

Let’s say for example that the IRS believes that a certain entity or group of people are working together to commit international tax fraud – but they do not yet have the names of individuals they believe may be operating offshore trusts and other asset protection entities designed to shield income from the U.S government. In this type of situation, the U.S. government issues a John Doe Summons on the entity itself to seek information about a group of taxpayers who may have used the company services and what the IRS believes is for improper purposes.  This is an example of what recently occurred in December 2024 when the IRS issued a John Doe Summons against Nevis Services Limited.

Cryptocurrency (SFOX) Fraud Allegations

In recent years, the Internal Revenue Service and Department of Justice have also been diligently investigating matters involving domestic and offshore cryptocurrency and specifically taxpayers who may be facilitating tax crimes using cryptocurrency. A few years back, the Central District Court of California authorized the IRS to survey John Doe Summons on SFOX for a group of taxpayers who conducted $20,000 or more in cryptocurrency transactions between 2016 and 2021.

Income Tax Violations

Expanding upon the example above, the Internal Revenue Service believed it had information that linked a certain bank to working with taxpayers to facilitate avoidance of reporting income and paying taxes on certain cryptocurrency transactions. Therefore, the Internal Revenue Service was granted a John Doe Summons from M.Y. Safra Bank regarding taxpayers who may have worked in conjunction with SFOX to avoid paying income on certain taxes related to cryptocurrency income.

Swiss Bank Accounts

Another important purpose of the John Doe Summons is to put pressure on domestic and foreign institutions to cooperate with the Internal Revenue Service or Department of Justice over matters that may involve offshore tax fraud and evasion. Previously, the U.S. government issued a John Doe Summons against UBS in Switzerland. This put pressure on UBS and other Swiss banks and financial institutions which ultimately led to these foreign financial institutions providing the U.S. government with a significant amount of information and the identities of U.S. taxpayers who were hiding foreign income, accounts, assets, and affiliate organizations and countries.

Offshore Accounts

For many years, the Department of Justice and Internal Revenue Service have been pursuing U.S. taxpayers who have hidden money and accounts in foreign countries. Another example of a John Doe Summons on an offshore tax matter was when a federal court in San Francisco authorized the IRS to survey John Doe Summons on Canadian Imperial Bank of Commerce FirstCaribbean International Bank (FCIB) to assist the government with identifying taxpayers who were potentially hiding money and assets in foreign accounts throughout Barbados and other Caribbean countries.

Late-Filing Disclosure Options

Before a taxpayer has been contacted by the IRS, if the Taxpayer is out of compliance, there are various international offshore tax amnesty programs that they can apply to safely get into compliance. Depending on the specific facts and circumstances of the Taxpayers’ noncompliance, they can determine which program will work best for them.

*Below please find separate links to each program with extensive details about the reporting requirements and examples.

Streamlined Filing Compliance Procedures (SFCP, Non-Willful)

The Streamlined Filing Compliance Procedures is one of the most common programs used by Taxpayers who are non-willful and qualify for either the Streamlined Domestic Offshore Procedures or Streamlined Foreign Offshore Procedures.

Streamlined Domestic Offshore Procedures (SDOP, Non-Willful)

Taxpayers who are considered U.S. residents and file timely tax returns each year but fail to report foreign income and/or assets may consider the Streamlined Domestic Offshore Procedures.

Streamlined Foreign Offshore Procedures (SFOP, Non-Willful)

Taxpayers who are foreign residents may consider the Streamlined Foreign Offshore Procedures which is typically the preferred program of the two streamlined procedures. That is because under this program Taxpayers can file original returns and the 5% title 26 miscellaneous offshore penalty is waived.

Delinquent FBAR Submission Procedures (DFSP, Non-Willful/Reasonable Cause)

Taxpayers who only missed the FBAR reporting and do not have any unreported income or other international information reporting forms to file may consider the Delinquent FBAR Submission Procedures — which may include a penalty waiver.

Delinquent International Information Returns Submission Procedures (DIIRSP, Reasonable Cause)

Taxpayers who have undisclosed foreign accounts and assets beyond just the FBAR — but have no unreported income — may consider the Delinquent International Information Return Submission Procedures. Before November 2020, the IRS was more inclined to issue a penalty waiver, but since then this type of delinquency procedure submission has morphed into a reasonable cause request to waive or abate penalties.

IRS Voluntary Disclosure Procedures (VDP, Willful)

For Taxpayers who are considered willful, the IRS offers a separate program referred to as the IRS Voluntary Disclosure Program (VDP). This program is used by Taxpayers to disclose both unreported domestic and offshore assets and income (before 2018, there was a separate program that only dealt with offshore assets (OVDP), but that program merged back into the traditional voluntary disclosure program (VDP).

Quiet Disclosure

Quiet disclosure is when a Taxpayer submits information to the IRS regarding the undisclosed foreign accounts, assets, and income but they do not go through one of the approved offshore disclosure programs. This is illegal and the IRS has indicated they have every intention of investigating Taxpayers who they discover intentionally sought to file delinquent forms to avoid the penalty instead of submitting to one of the approved methods identified above.

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and/or 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. 

*This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.

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.