HSBC Bank Accounts Targets by IRS Offshore Activity Efforts
On April 7, 2011, a United States District Court issued an order permitting the IRS to serve John Doe summonses requesting information from HSBC Bank regarding U.S. taxpayers who hold HSBC accounts maintained in India. The John Doe summonses were authorized on the basis that the IRS had a reasonable basis to believe that a group or class of persons may have failed to comply with U.S. tax laws.
The authorization of this type of summons furthers the IRS’ efforts to expose tax-avoidance schemes involving U.S. taxpayers’ who engage in offshore activities. The IRS and Department of Justice have taken similar actions with respect to Swiss bank accounts held with UBS. Although the UBS summonses were not enforced, the IRS did receive the information it sought after securing a treaty with the Swiss government. As a result, numerous U.S. taxpayers have incurred substantial civil and criminal penalties for their failure to comply with U.S. tax laws (i.e., foreign bank account reporting requirements).
U.S. persons who have failed to file required FBARs can receive reduced penalties if they participate in the IRS 2011 Offshore Voluntary Disclosure Initiative (2011 OVDI). U.S. persons who enter the program, before the August 31, 2011, deadline, can become compliant with U.S. tax laws, substantially decrease the risk of criminal prosecution, and lessen civil penalties. However, this program is not available to individuals whose foreign accounts have already been disclosed to the IRS, including disclosure by the bank itself. Once the IRS acquires a persons bank account information, via an John Doe summons issued to HSBC for example, that person will not be eligible for the 2011 OVDI or any other voluntary disclosure program offered by the IRS.
Consequently, U.S. persons having an interest in or signatory authority over foreign accounts, who believe they may not be in compliance with U.S. tax laws, should contact a licensed professional immediately to assess their compliance and evaluate their options. Andreozzi Bluestein LLP can provide legal counsel needs regarding these foreign accounts and the 2011 OVDI compliance initiative.
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