According to a report in the New York Times by Lynnley Browning, the Internal Revenue Service (IRS) has announced in a press release that is has applied for permission to serve a John Doe Summons on First Data Corporation. First Data is a leading processor of credit card payments. The information sought by the IRS is expected to be used to identify businesses that have opened offshore bank accounts, and directed the card processor to deposit the proceeds in these offshore accounts. Even if the merchant didn’t use the account to commit tax fraud, the merchant would still be required to file an FBAR form with the IRS.
Clients often ask me something like, “How will the IRS know that I have put my funds in a Swiss bank account?” I usually respond, “I don’t know for sure, but what I do know is if they find out you are not going to be happy with what happens next.” Even assuming that the IRS doesn’t get the information directly from the foreign bank this summons is just one example of the IRS obtaining data in ways which might not be immediately apparent to the casual observer.
I have previously blogged about the tax amnesty for holders of offshore accounts. This new lawsuit is yet another reason why those with offshore accounts need to consult with a tax attorney to determine whether or not a voluntary disclosure makes sense.