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Offshore accounts and the use of John Doe summons

A recent federal court decision demonstrates the determination of the IRS in tracking down offshore revenue. The federal court authorized the agency to use a John Doe summons in order to locate information about American citizens holding offshore accounts in Panama. Specifically, the IRS desired to use such a summons to locate accounts linked to debit cards.

The records concern a company named Panama's Sovereign Management & Legal LTD. The company issued account holders debit cards. U.S. authorities claim the purpose of this issuance was to hide assets and help in evasion of paying income taxes. The reason for the John Doe summons request was to discover the identity of the account holders.

"We are taking this step as part of our longstanding efforts against the use of secret offshore accounts," stated IRS Commissioner John Koskinen. "This action will help ensure that pre-paid cards aren't being inappropriately used to repatriate hidden income and avoid taxes."

Such a statement makes it clear that discovery of information regarding offshore accounts is a priority. Commissioner Koskinen's mention of longstanding efforts is telling. It indicates that the IRS will use a variety of means to discover offshore account information. Also, they will likely to continue in such efforts well into the future.

The problem regarding offshore income reporting is that requirements are complex. Accountholders may be in violation of federal rules without even being aware of it. It is therefore wise for Michigan taxpayers to sometimes seek the guidance of legal counsel to ensure compliance with offshore reporting requirements.

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