If you hold assets in an offshore bank account, your banking institution may receive a John Doe summons from the IRS. A John Doe summons is a request from the IRS for information about an unidentified taxpayer.
The IRS typically issues a summons when it believes a taxpayer has engaged in tax evasion or fails to follow reporting requirements for foreign accounts.
The IRS issues John Doe summonses to long-standing foreign banks such as UBS AG to obtain client information. In more recent years, it has also begun issuing summons to various cryptocurrency platforms to stop those who do not properly report their crypto earnings.
Learn more about IRS John Doe summons and how Abajian Law can help if your offshore bank receives a summons regarding your accounts.
The IRS first used a John Doe Summons in 2008, when it subpoenaed the records of over 4,500 Swiss bank accounts held by American taxpayers. Following this initial round of summonses, the IRS began its Offshore Voluntary Disclosure Program (OVDP) and prosecuted numerous individuals for tax fraud and criminal violations for failing to file foreign bank account information on the TDF 90-22.1 Form.
The IRS can issue a John Doe Summons under the following three conditions and upon approval by a federal court district judge:
A John Doe summons requires the recipient to provide relevant records and documents, including bank statements, tax returns, and financial statements. Failure to comply with a John Doe summons can result in severe penalties, including jail time.
The IRS typically uses John Doe summonses when it has clues about possible criminal activity but does not have enough information to identify a specific taxpayer. For example, a summons might be issued after an informant provides information about a business engaging in tax fraud.
By issuing a John Doe summons, the IRS can obtain the records needed to identify the taxpayers involved and build a case against them.
The IRS has targeted specific industries regarding potentially illegal reporting behavior. Included in the top sectors are cryptocurrency companies and Swiss banking institutions.
The Internal Revenue Service has issued John Doe summonses to several cryptocurrency companies to obtain information about Americans who may have used digital assets to evade taxes.
The summonses target an unknown number of Coinbase users who made transactions worth over $20,000 between 2016 and 2021. The IRS is seeking these individuals’ names, addresses, birthdates, and transaction records.
Coinbase has vowed to fight the summons, arguing that it violates the privacy rights of its customers. However, the IRS has argued that it has a legitimate interest in investigating potential tax evasion and that the summons is necessary to obtain information that would otherwise be unavailable. The case is currently awaiting a decision from a federal judge.
The Kraken cryptocurrency exchange is the subject of an IRS John Doe summons seeking information on millions of users. The summons was issued in March 2021 and unsealed in April 2021.
The IRS is seeking information on users who traded cryptocurrencies on the Kraken exchange between 2016 and 2020. The summons requires Kraken to provide information on users’ identities, account balances, trading history, and spiritual currency preferences.
In March of 2013, the United States Court of Appeals for the Second Circuit issued a decision in an ongoing case between the Internal Revenue Service (IRS) and UBS AG, a Swiss bank. The IRS had issued a John Doe Summons to UBS, seeking information about American taxpayers who may have used Swiss bank accounts to evade taxes. The court upheld the summons, ordering UBS to provide the IRS with the requested information.
In 2013, the Swiss bank, Wegelin & Co., pleaded guilty to aiding and abetting U.S. taxpayers in evading taxes and agreed to pay $74 million in restitution and penalties.
As part of its plea agreement, Wegelin & Co. agreed to cooperate with the Department of Justice in its ongoing investigation into Swiss banking practices. This cooperation included providing the IRS with information on American clients who had secret accounts at the bank.
The John Doe summons allowed the IRS to obtain information from other sources, such as credit card companies and banks, that helped to identify taxpayers with secret accounts. The summons also showed that the DOJ was serious about investigating Swiss banks and holding them accountable for helping Americans evade taxes.
An IRS John Doe summons can put you in a difficult situation. If you own a company that receives the summons, you must comply with the IRS request. If you hold accounts in an institution that receives a summons, an IRS investigation can implicate you in tax fraud or other tax crimes.
Additionally, a John Doe Summons extends the statute of limitations on failing to report foreign incomes. Typically, the statute is six years; however, if a John Doe Summons issued before the expiration of the statute, the statute extends to six months from when the summons is served to whenever it is resolved.
Contacting an experienced tax attorney with Abajian Law can help you understand your options related to the John Doe Summons. We can assist you in providing the proper documents and minimizing your tax liability to the IRS.
If you are under investigation for tax fraud, it is vital to seek the assistance of an attorney who can help you navigate the complex legal process. Abajian Law can help you understand the charges against you and develop a defense strategy. Working with a skilled tax lawyer can improve your chances of obtaining a favorable outcome in your case.
Contact us today to schedule a consultation and gain a resolution on your case.