IRS: International Tax Haven Crackdown Will Continue in 2020

Posted in Hot Topics, Offshore Account Update on January 28, 2020 | Share

In 2018, the Internal Revenue Service (IRS) formed the Joint Chiefs of Global Tax Enforcement, known as the J5, with tax authorities from Australia, Canada, the Netherlands and the United Kingdom. On January 23, 2020, the IRS announced the J5’s first major law enforcement initiative – a series of coordinated investigations that resulted in the takedown of a Central American bank suspected of “facilitating money laundering and tax evasion for customers across the globe.” According to the IRS, indictments of the bank’s clients are expected to follow.

As Washington D.C. tax lawyers, we have been aware of the J5 since its formation. We have also been closely watching the IRS’s offshore enforcement efforts, and we have been encouraging our clients with overseas holdings to ensure that they submit the requisite voluntary disclosures to the IRS. As we get further into 2020, we expect the IRS and the J5 to launch more investigations, and U.S. taxpayers who have failed to report their offshore holdings will be at heightened risk for civil or criminal prosecution.

What U.S. Taxpayers Need to Know About the J5

The Joint Chiefs of Global Tax Enforcement (J5) is a coordinated international law enforcement focused on combating the use of offshore banks and tax shelters to evade taxes and commit other financial crimes. The J5’s investigations and enforcement efforts are targeting financial institutions around the globe, with particular emphasis on banks and other financial institutions that serve clients in the J5 countries – the United States, the United Kingdom, Australia, Canada and the Netherlands. For U.S. taxpayers that utilize offshore accounts, this means an enhanced risk of scrutiny and, with it, an enhanced risk for civil or criminal prosecution.

According to Don Fort, U.S. Chief of Internal Revenue Service Criminal Investigation, the J5’s formation means that, “[t]ax cheats in the [U.S.] and abroad should be on notice that their days of non-compliance are over.” The January 2020 takedown of a Central American bank is just the first of what are expected to be numerous coordinated efforts targeting tax fraud and related crimes around the world.

How U.S. Taxpayers Can Mitigate Their Risk With IRS Voluntary Disclosure

For U.S. taxpayers who have offshore holdings and who rely on international banks for asset protection and lawful tax avoidance, the J5’s aggressive enforcement efforts mean that compliance with IRS’s voluntary disclosure procedures will take on heightened importance in 2020 and beyond. While the existence of the J5 does not fundamentally change U.S. taxpayers’ reporting obligations, it does mean that those who have offshore accounts with “problem” banks are at increased risk for IRS audits and criminal tax fraud investigations.

For more information, you can read: 5 Facts about Voluntary Disclosure Every Taxpayer Should Know.

Contact Washington D.C. Tax Lawyer Kevin E. Thorn, Managing Partner, Thorn Law Group

If you have questions about voluntary disclosure, or if you have concerns about the possibility of an IRS or J5 investigation, we encourage you to contact us promptly. To request a confidential consultation with Kevin E. Thorn, Managing Partner, Thorn Law Group, call 202-349-4033 or inquire online now.

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