U.S. Department of Justice and the Internal Revenue Service Expand Collection Efforts Internationally

As individuals and companies take advantage of international tax benefits or previously undetected avenues of sheltering money from taxes and creditors, the Internal Revenue Service (IRS) is now concentrating more of its efforts on overseas tax compliance and collection. IRS Commissioner Douglas H. Shulman called global tax administration efforts a “critical area for our nation,” and promised that “[i]nternational is going to stay a top priority at the agency.” This is probably in part because billions of tax dollars are lost to the IRS each year as individuals and businesses create international structures to minimize or evade taxes.

In the past few years, the federal government has taken several major steps to administer international tax collection and enforcement more effectively. Recently, (early in 2010), Congress passed the Foreign Account Tax Compliance Act (FATCA) which imposes a 30% withholding tax on foreign institutions that withhold information about accounts owned by citizens of the U.S.  Early in 2011, the IRS announced a new Offshore Voluntary Disclosure Initiative (OVDI), which is a program to provide taxpayers a chance to disclose money hidden overseas in exchange for no criminal prosecution and greatly reduced penalties.  You can view a previous blog on the new OVID by selecting the following link: OVDI 2011 Voluntary Disclosure for Offshore Bank Accounts and Investments. Finally, the IRS formed the Large Business and International division (LB&I) in 2010 to create a central body to process and enforce international tax matters.

Large Business and International Division

The LB&I was created through a realignment of the Large and Mid-Size Business division and the addition of about 875 employees to the existing 600. While the LB&I will still focus on “large and mid-size business” (i.e., corporations, S Corporations and partnerships with assets greater than $10 million and high-worth individuals), the IRS feels that the new realignment will do several things to strengthen international tax compliance, including:

  • helping the IRS identify emerging international tax compliance issues
  • Increasing specialization amongst the IRS staff in the LB&I
  • making management more efficient through centralization
  • consolidating international information reporting and programs
  • enabling the IRS to better address transfer pricing issues

Taken together, these developments mean that the IRS will be more efficient and better prepared to handle international tax matters.  This is good news for those who are participating in the OVDI or communicating about FATCA compliance because they can look forward to a more streamlined processing.  But this development also means that for those hiding money overseas, hoping to avoid the IRS collection process, the gamble will not be as promising as it was before.

We work to defend YOUR rights, YOUR loved one’s rights, and YOUR ASSETS. For over thirty years we have DEFENDED individuals and businesses accused of tax and financial crimes and advised others how to LEGALLY benefit from doing business outside the United States with LEGAL tax savings and avoiding the problems that can arise, even inadvertently when you enter the extremely complex and often time times tricky foreign area. Our law firm has the knowledge and the skills to aggressively defend your rights and provide you with sound, reliable, and practical advice. We have many years of substantial experience with the voluntary disclosure program, international tax issues, and related matters in advice, execution, and legal defense. Avoid having the government build a case against you. Understand and benefit from your rights.

If you have any questions or concerns regarding foreign income, foreign bank account(s), reporting issues, the amnesty program, or any other legal issue, we urge you to call (415) 394-7200 and schedule a complimentary attorney-client privileged consultation.