The Tax Times: IRS Issues John Doe Summons To Director of "Sovereign" a Panamanian Law Firm

Monday, March 20, 2017

IRS Issues John Doe Summons To Director of "Sovereign" a Panamanian Law Firm

The US Internal Revenue Service (IRS) has obtained a 'John Doe summons' against the director of a Panamanian company claimed by the IRS to have helped American taxpayers to set up anonymous offshore accounts.

The summons demands all records of Sovereign Management & Legal's clients (SML). The phrase 'John Doe' indicates that the US authorities do not know the clients' identities, but the summons applies to them irrespectively of that fact.

According to the US Department of Justice (DoJ), the company issued clients with prepaid debit cards called 'Sovereign Gold Cards' that enabled them to access the funds in the offshore accounts 'in such a manner as to evade their obligations under internal revenue laws'.

The accounts were opened by SML in the names of corporations that were owned by other entities such as fake charitable foundations, and held in the name of nominee officers provided by SML.

US District Court Judge Brian Morris found that there is a reasonable basis for believing that US taxpayers may be using Sovereign Gold Cards to violate federal tax laws.

“The Department of Justice and the IRS Are Committed to Stopping the Use of Foreign Bank Accounts to Evade

US Tax Laws,”

said Acting Assistant Attorney General David A. Hubbert, head of the Justice Department’s Tax Division.

“The Time to Come Forward and Come into Compliance Is Running Short, and Those Who Continue to Violate US Tax and Reporting Laws Will Pay a Heavy Price!”

Thus far, the U.S. District Court has granted the IRS the authority to serve eight different “John Doe” summons on several foreign financial institutions. These institutions are tied to a Panamanian entity that had been issuing debit cards to individuals who the IRS believes may have been using the accounts to evade their U.S. tax obligations. As a result of the summons, the IRS used data-mining methods to obtain additional information on such accounts.

These John Doe Summons may constitutes a public disclosure event that may prevent a taxpayer from entering an amnesty program such as the Offshore Voluntary Disclosure Program (OVDP) and the taxpayer will be subject to a 50% miscellaneous offshore penalty (instead of 27.5%).

Taxpayers that have issues related to these transactions should immediately seek the guidance of a tax advisor with significant experience in US international tax issues and voluntary disclosure practices.
The utilization of the OVDP or the Streamlined Filing Compliance Procedures is the first line of defense against substantial civil penalties and criminal prosecution.

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