IRS CID Chief: “Significant” International Tax Investigations Under Way


Don Fort was appointed Chief of Criminal Investigation (CI) for the Internal Revenue Service (IRS) in June.  He’s quickly making his presence known as the IRS’ top law enforcement officer. Just last month, Fort publicly announced various of CI’s goals and how it will be using data mining in its forthcoming tax investigations. CI will soon establish a Nationally Coordinated Investigations Unit (NCIU), the goal of which is to use data to help better select criminal investigations. International tax enforcement will be one of NCIU’s initial projects.

Expanding on its success in the international tax arena, Fort is now forming an International Tax Enforcement Group in Washington DC “that will be dedicated to working and developing significant international tax investigations.” The group will be comprised of IRS personnel in DC as well as IRS agents from other IRS locations around the nation, personnel from the Justice Department’s Tax Division as well as international partners. This dedicated group will be a team of subject-matter specialists which will also rely heavily on data to focus its investigations.  According to Fort, “we have more info than anyone. As we refine our data strategy, it is going to help guide this group to the investigations that warrant our agents investigative expertise.”

We know that the IRS has a tremendous volume of raw data about US taxpayers and their foreign financial assets.  This has been obtained from various sources, including the Offshore Voluntary Disclosure Programs which, in one form or another, have now been running for 8 years.  Since 2009 with the inception of the first IRS Offshore Voluntary Disclosure Program (OVDP), numerous taxpayers have provided detailed information to the IRS which has been steadily fed into its E –Trak System. More data was obtained via the Swiss Bank Non-prosecution Program, various whistleblowers and investigative journalist leaks, and more recently from data supplied by foreign governments and foreign financial institutions pursuant to the “Foreign Account Tax Compliance Act” (FATCA).   It is planned that this new International Tax Enforcement Group will be more efficiently mining this data and Ford believes that this could result in tax investigations in “other countries” and “other jurisdictions” that have as yet, not been in the IRS criminal crosshairs.

IRS Just Updated its “Offshore” Initiative Website Pages

Perhaps it is mere coincidence, but at around the same time as Mr. Fort made his public announcements in August, the IRS re-vamped and updated its website information pages for the OVDP and Streamlined Foreign Offshore Procedure and Streamlined Domestic Offshore Procedure.  All the latest IRS links can be tracked at this IRS main page Streamlined Filing Compliance Procedures.

Be Careful and Get the Best Advice

With the IRS’ evident renewed push for international tax investigations, I remind readers to exercise extreme caution in making their decisions how to regain US tax compliance.  Earlier this year the IRS announced it was going to select tax returns to pull for an audit through a new method, called  “campaigns.”   Through the use of data analyses, these “campaigns” will leverage the entire knowledge of the IRS to identify areas of tax noncompliance and to target tax returns for audit that will be more productive in bringing in tax revenue and penalties.

One of the campaigns involves “OVDP Declines and Withdrawals”; its focus is on OVDP applicants who applied for pre-clearance into the program but were either denied access to OVDP or withdrew from the program of their own accord.  They are now the subject of more intense IRS scrutiny for audit.  I know of many frightened taxpayers often telling the same sad story – it usually went something like this — their tax return preparer (or other advisor) convinced them to enter OVDP.  However, upon fully understanding the facts of their case, it was determined that entry into OVDP was a clear case of “overkill” and was unwarranted.  Some of these individuals successfully withdrew from OVDP and obtained tax compliance perhaps through a penalty-free IRS Streamlined initiative.   Now, these individuals may be targeted under this latest IRS “campaign”.  How lovely!

The Take-Away

Taxpayers are advised to be very, very careful in making all decisions with regard to how to become tax compliant.  In choosing a “Streamlined” initiative, the taxpayer must be able to demonstrate that the tax noncompliance was “nonwillful”.  An experienced professional’s advice should be sought here and the Statement of Fact demonstrating nonwillfulness meticulously prepared.  Getting a second read of Statements of Fact is often a good strategy. We do this for many individuals entering Streamlined.

A decision to enter OVDP has to be very carefully made. Once a taxpayer rings the OVDP bell, it will not be easy to unring and could eventually lead to the individual becoming a target in the OVDP Declines and Withdrawals “campaign”.

Everyone’s situation is different and a one-size-fits-all approach is not the answer.  Your best bet is to seek advice from a US tax attorney familiar with the offshore issues and voluntary disclosures. You will then have the protection of attorney-client privilege. This is NOT available with any other party such as a financial advisor or accountant.  Such third parties can be engaged directly by your attorney by way of a so-called “Kovel” arrangement to help extend the attorney-client privilege to communications with these non-attorney parties.

I have prepared a concise summary of the various options available to noncompliant taxpayers wishing to rectify their tax situation. I can help you achieve tax compliance in a reasonable fashion. Scare tactics are not my style, but neither is sugar-coating the truth.  Contact me if you need help.



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