Sat | Sep 18, 2021

IRS agents to hunt tax dodgers overseas

Published:Sunday | February 15, 2015 | 12:00 AM

Dayle Blair, Guest Columnist

On my way back from Vegas, I sat beside a distinguished-looking elderly man. I initiated a conversation with him and found out he was a former judge now living overseas. We talked about everything, including taxation.

The former judge admitted that he was an American citizen and he and some of his friends have problems sleeping because of Foreign Account Tax Compliance Act (FATCA). So, I asked him what about Foreign Bank Account Reporting (FBAR), as that was more serious than FATCA. But he had never heard about it. I wondered how many people are like the former judge and his friends who can't sleep at nights because of FATCA and who never heard of FBAR.

So, recently when I was invited to the International Tax Conference in the United States, hosted by lawyers and accountants, I jumped at the opportunity to find out what was new, given that IRS officers would be present for questions and answers. These officers included David W. Horton, director, international individual compliance; Kelly R. Jackson, special agent in charge of criminal investigation; and W. Robert Abramitis, senior counsel. The conference's main areas of interest: FATCA, FBAR, foreign corporations, current developments in international taxation, criminal investigations, bad international banks, IRS programmes to become tax compliant, and FATCA scams.


The IRS team said that FATCA has been successful so far. They said they have collected US$6.5 billion and they reasonably believe that as much as US$100 billion per year could be collected. They are working with other countries that would like to use the US model to improve their tax collection. The IRS will be working closely with the Organization for Economic Cooperation and Development (OECD) to implement Global FATCA; and also that the forms to request information from financial institutions would be standardised so that all countries would use the same forms, making it easy on the financial institutions.

The IRS reasonably believes that FATCA can work, and given that the law has the effect of forcing compliance by every country, ultimately, everyone will benefit.


The team said that FBAR is different from FATCA and the requirements are also different. While FATCA is reported on the tax returns, FBAR is an informational submission that must be filed with the Treasury Department if you have more than US$10,000 in financial assets overseas. So, for FATCA, the financial institutions and the foreign governments will report to the IRS directly, but for FBAR, the taxpayers must self-report to the United States Treasury Department by June 30 each year.


The IRS officers said they have a special interest in foreign corporations, i.e., corporations organised outside the United States. They are interested in shareholders with at least 10 per cent ownership and directors of these foreign corporations. Foreign corporations are very important because that is where the big bucks are. They want US citizens and green card holders who are 10 per cent shareholders and directors (in said corporations) to provide information from the following sources annually: articles of incorporation, listing of directors, annual returns for the company filed with the registrar of companies and financial statements. While this information is filed for informational purposes only, the foreign corporations should file a tax return with the IRS. You should note that the requirement applies to partnerships and trusts also.


The IRS said a record number of Americans have given up citizenship recently and some may have done so with the intent to get around FATCA. But the news is bad, because every one of those citizens will be thoroughly investigated with a view to seeing if they are trying to evade taxes.

The IRS said that people with a certain amount of assets will be treated as if all the assets were sold and will be taxed as at the day when citizenship was given up. This will also apply to long-term green card holders. Also, if one has given up citizenship and spends more than 30 days in the United States in a calendar year, he may be taxed as if he were a citizen.


The IRS has named about a dozen banks worldwide that are considered bad - and if you have an account in one of those banks and failed to comply with your filing and tax-reporting obligations, you are very likely to have a problem with the IRS. You should note that a bank operating in Jamaica is number seven on the list of bad banks.


There is a programme to help citizens and green card holders become compliant with their tax obligations without facing a penalty. This can be achieved by filing three years of tax returns and six years of FBARs returns, and paying all taxes and interest, if you live outside the US. But if you live in the US, there is a five per cent penalty calculated on the highest balance of financial assets for the last three years.You must certify under penalties of perjury that you were not trying to evade taxes. The IRS said the break could be withdrawn at any time, so people should jump at the opportunity to be compliant.


The IRS said it can tell when people enter and exit the country, and lying on immigration forms and tax returns is a federal offence. There is a website that can be used to tell whenever people enter and exit the United States. The number of days spent in the US may be important as follows:

For citizens, if you spend more than 330 days outside the US per year, you will not be required to participate in Obamacare, or the number of days spent abroad will affect the amount of foreign earnings you may be able to exclude from income, hence paying low or no tax to Uncle Sam. For green card holders, you have immigration issues, as well as tax issues if you spend more than a specified period outside the United States.


The IRS has said there are several scams going on with respect to FACTA; and taxpayers should note that the IRS does not communicate via emails. Therefore, I suggest that you should not communicate your tax or financial information by phone, Internet or fax to anyone, including your accountant, lawyer or tax preparer, as you don't know who may be zooming in on your information. Go the old-fashioned way by face-to-face meeting or use a courier service.

Today, the world is as big as the little town, Malton, where I was born, where everybody knows everybody. The IRS said people may be able to run, but they can't hide. The IRS said it is going to have agents all over the world, as they are going to work closely with foreign governments through the information exchange programme and the financial institutions.

Also, they said they would be using Internet searches and social media like Facebook and LinkedIn to find tax dodgers, along with whistle-blowers. There will be Global FATCA, where other countries will be following the IRS path. They are proposing one standard form that will be used to get information from financial institutions worldwide. So, if China wants information from Swiss banks, it will use the same forms to make the request as Jamaica or France.

The idea is to make it easier for the banks to retrieve information. So, we may be looking to one tax system if the OECD has its way and tax evasion worldwide may very well be a thing of the past in a few years' time, and the full compliance with the IRS requirements is the best way forward.

Dayle O. Blair is an attorney-at-law, certified public accountant, and certified international tax adviser/analyst. Email feedback to and