On January 25, 2017, the federal court in Montana authorized the IRS to serve John Doe Summons on Michael Berg of Bozeman, Montana, seeking information about US taxpayers with offshore accounts established by Sovereign Management & Legal LTD (“Sovereign”), a Panamanian company. In particular, the IRS is interested in US taxpayers who use debit cards linked to these offshore accounts (“Sovereign Debit Cards”). Let’s explore in more detail why the IRS is pursuing John Doe summons with respect to Sovereign Debit Cards.
Sovereign Debit Cards Used to Access Secret Offshore Accounts Without Identifying the Owner of the Accounts
First of all, it is important to point out that Sovereign is already on the OVDP (now closed) list of “facilitators”, which means that any US taxpayer who owns Sovereign offshore accounts and enters the OVDP will be subject to a 50% Offshore Penalty. Additionally, it means that the IRS has long been focusing on this company and what it is doing to promote US tax evasion.
It seems that there is a particular scheme linked to Sovereign debit cards that bothers the IRS. In its press release, the IRS and the DOJ stated that Sovereign advertised various products that allow US taxpayers to hide their offshore assets. In particular, the IRS emphasized one “package” where a corporation owned by another entity (including a fake charitable foundation) is officially governed by nominee officers provided by Sovereign. Then, Sovereign would open bank accounts for these entities and provide Sovereign debit cards (issued in the name of a nominee) to the taxpayer. By using Sovereign debit cards, taxpayers were able to access their offshore funds without revealing their identities.
In essence, the main issue here is the use of pre-paid debit cards for tax evasion purposes.
The Information that the IRS Seeks Regarding Sovereign Debit Cards
The John Doe summons issued by the IRS seek the records of US taxpayers who received Sovereign debit cards, specifically “Sovereign Gold Cards”. The IRS wishes to obtain the records for eleven years – 2005 through 2016.
This is the Second Time the IRS Seeks Regarding Sovereign Debit Cards
The current summons represent just a part of the case against the Sovereign . The IRS and the DOJ already previously obtained a similar order from the U.S. District Court for the Southern District of New York, which authorized the issuance of eight separate John Doe summonses on bank and other entities for information related to Sovereign and its US customers. The evidence submitted in the request to issue the current Montana John Doe summons was built in part on the information provided in response to the earlier summons.
Impact of Sovereign Debit Cards John Doe Summons on US Taxpayers
The new Sovereign Debit Cards John Doe Summons should be of grave concern to US taxpayers who own Sovereign Debit Cards as well as other noncompliant US taxpayers. Let’s discuss two most important aspects of these John Doe Summons with respect to noncompliant US taxpayers.
First of all, all noncompliant US taxpayers related to Sovereign in one way or another are in grave risk of the IRS detection. As long as their names appear in Sovereign’s internal records, these taxpayers are likely to be discovered and prosecuted by the IRS.
Second, what is especially disconcerting is the time frame for the new John Doe summons – years 2005 through 2016. The IRS is seeking records of even pre-UBS case tax noncompliance. This trend to going back that far should worry not only the US taxpayers with Sovereign debit cards, but also any US taxpayers who did quiet disclosure or just closed their accounts a long time ago and believe that they are safe from the IRS prosecution because of the passage of time. The willingness of the IRS to go back that far shows that all of these taxpayers are at risk.
Contact Sherayzen Law Office for Help with Your Voluntary Disclosure Concerning Sovereign Debit Cards and/or Any Other Undisclosed Foreign Accounts
As the IRS correctly pointed out, “the time to come forward and come into compliance is running short, and those who continue to violate U.S. tax and reporting laws will pay a heavy price.” The “heavy price” might be the criminal tax evasion penalties and willful and criminal FBAR penalties – a situation where a taxpayer might owe in penalties more than he ever had on his offshore accounts and he will also be put in prison for potentially as many as ten years.
This is why it is very important for noncompliant US taxpayers to contact Sherayzen Law Office to discuss their offshore voluntary disclosure options as soon as possible. The situation is particularly critical for US taxpayers with Sovereign debit cards.
We have successfully helped hundreds of US taxpayers avoid criminal penalties and achieve civil case resolutions with the IRS. We can Help You!