Whistleblower Law Blog

Federal Court Approves IRS’s Widened Use of “John Doe” Summonses to Identify Tax Evaders

In In the Matter of the Tax Liabilities Of: John Does, the United States District Court for the Southern District of Florida authorized the Internal Revenue Service to use “John Doe” summonses to identify U.S. taxpayers with undisclosed bank accounts in Belize.  The IRS uses “John Doe” summonses to assist in investigations where the identities of individuals are unknown. This marks at least the third time the IRS has used this investigatory tool, which makes it easier for the IRS to pursue tax fraud cases.

The IRS sought records from Bank of America, N.A. and Citibank, N.A. identifying U.S. taxpayers with accounts at Belize Bank International Limited, Belize Bank Limited, or Belize Corporate Services.  According to a Justice Department statement, these entities are subsidiaries of BCB Holdings Limited.

The district court allowed the IRS to serve these summonses upon Citibank and Bank of America, finding that the summonses “relate to the investigation of an ascertainable group or class of persons, that there is a reasonable basis for believing that such group or class of persons has failed or may have failed to comply with any provision of any internal revenue laws, and that the information sought to be obtained from the examination of the records or testimony [] are not readily available from other sources.”

The accounts at Bank of America and Citibank sought in this case are known as “correspondent” accounts.  If a foreign bank does not have a U.S. branch, but conducts business in U.S. dollars, these foreign banks maintain a “correspondent” account at a U.S. bank.  Transactions conducted through these accounts leave a trail that the IRS can follow to pursue individuals suspected of tax evasion.

The Department and the IRS plan to continue using “John Doe” summonses as a tool to pursue tax evasion.  Acting Assistant Attorney General Caroline D. Ciraolo said, “The time to come clean is now – before we knock on your door.”

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