The government for the first time this week targeted individuals suspected of using credit and debit cards issued by offshore banks to hide income from U.S. tax collectors.
The Justice Department and the Internal Revenue Service filed petitions in seven federal courts seeking records from MasterCard accounts at the Leadenhall Bank & Trust Co. in Nassau, Bahamas.
The actions were taken because the 10 people involved refused to produce records sought by earlier court summonses. The IRS already has obtained thousands of Visa, MasterCard and American Express records involving accounts at dozens of banks in tax-haven countries. But yesterday’s move was the first time since the initiative began in October 2000 that individual Americans have been targeted.
“From coast to coast, we are taking a close, careful look at those who may be involved in offshore tax cheating,” acting IRS Commissioner Bob Wenzel said. “We will continue to aggressively pursue those who aren’t paying their fair share.”
It is legal to have a credit or debit card issued by an offshore bank. But it is a violation of U.S. tax laws to hide income from the IRS in these accounts and then use the payment card to access them in the United States. Bank secrecy laws in tax-haven countries make the money difficult to trace.
The petitions were being filed in federal courts in California, Florida, Nevada, North Dakota, Maryland and Tennessee. They seek court orders against the individuals that would require them to turn over records the IRS believes would show they are hiding income. Names were not immediately disclosed.
The court actions come as time grows short for people who have offshore credit and debit cards to come forward voluntarily and pay their taxes without fear of civil penalties or criminal liability.
The IRS has given these people until April 15 to comply; IRS officials say that initiative has produced several million dollars in revenue.
Thousands of individuals who have the credit and debit cards will face audits, and several dozen cases have been referred for possible criminal prosecution.
The IRS says it was determined that initial estimates that 1 million card holders may have illegal offshore accounts were high because many people have multiple accounts.
By Curt Anderson, The Associated Press
