US persons with undisclosed offshore assets or accounts need to take action before E-Trak and the IRS find them!
The IRS has been using data-mining software called the “E-Trak Offshore Voluntary Disclosure System”. Data-mining technology, like E-Trak, is an analytical tool for analyzing data from numerous different dimensions or angles, allowing the user to categorize and summarize the relationships identified in the diverse data-bases. E-Trak digests all of the information and then suggests possible connections and relationships among taxpayers, bankers, attorneys and other advisors who were involved in creating and maintaining the foreign accounts, foreign entities and structures.
How the IRS Is Using E-Trak
Since 2009 with the inception of the first OVDP, over 33,000 taxpayers have provided detailed information to the IRS which has been steadily fed into its E –Trak System. The information has come from those participating in the various IRS’s Offshore Voluntary Disclosure Initiatives and Programs (OVDI / OVDP). There have now been three separate programs with more and more taxpayers coming forward.
In addition, some taxpayers entering the Programs have had face-to-face interviews with the IRS and / or the Department of Justice, providing even more detailed information that has gone into the E-Trak system. As time goes on, the information fed into E-Trak increases and most assuredly, so does the risk of detection of an undisclosed account. The foreign banks have demonstrated a definite willingness to be very forthcoming with the IRS in providing information about those persons whom they have assisted in the creation and maintenance of overseas accounts. Any taxpayer with undisclosed accounts who is relying on “banking secrecy” is sure to get burned in time.
Detailed Information is Being Provided to IRS by OVDP Participants
As part of the Voluntary Disclosure Program, the IRS requires participants to complete detailed questionnaires, the information from which will be fed to E-Trak, including, for example, the names of any and all foreign financial institutions where accounts were maintained; dates the accounts were opened or closed; contact persons at each financial institution; the circumstances of all face-to-face meetings with points of contact at the financial institutions; all communications with such financial institutions including documentation regarding opening and maintenance of the accounts; information regarding how deposits and withdrawals were made; whether funds could be accessed through credit or debit cards; information about all other advisors or persons affiliated with the creation of the accounts or creation of entities related to the accounts.
Further details about the types of information that must be submitted with entry into the OVDP can be accessed here
- 2012 Offshore Voluntary Disclosure Program Submission Requirements
- Foreign Account and Asset Statement
- Offshore Voluntary Disclosure Letter and attachment