Offshore Assets May Be Subject to Enforced Collection by the IRS

By admin of MillarLaw A Professional Corporation On Friday, November 10, 2017

The fact that you may have assets offshore does not mean that they are immune from seizure by the IRS. A recent case illustrates how the IRS can enforce collection outside the United States.

In Dewees the taxpayer was a dual national living in Canada with no U.S. assets. The taxpayer first entered the Offshore Voluntary Disclosure Program (OVDP) and then “opted out”. The audit following the “Opt Out” resulted in an assessment of tax, interest and penalties including penalties for failure to file an annual report of a Controlled Foreign Corporation )Form 5471). The penalty is $10,000 per unfilled return per year. The assessment was $120,000. The taxpayer refused to pay. The case was litigated and a judgment in favor of the IRS was ultimately entered.

The IRS enlisted the help of the government of Canada by making mutual collection assistance request under the provisions of the U.S. Canada Tax Treaty. Many of the tax treaties with the U.S. contain mutual collection assistance request provisions. The result is that the IRS can reach foreign assets in order to satisfy U.S. tax liabilities.

Don’t assume that because your assets are offshore that you can avoid the IRS. The collection process may have extraordinary reach.