US taxpayers with secret bank accounts in Belize are about to feel the full force of the Internal Revenue Service (IRS).
A federal court in Miami has issued summonses against Belize Bank International and Belize Bank aiming to identify accounts controlled by US taxpayers from 2006 until 2014.
Belize banks are subject to the Foreign Account Tax Compliance Act (FATCA) from 2015, but the US tax authorities want to uncover accounts where they believed millions of undeclared dollars were stashed away in secret during the previous decade.
In the lead up to FATCA, one Belize Bank lost correspondent status with the Bank of America, although this is now restored and another bank closed.
The closed bank suffered from allegations of laundering cash used to buy counterfeit goods such as alcohol, cigarettes, designer clothing and jewellery.
John Doe summons
US taxpayers should have filed a declaration with their annual returns to the IRS highlighting any earnings or gains from offshore accounts and investments.
Now, the IRS is using the same tactics deployed against Swiss banks to reveal the details of taxpayers who may not have declared their offshore financial interests.
The IRS served ‘John Doe’ summonses on the Swiss banks that required them to hand over list of US customers.
This time, the summonses are being served on the Bank of America and Citibank, who acted as correspondent banks for their counterparts in Belize.
Information from the Bank of America and Citibank should identify US taxpayers with offshore interests in the Belize banks.
As a result of the Swiss action, around 100 banks paid billions of dollars in fines, while one bank was forced to close. All admitted giving US taxpayers tax avoidance advice.
Penalties for taxpayers who have not declared their offshore finances are severe – including up to 10 years in jail and a $500,000 fine plus tax penalties and interest on any unpaid tax.
“Anyone with accounts at these banks has cause for concern and should act quickly to put matters straight,” said a spokesman for US lawyers and tax specialists Foley and Lardner LLP.
“Taxpayers in other financial centres may soon find they face the same problems.”
The US Treasury maintains a list of countries with FATCA agreements to deliver financial data to the IRS.
Currently, 73 countries have signed tax information swapping agreements, while another 39 have agreed to sign up to the network and are considered FATCA compliant.