Another warning for US citizens who live/work/bank abroad: The witch hunt has (as I predicted) broadened.
What are you reading?
Are you sick?
Have you bought a gun?
What magazines do you subscribe to?
What's your email address?
Who have you been emailing lately?
Where have you been?
Think all that is none of Uncle Sam's business? Think again....
IRS seeks records of credit-card sales
More than 40 firms asked to help ID offshore bank users
Chronicle Staff and News Services
Friday, August 30, 2002
©2002 San Francisco Chronicle.
The Internal Revenue Service went to court Thursday in San Francisco and six other cities to force more than 40 companies, including Gap Inc., EBay Inc. and Yahoo Inc., to surrender information on customers the tax collector suspects are hiding income in offshore bank accounts.
The IRS filed petitions in the seven U.S. District Courts seeking transaction records from airlines, hotels, rental car companies, retailers, Internet services and shippers. The companies aren't accused of any wrongdoing,
the IRS said, though the information may later be used in criminal investigations against their customers.
As many as 2 million Americans may hold debit or credit cards issued by banks in offshore tax havens. While it is legal to have an offshore bank credit card, the IRS believes the cards are frequently used to hide income and evade U.S. taxes.
Only 117,000 individual taxpayers in 1999 reported offshore bank accounts on their income tax returns; accounts above a $10,000 threshold are supposed to be reported.
Thursday's action marks the first attempt by the IRS to find out who is purchasing goods or services with credit cards linked to offshore accounts.
Previously, courts have authorized the IRS to serve so-called "John Doe" summonses on American Express, MasterCard and Visa International -- the latter in a March 24 petition filed in San Francisco -- seeking records on transactions using cards issued by banks in tax-haven countries.
But the IRS, in a statement, said that while these initial steps have produced significant information, it needs data from merchants where the offshore credit card users make purchases to more precisely identify those people.
"By requesting these John Doe summonses, the IRS is not saying that these companies have done anything improper," the IRS said. "As these companies conduct normal business with customers, they are unaware whether someone even has an offshore credit card."
IRS Commissioner Charles Rossotti said their goal was "simple and straightforward -- identify the people who may be using these offshore cards to evade paying their taxes."
The IRS began the investigation in October 2000, and it says it has developed hundreds of cases for civil audits or potential criminal investigation.
The Treasury loses between $20 billion and $40 billion in tax revenue each year because of offshore accounts, according to the General Accounting Office, the congressional auditing agency.
The investigation was prompted by transaction information the tax agency got from MasterCard in the last year. Rossotti told a Senate panel in April that the probe has yielded 1.7 million MasterCard records for more than 230, 000 accounts.
In some cases the IRS doesn't know the name or address of the cardholder; that is the information the agency is seeking from the merchants, said Dale Hart, deputy commissioner in the agency's small business and self-employed division.
Thursday's court petitions affect only MasterCard accounts, though the IRS may take similar steps with other companies based on its analysis of Visa and American Express purchases. The IRS said the court summonses were directed to "a limited number of businesses" that did business with customers using MasterCard accounts "issued by or through banks in Antigua and Barbuda, the Bahamas or the Cayman Islands."
The IRS said it chose the merchants named in Thursday's petitions because they are likely to collect the information it needs, such as names and addresses of cardholders.
According to Bloomberg News, IRS investigator Joseph West said in a court affidavit that the IRS has identified executives of publicly held companies, business owners, doctors, lawyers, investment professionals, tax shelter promoters and other wealthy individuals who use credit and debit cards issued through offshore banks.
©2002 San Francisco Chronicle. Page B - 2