Dubai (and Singapore) – Now IRS Targets for Offshore Investigations

Americans in Dubai / Singapore – If you are not tax compliant, time is really running out.  As reported by Bloomberg on March 8th, an official with the Internal Revenue Service (IRS) Criminal Investigation (CI) unit announced at a Washington DC Federal Bar Association event that CI is considering Dubai and Singapore as its “next stop”.  These were the locations named by CI to set up a US law enforcement presence to pursue offshore tax evasion investigations.  R. Damon Rowe, director of international operations at CI  stated “[Dubai is] ripe for U.S. presence. [It’s] a hub for international activity, and we can make a big impact there saving U.S. taxpayer dollars.”

No sooner was that announcement made, than Bloomberg reported just yesterday, March 12, that European Union finance ministers agreed to add 10 countries to a blacklist of alleged tax havens, including the United Arab Emirates. This is an unfortunate combination of events as it puts Dubai right in the spotlight for IRS scrutiny.

Branded as a “tax haven” jurisdiction, and with Criminal Investigations viewing Dubai as a place that is “ripe” for tax evasion investigation means the heat is really being ramped up. With the US passport now at risk for denial of issuance or for revocation if a taxpayer has “seriously delinquent” tax debt, the stakes are very high indeed.

What About YOU?

Not everyone is a tax cheat or tax evader. The vast majority of individuals coming to see me are doing their best to be tax compliant but are lacking adequate US tax help since international issues are highly complex. Many others who come to see me hold US citizenship by happenstance or by naturalization without an understanding of what it means to be an American abroad. Typically they are dual nationals who have lived most of their lives overseas and are very confused and overwhelmed by a tax system they simply do not understand.

What to Do?

The IRS Offshore Voluntary Disclosure Program (OVDP) has been closed since September 2018.  Taxpayers had been given ample warning. New guidance for all types of voluntary disclosures (whether domestic or “offshore”) was announced by the IRS in November 2018. I discuss the new procedures here.  Importantly, I remind taxpayers who have fears about their noncompliance that for those without criminal exposure, the IRS has other procedures. These include filing amended returns (that may be qualified amended returns avoiding the accuracy related penalties) and the special procedures for correcting offshore filings outside OVDP (such as the Streamlined Foreign Offshore (or Domestic) Procedures, Delinquent International Information Return Procedures or the Delinquent FBAR Submission Procedures.  I have vast experience with all of these procedures and have had success in all of my cases to date.  Do not jump into OVDP – seek a second opinion if an advisor suggests you join that program.

For those sitting on the fence, the problem I have seen in practice, is that once IRS spreads the net and makes a catch (innocents included), it is very difficult to extricate oneself from the net. Even if a taxpayer’s case is not in any way criminal, it is always far more difficult to deal with the IRS if the agency comes to the taxpayer first, before the taxpayer has taken corrective measures with regard to his tax situation.  Dealing with the IRS “after the fact” can be a terrible nightmare and will inevitably take exponentially more in the way of professional time and fees.

Please contact me if you need help.

Posted March 13, 2019

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