The Internal Revenue Service (IRS) has many tools in its toolbox to collect on tax debt. When it comes to domestic options, it can use legal tools like a levy on accounts or it can choose to garnish wages. Those with assets in foreign accounts or who own foreign property often believe those funds are safe from reach of the IRS.
Unfortunately, such a presumption is greatly misguided.
Will the IRS even know about these assets?
It is very unlikely that anyone, individual or business, can keep foreign assets a secret from the IRS. Take foreign bank accounts as an example. The Foreign Account Tax Compliance Act (FATCA) requires certain foreign financial institutions to report qualifying accounts held by United States citizens. Foreign financial institutions that fail to do so can face serious consequences from the U.S. government. They are greatly incentivized to abide by this rule.
How can the IRS reach offshore accounts?
Now that we know the IRS is likely aware of these assets, the next question is whether they can reach the funds. The truth is they have multiple tools at their disposal to achieve this goal. These can include a levy on a domestic branch of business to encourage payment as well as the following:
- Repatriation orders. This is a court order that requires the taxpayer to bring the funds back to the United States to pay their tax bill.
- Writ ne exeat republica. Latin for “let him not leave the republic,” this option allows the IRS to arrest a taxpayer if it believes they are about to leave the U.S. in an attempt to avoid tax obligations.
- Mutual collection assistance request. This basically allows the IRS to work with the other country to get the funds.
These are just a few options. The IRS has other tools at its disposal that it may use depending on the details of the case.
What if the IRS is trying to get my assets?
Those who are the subject of an audit and are concerned the IRS will go after foreign assets have options. There are defenses and legal strategies to reduce the risk that the IRS gets these funds and to lower the tax obligation, if any applies. An attorney can review the case and discuss your options.