IRS Evaluating Customs Holds as Collection Tool

The IRS has vast powers to collect delinquent taxes. Notwithstanding all the bad ink lately about the IRS and how it allegedly targeted conservative groups for audit, some say the IRS needs to be more aggressive. The Treasury Inspector General for Tax Administration (“TIGTA”), the IRS’ internal watchdog, says the IRS isn’t doing enough to collect taxes from Americans living abroad and international taxpayers.

One suggestion to remedy that problem is a customs hold.

The IRS already has authority to access the Customs and Border Patrol data base. That means every time you leave the U.S. or return, the IRS can access that information. The IRS also has the authority to place a customs hold on people the IRS wants detained for questioning.

TIGTA says the IRS has just 1,700 people on the list. Currently there is an estimated 7.8 million Americans living overseas and countless millions more green card holders. Many of these folks have not properly reported their offshore financial holdings and filed FBAR forms.

TIGTA believes that the customs hold could become an effective offshore reporting and collection tool. As the Inspector General envisions, people on the list could be pulled aside and questioned upon entering the United States. Theoretically, the IRS could also use these holds to prevent people from leaving the country. There has already been debate about suspending passports of taxpayers with serious tax collection problems.

In recent years, the IRS has become incredibly aggressive in ferreting out taxpayers with unreported foreign bank accounts. They have teamed up with the Justice Department to prosecute dozens of taxpayers with unfiled FBARs along with bankers and offshore trust companies that helped hide the accounts. Soon we could also see border patrol and customs agents assisting in the IRS’ efforts.

Much like the TSA maintains a “Do Not Fly” list, the IRS could soon use custom holds to develop a “Delinquent Taxpayer Stop and Question” list. We already know of one taxpayer who was routinely pulled aside when returning from Canada and searched for cash. We suspect Customs was cooperating with the IRS as the taxpayer owed significant money to the IRS and was suspected of having an offshore account.

If you have an unreported account, the time to take action is now. The IRS has a streamlined amnesty plan designed to help taxpayers comply with offshore reporting requirements and save money on penalties. Taxpayers are not eligible, however, if the IRS finds them first.

Before you are detained entering or leaving the country, speak with an experienced FBAR lawyer and understand your obligations and options. The penalties for noncompliance are huge.

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Need more information about FBARs, FATCA or custom holds? Give us a call. We offer no fee initial telephone consultations to folks anywhere in the world. All inquiries are protected by the attorney – client privilege and kept in complete confidence. For more information, contact attorney Bethany Canfield at or by telephone at (414) 223-0464.