Are you currently (or were you in the past) a client of Sovereign Management & Legal Ltd? If so, then you really need to seriously consider getting yourself into full tax compliance as fast as possible. Why? Because the US District Court for the Southern District of New York authorized the IRS to issue what are known as John Doe summonses to a number of different companies in an effort to obtain records for US taxpayers who might be attempting to evade US taxes. But what are these John Does summonses and what could they mean to you?
What Do These John Doe Summonses Hope To Accomplish: These are special summons that have now been served on the following companies:
- FedEx Express
- FedEx Ground
- Western Union
- Federal Reserve Bank of New York (FRBNY)
- Clearing House Payments Company, LLC
- HSBC Bank USA
Since Sovereign Management & Legal is technically a Panamanian company, you might be wondering if this move is the US government looking to extend jurisdiction into Panama. Not really. Instead, what it does is allow the US to take a look into the domestic operations of these companies listed above. The IRS is hoping they will find packages and documents recorded as being delivered from Sovereign in Panama to people living in the US—people the government has no idea are actual clients. It is an example of the IRS fishing, hoping to find new leads they can then track down and potentially charge with tax evasion.
Are Tax Evaders Using Sovereign Management & Legal?
The real question is why exactly would the IRS be targeting this company. They have provided a list of allegations against the Panamanian company which basically assert they provide multi-jurisdictional offshore services to clients. Part of these services include the formation of anonymous corporations and foundations in Panama along with other offshore structures. The main problem the IRS has seems to be the fact that these structures can have professional managers appointed to serve as company directors while the client remains secretly in control of the entity and the assets.
This information was supposedly obtained from a disclosure made voluntarily by a taxpayer in order to escape prosecution. He claimed Sovereign had helped him to establish just such an entity which he controlled, although his name was not technically associated with the company. In other words, they helped him to hide assets. This also led to the discovery that Sovereign used the services of the summoned companies (listed above) while corresponding with clients and moving money. The IRS is confident they will be able to obtain new leads and track down US tax evaders.
Will The IRS Catch Tax Evaders?
The problem with such a move is that the net will probably first fall upon people who are not willfully evading taxes. If someone was to engage in such an activity, chances are good they would not have incriminating documents sent to them or money wired either to them in the United States, or from their US accounts to Panamanian or other offshore assets and companies.
Chances are pretty high these leads will simply be people who had legitimate reasons for opening such accounts or entities. Perhaps they had inherited accounts and just never bothered to report them. Or maybe they didn’t know enough not to have any information sent to them in the US. Obviously, such people didn’t think they were breaking the law.
There will still be much more to come of this situation between the IRS and Sovereign Management & Legal LLC. The IRS seems intent on cracking down upon their US clients, but it is rather unclear as to whether they are really going to catch the true intended targets: willful and knowledgeable tax evaders. But, if you have used this company in the past (or still use them), you might want to evaluate your personal situation and maybe even consult a good international tax attorney before making your next move.