You may not think international tax law applies to you, but it may. Do you have a bank account outside of the United States? If so, you are supposed to report it on your tax return. There is a check box on the tax return to report any foreign bank accounts. If you do not report your account, the IRS may come calling on you.
I worked as an attorney in the International Division of Office of Chief Counsel, IRS, for many years. As such, I assisted the IRS in gathering information from many foreign countries including most of the the Caribbean jurisdictions. So, there is a process for the IRS to collect foreign bank account and business/financial information.
The IRS has many ways to find out about your foreign activities. Many foreign countries have tax treaties with the US. All the treaties have an “exchange of information” section. The taxing authority of each country often spontaneously furnishes business and financial information to the IRS. Well, the IRS takes it from there. In addition, the IRS has Tax Information Exchange Agreements with many foreign jurisdictions. Offshore financial centers like the Cayman Islands, Bahamas, Bermuda and many other counties signed these agreements. Basically, the IRS can request business, banking or financial information from the foreign tax authority. The foreign tax authority will get the information and give it to the IRS.
So, do not think your financial or business information is out of the IRS’ grasp just because the information is in another country.
More on this interesting subject will be in another post soon. Keep coming back and read about it.