IRS targets merchants processing offshore cards

IRS targets merchants processing offshore cards

Asks First Data for clients' names in widening tax probe

While the IRS has had limited success in locating and prosecuting individual Americans who evade taxes by using offshore accounts, it is now widening its net in an attempt to pull in tax-evading merchants as well.

As part of a widening tax evasion investigation against merchants who wire money to offshore accounts to avoid paying taxes, the IRS asked a Federal District Court in Denver April 15 to order the credit card processing company First Data Corp. to turn over data on several clients who may have shirked their tax liabilities.

If the federal judge approves what the Justice Department called a "John Doe summons," First Data would be required to name American clients who avoided reporting income or received unreported income through the use of offshore accounts as far back as 2002.

The latest summons follows years of similar arraignments by the IRS against several other payment networks and merchant providers -- including eBay, MasterCard, and Visa international -- seeking to force them to name clients who use payment cards linked to offshore accounts. In its request to the court, the IRS said First Data, at the request of merchants, deposited funds into its clients' offshore accounts, which were in turn used by merchants to hide taxable income from the government. The IRS is specifically focused on a subsidiary of First Data called First Data Independent Sales, formerly Cardservice International. In court documents, the IRS said in 2002 the subsidiary marketed and sold offshore processing services with First Atlantic Commerce, an e-commerce company in Bermuda. First Data "clearly markets offshore merchant account services to U.S. merchants as a means of tax avoidance ..." said IRS agent Daniel Reeves in a prepared statement.

Christa Goeson, a spokeswoman for First Data, said the company hadn't "seen the summons," but that she expects First Data to comply with the request "with due regard for the confidentiality of our customers' data."

Published: April 21,2023