Taxation evaded through First Data payment processor. IRS’ investigation

A "John Doe" summons for information was asked by the Justice Department from a federal judge to enable Internal Revenue Service to obtain data about American taxpayers whose businesses directly deposit income from credit, debit and other payment cards through payment-card processor First Data Corp. into foreign accounts to avoid taxation in the U.S., reports the Associated Press.

The IRS alleges that having opened offshore bank accounts merchants used Greenwood Village-based First Data payment processor to deposit proceeds from their debit or credit card transactions directly into those accounts. With "John Doe" summons IRS will be able to get information about U.S. taxpayers whose identities are not yet known.

Meantime First Data spokeswoman Christa Goeson said Wednesday that she hadn't seen the summons yet.

"We have an excellent track record of cooperating with all government agencies and expect to continue our practice of complying with all lawful requests for information with due regard for the confidentiality of our customers' data," she said.

In the court filings IRS revenue agent Daniel Reeves reported that Cardservice International, based in Moorpark, Calif., and First Atlantic Commerce, based in Bermuda, both subsidiaries of First Data, were jointly promoting their services to attract international merchants. Both companies in 2001 were promoting the benefits of "split jurisdictional settlement," where a merchant's sales income from universally accepted credit cards like MasterCard and Visa could be deposited in foreign merchant accounts. Thereby Reeves concludes that this way the companies were marketing offshore merchant accounts as a means to evade taxation.

Prosecutors are asking names, addresses, annual statements and other information from the John Doe clients. Whether IRS will start an action against First Data above summons remains undisclosed.

Source: The Associated Press