US to unleash IRS against Russian banks

WASHINGTON (AP) – As the United States attempts to punish Russia for its actions in Ukraine, the Treasury Department is deploying an economic weapon that could prove more costly than sanctions: the Internal Revenue Service.

This summer, the U.S. plans to start using a new law that will make it more expensive for Russian banks to do business in America.

“It’s a huge deal,” says Mark E. Matthews, a former IRS deputy commissioner. “It would throw enormous uncertainty into the Russian banking community.”

Long before the Ukraine crisis, Congress approved the law in 2010 to curb tax evasion that relies on overseas accounts. Now, beginning in July, U.S. banks will be required to start withholding a 30 percent tax on certain payments to financial institutions in other countries – unless those foreign banks have agreements in place to share information about U.S. account holders with the IRS.