Books whose characters hide money in secret foreign accounts have another reason to be called fiction. The only way to do that anymore is by risking the chance of a huge penalty for a mere failure to tell good old Uncle Sammy where the money is hidden, and what the account number is.
In 1970, the U.S. government passed the Bank Secrecy Act which (among many other things) required U.S. citizens and residents to file a report that gives the location and account number of all foreign financial accounts held by or for U.S. persons. The Act introduced severe penalties for a willful failure to disclose the existence of any foreign accounts but proving that a failure to report such accounts is willful is difficult and only a few people were assessed penalties.
In 2004, the Government introduced a new penalty of up to $10,000 for a non-willful failure to file the Foreign Bank Account (FBAR) form. And, in the past few years, the IRS has acquired information about offshore credit cards from a variety of sources. Now they have a way to identify scofflaws who have foreign accounts that are not reported on Treasury Department Form 90-22.1 on or before June 30th of the year following the reporting year.
Also, on the bottom of the Interest and Dividend Schedule B of Form 1040, there is a question about whether the taxpayer has an “… interest in or signature or other authority over a financial account in a foreign country …” A failure to provide that information means the IRS treats the tax return as if it has not been filed and the statute of limitations doesn’t start until the information is provided.
The FBAR form asks the taxpayer to provide personal information such as their address, date of birth and social security number. For each foreign account, the form asks for the type of account, the amount of funds in the account, the account number, the name of the financial institution where the account is held and the country where the account is held.
by Vernon Jacobs
Note: This is a syndicated article and may be distributed to others and reprinted (as is) in other publications or web sites.
About the Author:
Vernon Jacobs is a CPA with a focus on international tax law. He is the author of the email publication, The Jacobs Report on International Financial Planning and a 62 page report called the 2006 Guide to Reporting Offshore Financial Accounts. Information about his FBAR Guide is available at www.offshorepress.com
