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Disclose Foreign Bank Accounts Now To Avoid Jail

By Kent Anderson, Oregon Bankruptcy Attorney

All citizens and residents of the United States are required to disclose foreign financial accounts that aggregate more than $10,000 in value by the Bank Secrecy Act . The failure to disclose or otherwise comply can result in heavy civil penalties and even criminal prosecution. The US government is serious about this issue and views the investigation of foreign financial transactions as part of the war on terror.

In 2009 the Internal Revenue Service, as part of its efforts to discover and tax hidden overseas assets, offered a voluntary disclosure program with substantially reduced penalties for failure to file the required annual Foreign Bank Account Report or FBAR return. The 2009 IRS voluntary disclosure program offered amnesty to most non-filers who mended their ways. Participation in the program was encouraged by news reports that a giant Swiss bank, UBS AG had begun to turn over records to the US Treasury that would uncover many secret accounts held by US citizens.

The 2009 program offered clemency, to those not already under investigation by the Internal Revenue Service, who held undisclosed offshore bank accounts. When a violator was accepted for the program, criminal prosecution was waived and penalties were significantly reduced. The program was popular and was even extended from its original ending date of September 23, 2009, to October 15, 2009, due to a flood of applicants. According to the IRS, more than 15,000 taxpayers participated in the program.

While the official program was not extended beyond October 15^th, the IRS Criminal Investigation Division, gatekeeper for the program, continued to accept voluntary disclosure applications, using the same forms and documents provided for the original program. It was generally assumed among tax practitioners and IRS personnel that the program would be renewed for those unable to participate in the first go-around. That assumption proved to be correct.

More than 3,000 taxpayers came forward after the October 2009 extended deadline hoping they had not missed the  boat. On February 8, 2011, the Internal Revenue Service announced another voluntary disclosure initiative similar to the 2009 program. The 2009 program latecomers will be included in the new program. This time, the deadline expires August 31, 2011.

If you live in the United States and have more than $10,000 in financial institutions outside the country, you should be filing Form TD F 90-22.1 annually. The FBAR is due on June 30^th for the previous year and no extension of the filing deadline is permitted. If you have failed to do so, you have until August 31, 2011, to get yourself out of trouble and avoid possible criminal penalties.

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Full post as published by Credit Law Network on February 17, 2011 (boomark / email).