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If I close my foreign bank account, do I have to report it?

Closing your foreign bank account does not excuse you from disclosing it. With the end of the offshore bank account amnesty program called the Offshore Voluntary Disclosure Initiative, the consequences for not disclosing your foreign bank accounts is even greater. Transparency is truly the best policy. Those who do not follow these 10 rules may face at least five years in prison, three years of supervised probation and up to $250,000 in fines and fees.

1. Worldwide income must be reported on your U.S. IRS tax return. Even if you live outside the U.S. you must check "yes" on your Schedule B.

2. If your foreign bank accounts exceed $10,000 for any amount of time during the year, you must file your Report of Foreign Bank and Financial Accounts by June 30.

3. Find out if you must also file an IRS Form 8938 along with your regular tax return to report your foreign accounts and assets.

4. Tax evasion and tax fraud carry not only federal and state criminal charges, but civil charges as well. The statute of limitation on civil tax fraud never expires.

5. The failure to file your FBAR is separate and great. Each non-willful violation carries a $10,000 fine. Each willful violation carries a $100,000 fine. Each year you do not file is a separate violation.

6. Tax evasion not only carries jail sentences, but when you fail to file your FBARs, the stakes are raised to a possible 10 years and $500,000.

7. It's never too late to voluntarily disclose your failures. You will have to pay back taxes and penalties, but you will not be prosecuted.

8. Honesty is the best policy. Do not quietly file your back taxes and corrected forms. Be upfront about what you are doing with the IRS.

9. You may be able to start complying with the new rules this year and ignore the past, but if it gets noticed, you will no longer be eligible to make a voluntary disclosure.

10. Disclosure and transparency are key. U.S. citizens may have money, assets and investments all over the world as long as you disclose them in your FBAR.

Source: forbes.com, "10 IRS Rules for Stress-Free Foreign Accounts," Robert W. Wood, April 18, 2012

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