A judge in New York ordered an 83-year-old Massachusetts man to pay a large civil penalty after he was found guilty of tax evasion. He is said to have hidden $5.7 million from the Internal Revenue Service. According to authorities, the man had spent several years of his life attempting to hide his wealth from the IRS. He used Swiss bank accounts to prevent authorities from learning about his real wealth. However, Americans are required to file Foreign Bank and Financial Accounts Reports when they have a foreign bank account with a balance of more than $10,000. This man was accused of failing to file these reports from 2006 to 2011. The man's financial adviser was also charged with conspiring with United States taxpayers to hide over $184 million from tax authorities.
Earlier this week, the IRS released a statement saying that its voluntary offshore disclosure programs are working. Programs such as the Report of Foreign Bank and Financial Accounts, (often referred to as FBAR) which requires a Form TD F 90-22.1; and the Foreign Account Tax Compliance Act (FATCA) on Form 8938 have helped the IRS recover more than $5 billion in penalties, interest and back taxes in the last couple years.
The restrictions on investment products available to Americans make it difficult to invest in markets outside of the U.S. So much so, that it's causing some Americans to renounce their citizenship. Nearly 2,000 gave up their U.S. passports in 2011, compared with only 235 just three years ago.
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.
All American citizens who have offshore bank accounts totaling more than $10,000 are required to disclose those accounts to the Internal Revenue Service and pay any applicable taxes.