Having Unreported Assets Overseas is Tax Fraud

Last updated on November 27, 2013

U.S. citizens are required to report assets in foreign countries to the IRS by law. Noncompliance can result in penalties and/or imprisonment. Any unreported assets in bank accounts or financial entities can lead to trouble with the IRS even if the taxpayer did not intend to break the law.

The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 by Congress to bring down tax evasion by increasing transparency in financial transactions of U.S. citizens overseas. FATCA not only applies to individual taxpayers, but also foreign financial entities in which U.S. taxpayers hold a substantial ownership interest. They are required to report their financial activities if they exceed a certain threshold.

The IRS has made agreements under FATCA with various countries, including Switzerland, Norway, Ireland, Denmark, U.K., Mexico, Spain and Germany. According to the IRS, the agency is in talks with many other countries for the enforcement of FATCA.

With the recent efforts of the IRS to curb tax evasion, U.S. citizens should report any undisclosed assets to the IRS through the Offshore Voluntary Disclosure Program (OVDP). The program provides taxpayers the opportunity to get back into compliance while paying less in penalties.