Bowman Offshore Bank Transfers: Ten Things to Know About
Offshore Bank Accounts
If you are a U.S. citizen or resident and maintain an undisclosed foreign bank account, beware. As
numerous prosecutions trumpeted by the IRS make clear, the stakes have never been higher and the
potential liabilities can be staggering. Why worry?
The vaunted secrecy of Swiss and other tax havens turns out not to be so secret after all. They've already
named names to the IRS and more are on the way. Although the UBS case was most publicized, HSBC,
Credit Suisse, and many other banks are in the mix now, as are many foreign countries besides
Switzerland. So putting your head in the sand won't work in the long term.
The IRS had a special "Voluntary Disclosure Program" to bring violators into the fold, but the cutoff for
participating in it was Oct. 15, 2009. If you are in that program, you are probably still slogging through
filings and disclosures to the IRS. But if you missed that deadline--and many thousands did--beware.
Sooner or later you'll have to address this problem one way or another.
Here's what you need to know:
1. You Must Report Worldwide Income
You must report your worldwide income on your U.S. income tax return. Plus, you must check "yes" (on
Schedule B) if you have an interest in a foreign bank or financial account. Worldwide income means
everything, including interest, foreign earnings, wages, dividends and other income. Even if the foreign
income is taxed somewhere else, you still must report it to the IRS. You might be entitled to a foreign tax
credit, or if you are living and working abroad, you may be entitled to an exclusion from U.S. tax for some
or all of the income you earn abroad. But you still must report it.
2. Tax Return Disclosure Isn't Enough
Tax return filing alone isn't enough. All U.S. persons with foreign bank accounts must also file annually a
Treasury Department Form, TD F 90-22.1 Report of Foreign Bank and Financial Accounts--commonly
called an FBAR. The FBAR is due each June 30 for the preceding year. You must file an FBAR if the
aggregate value of your foreign financial accounts exceeds $10,000 at any time during the year. All your
foreign accounts are aggregated, so if you have two small accounts, say one in Germany with $5,000, and
one in England with $6,000, you need to file an FBAR. If your foreign account balances at all times during