US citizens who have neglected to report foreign accounts they own or have signing authority over may be facing stiff penalties. Many of my clients want to comply with this policy but have concerns about prior years they failed to report. Should you file late FBARs or just start reporting them going forward? If they file a current year FBAR, will the IRS flag them for audits in prior years? One thing I tell them for certain is that continuing to not report their foreign accounts is a bad idea. The end game for not reporting your foreign accounts is costly and stressful. Here are the top five reasons you should start reporting you foreign bank accounts.
The IRS will find out
Recent legislation called FACTA may be the strongest weapon the IRS has been armed with in years. This law allows the IRS to enforce a debilitating withholding tax on foreign banks that do not report their US depositors. The results speak for themselves. Even the strict bank secrecy laws in Switzerland are proving to be no match for FACTA. Almost all the major overseas banks are reporting their US depositors to the IRS. Even though the IRS receives information on millions of foreign accounts owned by US citizens, thanks to current technology, they can easily check this information against their databases. Even if the IRS runs into technical complications processing this information, they will inevitably work them out and become more efficient as time goes on.