IRS Seeks Reports of Foreign Accounts

NEW YORK -- In its hunt for wealthy Americans who have stashed money overseas to evade taxes, the federal government has turned to an obscure law enacted nearly four decades ago, The New York Times reported Thursday.

Under the law, originally aimed at rooting out laundering of drug money, citizens or residents of the United States must tell the Internal Revenue Service each year if they have any foreign bank or financial accounts holding a total of $10,000 or more. Income from the assets is taxed at ordinary rates of up 35 percent, The Times reported.

The law took effect in 1970, but many taxpayers have either ignored it or were not aware of it, and the Treasury Department has rarely enforced it. The IRS estimates that one million American taxpayers warrant disclosure, but that as few as one in four file the disclosures, The Times reported.

Now, as it intensifies its efforts to root out offshore tax evasion, the IRS is moving to enforce the law aggressively and to apply stiff new penalties to taxpayers who don’t file the disclosures, The Times reported.

The disclosure, known formally as a Foreign Bank and Financial Account Report and informally as an Fbar, is separate from a federal income tax return. The disclosure is also required of United States residents with signatory power over or a financial interest in at least 50 percent of a foreign account. And the definition of those who must file includes domestic estates, trusts, partnerships and corporations, The Times reported.

-- NYSSCPA.org News Staff

Posted on 5/15/08