Foreign bank accounts must be reported to the Internal Revenue Service every year when you file your tax returns. If you failed to file the Report of Foreign Bank and Financial Accounts (FBAR), then you are in violation of U.S. tax law and you could face fines, penalties and even prosecution.  

U.S. taxpayers with offshore accounts are finding themselves facing increased pressure to report these investments. The risks of non-reporting become bigger every day, as the Internal Revenue Service and the Department of Justice have joined together to crack down on tax evaders. 

The Internal Revenue Service has developed amnesty programs to encourage taxpayers to come forward and voluntarily report offshore accounts that they may have failed to file forms on in the past. All United States citizens, including people living abroad, are required to file the Report of Foreign Bank and Financial Accounts (FBAR) annually or they face significant financial penalties.

If you have an undisclosed offshore bank account, you are running out of time to avoid penalties for failure to report the account. The Offshore Voluntary Disclosure Program (OVDP) allows you to come forward voluntarily to provide information to the government on foreign sources of income and pay penalties up to 27.5 percent. However, the rules are changing and if you do not act by August 3, 2014, then the minimum penalties will be increased from 27.5 to 50 percent.

If you have offshore financial accounts, you are required to file a Report of Foreign Bank and Financial Accounts (FBAR). If you failed to file this report, then you may face criminal prosecution and penalties based on the balance of the account during each year it went unreported.    In one recent case, an individual with unreported offshore accounts actually faced penalties that exceeded the total value of the overseas account.