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.

Since 2009, the Offshore Voluntary Disclosure Program (OVDP) has made it possible for more than 45,000 taxpayers to declare offshore foreign accounts that they had failed to disclose in the past.  The OVDP was designed to reduce penalties that would be associated with a failure to disclose a foreign account.  Unfortunately, the program was very limited and many people who wanted to take advantage of it were unable to do so.

An 87-year-old Florida man faces FBAR penalties equal to approximately 150 percent of the value of his Swiss bank account. FBAR penalties are assessed when U.S. persons with investments in foreign banks fail to complete and file an annual Report of Foreign Bank And Financial Accounts (Form TD F 90-22.1).