US: Failure to Report Offshore Funds Included on Internal Revenue Service 2019 List of "Dirty Dozen" Tax Scams

Added on 19/03/2019

As published on, Monday 18th March, 2019.


The failure to report funds and assets in offshore financial accounts is a crime, and it continues to be a focal point of IRS investigation and enforcement action. As a warning to taxpayers, the hiding of money or assets in offshore accounts is included on the IRS list of "Dirty Dozen" tax scams.

Under applicable rules, taxpayers are required to disclose offshore financial accounts and the value of the assets held in those accounts to the government. Further, any income generated from offshore accounts must be reported on the income tax return of the taxpayer. The civil penalties and the criminal sanctions for failure to comply with these reporting requirements can be severe.

For years, taxpayers' lack of compliance with their reporting requirements for offshore accounts has been heavily investigated by the IRS and the Department of Justice. Through these efforts, numerous taxpayers have been found to have evaded taxes by trying to hide income in offshore banks, brokerage accounts or by using nominee entities. Funds in these accounts are then accessed using debit cards, credit cards or wire transfers. Other taxpayers have been found to have evaded taxes by the use foreign trusts, insurance plans, private annuities or employee leasing schemes.

Through its investigations, and through the Foreign Account Tax Compliance Act (FATCA) and the network of intergovernmental agreements with partner jurisdictions, the IRS and the Department of Justice continue to receive more information regarding potential noncompliance by U.S. taxpayers. Because of this, if you have undisclosed offshore financial accounts, it is possible that the account, and the failure to report income therefrom, will be discovered.

The IRS offers several options for addressing previous failures to comply with U.S. tax and information return obligations with respect to offshore accounts:

  • Voluntary disclosure procedures
  • Streamlined filing compliance procedures
  • Delinquent FBAR submission procedures
  • Delinquent international information return submission procedures