The 2019 IRS “Dirty Dozen” Tax Scams #10 Failure to Report Offshore Funds

If you have an overseas account, you are obligated to report it to the IRS. The penalties are simply too high to risk noncompliance with foreign account reporting requirements.

For many years, the IRS Criminal Investigation Division and the U.S. Justice Department have been heightening investigations of offshore accountholders, compliance with foreign reporting requirements, and tax scams involving foreign holdings. “Failure to Report Offshore Funds” seems to have earned itself a permanent place on the annual IRS Dirty Dozen.

Ever since UBS employee Bradley Birkenfeld blew the whistle on Swiss banking practices in 2007, the U.S. government has aggressively pursued U.S. taxpayers who attempt to hide their foreign assets by not reporting them on their U.S. tax returns and Form 8938, Statement of Specified Foreign Financial Assets, and by failing to file their annual Report of Foreign Bank and Financial Accounts (FBAR). Investigations have since expanded to U.S. taxpayer accounts in other countries, and to bankers and financial institutions who may have assisted their clients hide funds abroad.

Methods utilized

People have used a variety of methods to avoid paying taxes on their foreign income, including but not limited to:

  • hiding money in offshore banks and brokerage accounts
  • using nominee entities whereby someone else holds an account in their own name on behalf of the person who owns it
  • foregoing paper statements on a hidden account and accessing the funds exclusively through wire transfers, debit cards, and credit cards
  • engaging in abusive tax evasion schemes involving foreign trusts
  • participating in illegal foreign employee-leasing, annuity, and insurance schemes

The consequences of engaging in an illegal tax scam is a hefty fine and possible criminal prosecution. If you have not reported your foreign holdings nor paid tax on your overseas income, you have options. Contact an experienced tax attorney before the IRS finds you first!


You can learn more about foreign bank reporting and related penalties through some of our recent blog posts on this topic: