If you own offshore accounts that exceed the reporting thresholds under the Bank Secrecy Act (BSA) or Foreign Account Tax Compliance Act (FATCA), you are required to report your offshore accounts to the Internal Revenue Service (IRS) or the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), or both. But what happens if you don’t? Can the IRS see your offshore accounts if you don’t report them? New Jersey international tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains.
You Aren’t the Only One Required to Report Your Offshore Accounts to the Federal Government
If you fail to report your offshore accounts to the IRS or FinCEN, the IRS will know. This is because you aren’t the only one required to report your offshore accounts to the federal government. The financial institutions that hold your offshore accounts are required to report them as well.
If a foreign bank (or a foreign branch of a U.S. bank) reports an offshore account that you fail to disclose to the IRS or FinCEN, this can have serious consequences.
Penalties for Failing to Disclose Offshore Accounts to the IRS or FinCEN
Minimally, you can face civil penalties as a result of your failure to file. Under FATCA, the fine for failing to disclose offshore accounts to the IRS (using IRS Form 8938) is up to $10,000 per month, subject to a maximum penalty of $60,000. Under the BSA, the fine for failing to disclose offshore accounts to FinCEN (using an FBAR) starts at more than $10,000—BSA fines are adjusted annually for inflation.
However, if a violation of the BSA’s offshore disclosure requirements is deemed willful, this can trigger civil penalties in excess of $100,000 per FBAR. Willful violations can also trigger criminal charges in some cases. If you are prosecuted for a criminal violation of the BSA or FATCA, you will be at risk for both substantial fines and federal imprisonment.
Ensuring Offshore Account Disclosure Compliance in 2025
With these concerns in mind, U.S. taxpayers who own offshore accounts need to be very careful to ensure compliance with the BSA and FATCA. This has two key aspects in 2025:
1. Ensuring Compliance for the 2024 Tax Year
First, taxpayers need to ensure compliance for the 2024 tax year. For many taxpayers this will mean filing an FBAR with FinCEN and filing IRS Form 8938 with their annual return by April 15, 2025.
2. Making Sure Past Disclosure Violations Aren’t Leaving You Exposed
Along with ensuring compliance for the 2024 tax year, taxpayers should also ensure that past offshore account disclosure violations aren’t leaving them exposed. If you have to meet your disclosure obligations in prior tax years, you may need to submit a streamlined filing or voluntary disclosure to avoid facing IRS scrutiny.
Discuss Your Offshore Account Disclosure Obligations with a New Jersey International Tax Attorney
If you have questions or concerns about your offshore account disclosure obligations, we can help. To schedule a confidential consultation with New Jersey international tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 201-842-7696 or request an appointment online today.
