IRS Enforcement of Foreign Bank Account Reporting Rules May Catch Non-U.S. Persons by Surprise


U.S. persons are generally required to file an annual information statement with the U.S. Internal Revenue Service (IRS) disclosing any beneficial interest in, or signatory authority over, bank or other financial accounts located outside the U.S. This information statement is filed on Form TD F 90-22.1, and is generally referred to as an "FBAR" (Foreign Bank Account Report").

Due to increasing concerns regarding the potential evasion of U.S. income tax that is facilitated by hiding funds in offshore accounts, the IRS has been increasingly focused on FBAR reporting over the last several years and has aggressively pursued U.S. taxpayers who have failed to properly file these reports. The IRS' most visible recent efforts in this area involved the filing of criminal charges in the U.S. against the Swiss bank UBS and certain of its employees, which actions ultimately resulted in UBS' agreement to turn over to the IRS certain information relating to accounts maintained by U.S. customers in Switzerland.

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