Taxpayers who hold any interest in, or signature authority over, a foreign bank account are required to indicate that on Schedule B of the Form 1040, and also file with the Treasury a Report of Foreign Bank and Financial Accounts, Form TD F 90-22.1 (the “FBAR” form). Those who fail to declare the accounts and file the forms can be subject to criminal prosecution as well as harsh civil penalties.

Last December, the Commissioner of Internal Revenue announced that the Internal Revenue Service may institute a second Voluntary Disclosure Program for taxpayers with undeclared foreign bank accounts, allowing them to avoid criminal prosecution upon full and complete disclosure of the accounts along with the payment of back taxes on undeclared income and penalties.