Not that long ago, international bank accounts were the perfect safe haven for those who didn’t want to disclose all of their personal assets to the Internal Revenue Service (IRS). However, international banking has become much more transparent than it once was. Even countries that were once considered safe havens for assets, like Switzerland and the Bahamas now disclose information that could lead to the prosecution of foreign account holders.
Those with international assets have always had an obligation to report their offshore holdings for tax purposes, but now it is far easier than it once was for the IRS to discover international holdings.
Why are international accounts now easier for the IRS to find?
International law has changed so that many countries share banking and income information with one another for tax purposes. The United States Foreign Account Tax Compliance Act is a federal law that dozens of other countries are now subject to.
With more than 100 countries agreeing to comply and promoting financial transparency for tax reasons, it has never been easier for the government in one country to learn about its citizens’ holdings in another country. While the United States does not always disclose accounts held domestically to other countries, it certainly does expect those countries to disclose records about United States citizens and businesses operating abroad.
Only a handful of countries do not share this information with other nations, and many of these countries are notorious for having unreliable banking institutions. The countries other than the United States that do not share banking information include:
- Armenia
- Cambodia
- Dominican Republic
- Georgia
- Guatemala
- Kazakhstan
- Macedonia
- Montenegro
- Paraguay
- Philippines
- Serbia
- Ukraine
Even if someone banks in these countries, they have an obligation to report those assets or face tax consequences later.
Failing to disclose international assets could lead to allegations of tax evasion
The IRS does limit the negative consequences faced by those who make a voluntary disclosure of previously hidden assets. Those who get caught could face not only penalties but even tax evasion charges.
Learning more about how tax laws have changed in recent years could help you avoid or fight back against allegations of tax evasion due to your international banking habits.