The Bank Made Me Do It
Recently, the federal government prosecuted two Americans of Indian descent for not declaring their NRI (Non Resident Indian) Accounts that they held with a major international Bank based in the UK. In addition to the 50% penalty that the IRS levies, these two people could have faced up to 3 years in jail and $250,000 in fines. The defendants argued that they had been targeted by the bank with the promise that it would not release account information to the United States Federal Government. Two separate courts held that, while these banks are liable for attempting to defraud the US government, the individual account holder bears full responsibility.
So, what should you do if you have money in a foreign bank account?
The IRS is offering a onetime reduced penalty of 25% to people who file FBARs and amended returns for each year the account was held by August 31, 2011. Here is the tricky part: Four major international banks are in the process of releasing account holder information to the US government. Once the IRS notifies a taxpayer that they have information about foreign bank accounts, they are no longer eligible for the reduced penalty offer. So, really people have between now and when their bank feel compelled to release the information to the US government to become current.
It is absolutely crucial that you act as soon as possible!