In recent years, the Internal Revenue Service (IRS) has dramatically expanded its reach into foreign jurisdictions to detect and collect from U.S. taxpayers hiding income generating assets abroad. International data sharing, tax treaties, and the Foreign Account Tax Compliance Act (FATCA) have made bank and brokerage secrecy a thing of the past. Whether you have an unreported Swiss bank account, a foreign business, or undisclosed investments in Asia, the IRS has a robust arsenal of civil and criminal tax investigative tools—and may even go so far as to initiate grand jury subpoenas or cooperate with foreign banks to bring noncompliant taxpayers to justice.
Yet the power to “see” these hidden funds is only half the story. Under the right circumstances, the IRS can also seize foreign-held assets or employ creative methods—such as levies on domestic branches of foreign banks or mutual collection assistance with treaty partners—to enforce unpaid U.S. taxes overseas. This intensifying campaign highlights the importance of ensuring full compliance with U.S. laws, reporting requirements, and potential disclosure obligations.
If you have undisclosed foreign bank accounts, the best time to consult an experienced dual-licensed tax attorney & CPA is now—before the IRS launches an FBAR audit or criminal tax and foreign information reporting fraud investigation. Taxpayers can quickly become overwhelmed by the myriad of acronyms, tax forms, deadlines, and disclosure programs associated with FATCA and FBAR. However, even minor errors or missteps can expose you to debilitating penalties—and in some cases, you may even face criminal tax prosecution and potential prison time. A swift, proactive approach can significantly reduce the FBAR penalties you risk facing. For a reduced-rate consultation, reach out to the Tax Law Offices of David W. Klasing online or call us today at (888) 564-1409 for a reduced-rate initial consultation.
How the IRS Tracks Offshore Assets
- FATCA & Intergovernmental Agreements
Virtually all major global financial institutions now report details of U.S. account holders to the IRS—or face steep withholding taxes on U.S.-sourced income. - John Doe Summonses & Grand Jury Subpoenas
When specific taxpayers are unknown, the IRS may use John Doe summonses to compel banks to reveal broad classes of American-linked accounts. For known suspects, the IRS can directly serve grand jury subpoenas demanding historical statements from 2003 onward. - Mutual Legal Assistance & Foreign Treaty Partners
Tax treaties and mutual legal assistance agreements allow IRS investigators to share data and coordinate enforcement with foreign governments. Countries like Switzerland, long a hub of secrecy, have buckled under U.S. pressure, divulging client names and transaction details from Swiss banks. - Correspondent Banking
Smaller banks that do not maintain overseas branches often use bigger banks for international transfers—creating a “paper trail” that the IRS can exploit.
If a taxpayer with undisclosed offshore assets—who has willfully committed tax crimes such as non-filed returns combined with intentional evasion of payment—self-reports the fraud (even if it involves a pattern of non-filed returns) through domestic or offshore voluntary disclosure before the IRS initiates an audit or criminal tax investigation, they can typically be brought back into compliance. In such cases, the taxpayer is usually afforded a nearly guaranteed pass on criminal tax prosecution and often benefits from reduced civil penalties that would otherwise apply. It would be wise to act quickly if you have received a FATCA letter from an overseas bank. Contact our dual-licensed international tax attorneys & CPAs at the tax law offices of David W. Klasing promptly – because the way you respond could impact how swiftly and how severely you are penalized.
Can the IRS Actually Seize Your Foreign Assets?
The IRS has the authority to pursue offshore assets, but the process is far from straightforward. Some countries cooperate through mutual collection assistance provisions, enabling the IRS to garnish or seize property under local law. Even in nations without such treaties, the IRS can:
- Levy Domestic Branches or Correspondent Accounts: If a foreign bank holds funds in a U.S.-based branch or correspondent account, the IRS can issue a levy there.
- Revoke Passports: For “seriously delinquent” debtors, the IRS works with the State Department to deny or revoke passports.
- File Suits for Repatriation: Where local authorities remain uncooperative, the IRS may initiate litigation or request the assistance of foreign courts.
- Leverage Criminal Investigations: If the taxpayer appears willful or engaged in fraud, the IRS can escalate to the Criminal Investigation Division (CID) and secure indictments.
Maybe you’re hiding money overseas—or perhaps you’re not. In recent years, the IRS has been relentlessly pursuing Americans with undisclosed offshore accounts, imposing a harsh mix of prison sentences, criminal tax penalties, and steep civil fines. FATCA was enacted to target those with foreign accounts, with the intention of avoiding paying U.S. taxes. Even if you aren’t engaging in outright criminal tax evasion, failing to report your offshore assets can expose you to serious legal risks.
At the Tax Law Offices of David W. Klasing, our experienced team of dual-licensed Tax Attorneys and CPAs can help you chart the best course of action for your tax situation. Whether you’re in the IRS’s crosshairs for willfully failing to file your Reports of Foreign Bank Accounts or you’re an American resident with legacy accounts overseas, we’re here to help you straighten out your taxes. We can assist you in making a proactive, “noisy” disclosure of your offshore accounts and guide you through any forthcoming disclosure programs. Don’t risk getting caught on the wrong side of the IRS—contact the Tax Law Offices of David W. Klasing online today or call us today at (888) 564-1409 for a reduced-rate initial consultation.
Civil & Criminal Tax Penalties for Noncompliance
- FBAR (FinCEN Form 114) Violations: Non-willful penalties up to $10,000 per year; willful violations up to 50% of the unreported account balance.
- Form 8938 Penalties: Failure to disclose specified foreign financial assets can result in a $10,000 penalty, plus additional fines for continued non-filing.
- Tax Evasion Charges (IRC § 7201): Up to five years in prison and substantial fines for willful concealment of taxable offshore or domestic taxable income.
- Filing False Returns (IRC § 7206): A felony carrying up to three years in prison.
- Accomplice Liability: Bankers or advisors who help to hide offshore assets may also face prosecution.
Some Americans try to avoid these penalties by renouncing their citizenship—a trend on the rise among U.S. expats. However, renunciation does not erase prior tax liabilities, and under the Reed Amendment, those suspected of expatriating primarily to dodge taxes can be denied re-entry to the United States. Moreover, leaving the U.S. often requires going through formal exit procedures that typically include settling outstanding tax obligations.
Furthermore, tax treaties with over 40 countries help the IRS identify citizens living abroad who are not filing tax returns. Americans in Asia have come under intense scrutiny, where the IRS suspects some have set up offshore corporations designed primarily to dodge taxes. Once discovered, such taxpayers may face massive back-assessments, interest, and penalties if they return to the U.S. or hold attachable assets on American soil.
If you are thinking of relinquishing your U.S. citizenship because of the IRS’ strict offshore account disclosure requirements or fear that a foreign bank will reveal your past tax crimes to the IRS because of FATCA, be careful— your tax-related problems could follow you abroad if you flee the country. Come see our founder, dual-licensed attorney-CPA David Klasing, before you get on the plane.
Contact the Tax Law Offices of David W. Klasing If You’re Concerned About IRS Discovering Your Offshore Assets
At the Tax Law Offices of David W. Klasing, our team of dual-licensed tax attorneys and CPAs can guide you in determining the best strategy for your tax situation. Whether you’re under the IRS’s scrutiny for willfully failing to file your Reports of Foreign Bank Accounts or you’re an American resident with old offshore accounts, we can help you bring your taxes into compliance. We can assist you in making a proactive disclosure of your offshore assets and navigate any upcoming disclosure programs that may apply to your case. We have the expertise to manage everything from voluntary disclosures to criminal tax defense. We expertly navigate audits—whether you’re faced with a John Doe summons, a grand jury subpoena, or any other IRS notice—and handle all correspondence with the IRS to prevent inadvertent admissions of willful noncompliance.
If you have undisclosed foreign accounts or suspect that you’re under the IRS’s radar, time is of the essence. The potential civil penalties and criminal tax charges can be devastating, making it crucial to act before the IRS intensifies its investigation. Now is the ideal time to secure professional guidance to evaluate your offshore exposure and guidance through voluntary disclosures, foreign account reporting, and any forthcoming streamlined programs. Call us at (800) 681-1295 or reach out online to schedule a reduced-rate initial consultation and protect your assets, secure your future, and stay compliant with U.S. tax laws—no matter where your funds are held.
