The IRS Will Flag You If You If You Break This Bank Account Rule

More than $9 billion in financial crime was uncovered by IRS criminal investigations in 2024, with offshore accounts starring in many of the cases. Plus, the U.S. government's reach now extends well beyond its borders thanks to tax agreements and data-sharing partnerships that make hiding money offshore increasingly difficult. This IRS focus on foreign accounts is not just for billionaires; everyone with offshore assets must abide by the law.

As many wealthy individuals continue to use complex tax strategies and loopholes to keep their liabilities at a minimum, the IRS has taken notice. According to a 2024 report from the U.S. Treasury Inspector General for Tax Administration, the IRS intensified the use of artificial intelligence to identify suspicious tax filing patterns from 2023 to 2024. That high-tech crackdown paid off in a big way — in 2024, the IRS brought in more than $98 billion in enforcement income, boosted by more stringent international data sharing and the pursuit of offshore account abuses.

One of the most important IRS rules for filers to be aware of is the Foreign Account Tax Compliance Act (FATCA), under which American citizens must disclose foreign assets, on Form 8938, if those assets reach certain thresholds every year. While it can be easy to overlook, failing to comply with FATCA can land anyone with offshore assets in the IRS' crosshairs.

Many dual citizens and internationally mobile Americans have come under IRS scrutiny in recent years. Under the Foreign Account Tax Compliance Act, Americans must report if their foreign assets top $50,000 at year's end, or $75,000 at any point during the year for individuals. For married couples filing jointly, the asset bar rises to $100,000 at year's end, or $150,000 at any time. FATCA also mandates that foreign financial firms report data related to American account holders to the IRS directly, building a double-layer regulation system. These numbers aren't suggestions — they're hard lines, and missing them can draw fast attention and even trigger an IRS audit.

Since foreign banks report account information directly to the IRS, discrepancies between the amount reported and what is listed on a tax return are immediately noticeable. These rules also go well past traditional checking or savings accounts. They cover foreign investment accounts, certain retirement plans, life insurance policies with cash value, and even business interests held overseas. Even signature authority accounts, like a family trust or an LLC, require reporting. Honest errors can also raise a red flag, since the IRS now uses software systems to cross-check global bank information against personal tax reporting in real time — making accuracy and attention to detail more important than ever for anyone who has assets abroad.

Failing to file Form 8938 under FATCA can result in an initial $10,000 fine — up to a maximum of $50,000 per violation for ongoing failure to file. U.S. individuals also need to file a report of Foreign Bank and Financial Accounts (FBAR) using FinCEN Form 114 if they have a financial interest in or signature authority over foreign accounts. You must file if those accounts go over $10,000 at any point in the year. While FATCA reports go directly go to the IRS, FBAR forms get forwarded to the Financial Crimes Enforcement Network (FinCEN) — an independent bureau of the U.S. Treasury responsible for protecting the financial system.

For those who forget their FBAR filing, non-willful violations can cost up to $10,000 per year, per form, adjusted for inflation, according to the Code of Federal Regulations. The IRS does not look favorably upon willful offenses: penalties rise to the greater of $100,000 or 50% of the balance of the account for each year the account is not reported.

Penalties can also go beyond fines. Willful violations may also result in criminal charges by the IRS and result in considerable fines as well as prison time based on the intent and seriousness of the violations. In cases involving a pattern of illegal activity or larger sums, those numbers can double, up to $500,000 in fines and 10 years behind bars. The risks of cutting corners are steep, and the agency's enforcement playbook leaves little to chance.