Tax Attorney Robert Wood says in Forbes "There’s widespread confusion and noncompliance involving foreign bank accounts, and the situation is unlikely to get better." Wood says it's important to get professional tax help if you are receiving income from a foreign account.
Over the last few years, IRS subpoenas and prosecutions have caused banks to name names of U.S. citizens and residents with foreign accounts. But that was a drop in the bucket. The biggest sea change is FATCA, a 2010 law that takes effect in 2014. It’s the reason overseas banks are asking questions about who is American. Here are 7 sins to avoid:
1. Don’t Fail to Report Worldwide Income. You must report worldwide income on your U.S. taxes, including interest, earnings, dividends and more. If you have a foreign account, check “yes” (on Schedule B). You may be entitled to foreign tax credits or an exclusion for income earned abroad. But you still must report it. As part of your tax return (starting in 2011), file Form 8938 where your foreign assets (generally) exceed $50,000 in value.