U.S. Taxpayers With Secret Offshore Money Face New Risks And Options

 By Deborah L.  Jacobs and Janet Novack

The jig is up for secret offshore accounts. In May Credit Suisse pleaded guilty to conspiring to aid U.S. tax evaders. More than 100 other Swiss banks are handing over leads that should eventually out more U.S. tax dodgers. Israeli, Asian and Caribbean banks are all under investigation. Plus, the Foreign Account Tax Compliance Act (FATCA), which took effect July 1, requires foreign financial institutions to report accounts held by U.S. persons to the Internal Revenue Service.

But the best way to get right with Uncle Sam isn't always clear–especially if, like lots of account holders, you're not a flagrant tax cheat. Consider this immigrant family's tale: Before fleeing to the U.S. during the fall of the Shah, an Iranian Jew moved part of his fortune to an Israeli bank. He died in California in 2009 without ever reporting his stash to the U.S. Treasury–not on his income tax return and not on the Foreign Bank Accounts Report (FBAR) that U.S. citizens or residents must file each year if they own or control foreign accounts worth $10,000 or more. (It's possible he never knew he had to file FBARs.)