Under the Bank Secrecy Act, U.S. residents or a person in and doing business in the United States must file a report with the U.S. Treasury if he or she has a financial account in a foreign country with a value exceeding $10,000 at any time during the calendar year. Taxpayers comply with this law by noting the account on their tax return and by filing Form 90-22.1, the Foreign Bank and Financial Account Report (FBAR). Willfully failing to file an FBAR report can be punished under both civil and criminal law.
About 7 million U. S. Taxpayers fail to file required income tax returns each year, while 146 million Americans dutifully file their returns each year. That means that about 5% of the populace fail to meet their obligations to Uncle Sam. As part of its National Research Program the IRS released a study in 2011 of 2006 returns which found that as result of non-filing, the government loses $28 billion per year. Although the IRS makes efforts to force non-filers into compliance, the continuing improvident cutting of the IRS budget allows more taxpayers to duck their filing obligations because the IRS has fewer resources to pursue non-compliant taxpayers.
As a tax controversy lawyer I frequently meet with taxpayers who have failed to file multiple years of returns. Many of those clients ask, “Should I file the return right now, or wait until I have the money to pay it?” The answer is simple: file it as soon as possible!