Do you want to do some undercover work for the IRS? The IRS is encouraging you to report promoters of off-shore tax avoidance schemes. Whistle-blowers who provide allegations of fraud to the IRS may be eligible for a reward.

With that said, the IRS is reminding United States citizens and resident aliens that income received from foreign sources must be reported on your Federal tax return. Lately there has been interest in of IRS in taxpayers with accounts in Liechtenstein. The interest of the IRS extends beyond accounts in Liechtenstein to accounts anywhere in the world. So make sure to report your worldwide income on your U.S. tax return.

U.S. citizens and residents alient must report all income whether or not you receive a W-2 Wage and Tax Statement, a Form 1099 or foreign equivalents. This is true whether you reside inside or outside the United States. This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents and royalties).

If you reside outside the US, you may be able to exclude part or all of your foreign source income. For details, see Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad).

Hiding Income Offshore
Not reporting income from foreign sources may be a crime. The IRS and its international partners are pursuing those who hide income or assets offshore to evade taxes. Specially trained IRS examiners focus on aggressive international tax planning, including the abusive use of entities and structures established in foreign jurisdictions. The goal is to ensure U.S. citizens and residents are accurately reporting their income and paying the correct tax.

Foreign Financial Accounts
In addition to reporting your worldwide income, you must also report on your U.S. tax return whether you have any foreign bank or investment accounts. The Bank Secrecy Act requires you to file a Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), if:

• You have financial interest in, signature authority, or other authority over one or more accounts in a foreign country, and
• The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

Consequences for Evading Taxes on Foreign Source Income
You will face serious consequences if the IRS finds you have unreported income or undisclosed foreign financial accounts. These consequences can include not only the additional taxes, but also substantial penalties, interest, fines and even imprisonment.

If you have a tax question, check the information on www.irs.gov or call 1-800-829-1040

source: www.irs.gov