Can the IRS see my foreign bank accounts?

Yes, the IRS has multiple mechanisms to obtain information about your foreign bank accounts, and its ability to do so has expanded significantly over the past decade. The era of banking secrecy for US persons is effectively over.

FATCA (Foreign Account Tax Compliance Act) is the primary tool. Under FATCA, foreign financial institutions around the world are required to identify and report accounts held by US persons directly to the IRS. Over 110 countries have entered into FATCA agreements (known as Intergovernmental Agreements or IGAs) requiring their financial institutions to comply. Banks that fail to comply face a 30% withholding tax on US-source payments. As a result, virtually every major foreign bank now reports US-held accounts to the IRS annually.

Automatic Exchange of Information agreements, including the Common Reporting Standard (CRS) developed by the OECD, facilitate the automatic exchange of financial account information between countries. While the US has not adopted CRS itself, it receives information through its extensive network of bilateral tax information exchange agreements and FATCA IGAs.

Tax treaties between the US and individual countries typically include information exchange provisions that allow the IRS to request specific account information from foreign tax authorities. Many treaties also allow for spontaneous exchange of information when one country discovers information relevant to the other.

The US also has Mutual Legal Assistance Treaties (MLATs) with many countries that can compel the disclosure of financial records in criminal investigations. The IRS can issue John Doe summonses to foreign banks with US operations to obtain information about categories of US account holders.

Additionally, the Department of Justice has aggressively pursued foreign banks that facilitated US tax evasion. The Swiss Bank Program resulted in over 80 Swiss banks paying penalties and disclosing US account holder information. Similar enforcement actions have targeted banks in Israel, India, the Caribbean, and other jurisdictions.

Given this extensive information-sharing network, attempting to hide foreign accounts from the IRS is both risky and increasingly futile. Voluntary compliance through proper reporting is always the recommended approach.