The term "gross income," according to the Internal Revenue Code (IRC), generally "means all income from whatever source derived." As a result, worldwide income is subject to taxation by the United States. Thus, U.S. citizens and U.S. residents generally are required to pay U.S. income tax on income from sources in foreign countries. Nonetheless, it has been reported that some taxpayers apparently believe that they can successfully avoid U.S. income tax by maintaining assets outside of the country. This "avoidance" is actually "evasion," which is illegal. Until recently, it was very difficult for the Internal Revenue Service (IRS) to detect such evasion. Changes in laws, penalties, and enforcement activity are making it easier to encourage compliance with U.S. tax laws. For many years, U.S. taxpayers have been required to report various foreign accounts to the Department of the Treasury under the Bank Secrecy Act of 1970. Over time, additional provisions have been added to that act to encourage such reporting. More recently, Congress enacted a separate provision in the Foreign Account Tax Compliance Act (FATCA) that has reporting requirements that in some cases may result in the same account being reported on two different forms, but which includes reporting requirements for assets not covered by the earlier act. Additionally, FATCA includes requirements for information reporting by foreign financial institutions (FFIs) and other financial intermediaries. In some cases, withholding tax requirements may be imposed on these entities. This report outlines the U.S. reporting requirements for foreign assets and accounts under FATCA along with the reporting requirements (FBAR) under the Bank Secrecy Act. It also addresses the requirements imposed on foreign financial institutions and the agreements the United States has with other countries to cooperate in information reporting. Additionally, recently proposed bills to modify FATCA either through repeal or amendment are discussed. In addition to being required, generally, to report all income from accounts and assets even if located outside the United States, certain persons are required to report the existence of such foreign assets either via Form 8938, which is filed along with their tax returns, or by electronically filing FinCEN Form 114 (FBAR) with the Department of the Treasury. In some cases, they must file both even if doing so appears to be duplicative. The Foreign Account Tax Compliance Act, enacted in 2010 as part of the Hiring Incentives to Restore Employment Act, requires "specified persons" to report "specified foreign financial assets" located outside the United States. However, this reporting is subject to filing thresholds. "Specified persons" includes both entities and individuals; however, although "specified individuals" and their related requirements for filing Form 8963 have been defined in regulation, there is currently no such legal definition of specified entities. As a result, the following outline of requirements applies only to individuals. Specified individuals (SIs) include U.S. citizens, U.S. resident aliens (even if resident for only part of the year), nonresident aliens who elect to be treated as resident aliens for purposes of filing a joint tax return, and nonresident aliens who are bona fide residents of Puerto Rico, Guam, American Samoa, the Northern Mariana Islands, or the U.S. Virgin Islands. Specified foreign financial assets (SFFAs) include financial accounts maintained at foreign financial institutions (e.g., savings or checking accounts, brokerage accounts, or retirement accounts held with a bank or broker-dealer). They also include assets held for investment, but not held in a financial account. Examples include any interest in a foreign entity, including stock or securities issued by a foreign corporation and any financial instrument or contract with a foreign issuer or counterparty. However, shares of stock issued by a foreign corporation are not considered SFFAs if they are held inside a U.S. brokerage or financial account. Additionally, some assets are not reportable if held directly by the specified individual. These include foreign real estate, foreign currency, and foreign Social Security-type programs. The filing thresholds are based on the total value of all SFFAs. SIs who file joint returns and live in the United States are not required to file Form 8938 if the total value of their SFFAs is $100,000 or less on the last day of the tax year and $150,000 or less at all times during the tax year. If the couple is living abroad, the thresholds are higher: $400,000 on the last day and $600,000 at all times. For all other SIs, the thresholds are $50,000 and $75,000 if living in the United States and $200,000 and $300,000 if living abroad—in other words, half that of a married couple that files jointly. U.S. citizens are considered to have been living abroad if they are bona fide residents of a foreign country for an uninterrupted period that includes the entire year or were present in a foreign country at least 330 days during any 12-month consecutive period that ends in the tax year. Penalties for failure to file a required Form 8938 begin at $10,000 and may be as much as $50,000 if the form is not filed in a timely manner after the individual has been informed by the IRS that the individual has failed to comply with the requirement to report SFFAs. In addition to the penalty for failure to file Form 8938, taxpayers who fail to report income from such assets on their tax returns are subject to a penalty of 40% of the tax due on that income (in addition to the tax on the income). There is no differentiation in the penalty based on willfulness of the failure to file. Since 1970, Title 31 of the U.S. Code has required "U.S. persons" to report foreign financial accounts they own or for which they have signatory authority. This requirement is separate from the requirement to report income from accounts owned by U.S. persons on the relevant income tax returns. "Financial accounts" is a broad term that can include bank accounts, security accounts, some life insurance, mutual funds, and such accounts held by an entity in which one has a significant interest. Many foreign financial accounts are also considered foreign financial assets for purposes of reporting under Title 26, but the latter term generally is more inclusive. Furthermore, the distinctions are not intuitive. The IRS provides a chart of various types of assets along with whether they are reportable under either Title 31 or Title 26. Generally, foreign financial accounts must be reported under Title 31 if the aggregate value of all such accounts is over $10,000 at any time during the year. The report is made on FinCen Form 114, Report of Foreign Bank and Financial Accounts [FBAR]. This form replaces another used for many years—TD F 90-22.1—and must be filed electronically. Forms not received by the Department of the Treasury by June 30 are considered delinquent—no extensions are available. Penalties for failure to file an FBAR can be quite severe. In addition to a rarely imposed negligence penalty, there are penalties imposed for either willful or non-willful failure to file the required FBAR, with the penalty for willful failure to file being the most severe and including the possibility of criminal as well as civil penalties. If failure to file an FBAR is found to be willful, there may be both criminal and civil penalties. Criminal penalties can include both a fine (up to $250,000) and up to five years in prison. The maximum civil penalty on each account is the greater of $100,000 or 50% of the balance of the account. In determining whether failure to file a required FBAR was willful, courts have thus far found that the government must prove its case by a preponderance of the evidence rather than by the more demanding standard of clear and convincing evidence. If the failure to file the FBAR was not willful, the maximum penalty is $10,000 per account. This penalty may in some cases be waived if the failure was due to a reasonable cause and the account was later properly reported on an FBAR. Tax evasion through offshore accounts can be facilitated by foreign financial institutions (FFIs) or other financial intermediaries. Although they may not be complicit in the tax evasion, these entities can play a part in curbing offshore tax evasion by reporting information on assets owned or controlled by entities subject to U.S. income tax. FATCA imposes reporting requirements on FFIs regarding their U.S. account holders, as well as obligations on non-financial foreign entities (NFFEs). These provisions address gaps in the pre-existing legal authorities that the IRS uses to learn information about taxpayers suspected of evading U.S. taxes. Some of the primary authorities are summarized in Table 1 . While these tools play an important role in addressing tax evasion relating to assets held overseas (see, for example, the UBS discussion below), their usefulness can be limited by information gaps, particularly when the information is held by a foreign party. For example, a whistleblower played a key role in the UBS case, thus perhaps raising the question of how the IRS might have fared absent his involvement. Tax treaties and TIEAs may be of limited use when another country's domestic laws restrict providing the information sought by the IRS or the treaty partner is unable to get the information. Additionally, thorny legal questions can arise when a U.S. court attempts to take action against an overseas party, for example, to enforce a subpoena. Furthermore, identified limitations in the Qualified Intermediary program include the lack of a requirement to report foreign source income and the ability for a corporation to be treated as a beneficial owner, both of which might allow U.S. taxpayers to avoid discovery (e.g., by setting up a foreign shell corporation to receive the income).