When doing the income tax, why would the IRS ask if one has a savings account, and what would the consequences be not telling the truth?
Criminal Defense Attorney
There is no place on the tax return to disclose your bank accounts. I assume that you are being audited. If they are asking about savings accounts and other bank accounts it could be for a couple of reasons. The could be looking for unreported interest income (Usually they will have 1099 INT for all of the interest. The other more likely reason is to try to count all of your deposits as income. If you have savings accounts that show deposits during the tax year you better be able to demonstrate that the deposits were not income (such as documentation of transfers from one account to another, or the sale of an investment for which you reported the gains already on Schedule D etc.) If you lie you could be charged with tax evasion or other crimes. If you are being audited (or examined) I recommend that you take a tax attorney with you.
Was the question to determine if you received interest from a savings account? That could have been it. You must report your interest.
The above is not legal advice. It is an illustration of options that can be used in certain situations. I have not examined all of your facts, if I did I might provide a different response.
As the other attorneys have mentioned, there is no place on a tax return for you to list your savings account or any specific bank account. However, if you received interest income from that savings account, you must report such income on your tax return. If you fail to report the income from that savings account on your tax return, if it is a domestic account, the IRS will match and compare the information that third parties (i.e., such as banks) reported as having been paid to you and the income that you reported on your tax return. If there is a mismatch of that information, the IRS will send you a "We Changed Your Account" letter and request you to pay the tax due on the income from that savings account and assert penalties for tax under-reporting.
If the savings account to which you refer is a foreign account, you are required to report the income from that account on Schedule B of your tax return, as well as check box 7 and list the country with which you maintain the account(s). In addition, if your total income from foreign sources for a given year exceeds $10,000, you must e-file a Foreign Bank Account Report ("FBAR"), Form TD 90-22.1, with the FinCen branch of the Treasury Department in Detroit on June 30th of the year after the calendar year in question. You may also be required to file other forms regarding that foreign account. Please note that if you had an obligation to report income from foreign sources and to file FBARs and/or related tax forms in previous years but failed to do so, the IRS can assert draconian penalties against you (and even possibly prosecute you criminally). The statute of limitations for both civil and criminal FBAR penalties is 6 years from the due date of the FBAR in question.
If you are presently under audit, you disclose the existence of other bank accounts and represent to the auditor that those are all of your bank accounts and you fail to disclose the existence of the savings account, then the IRS would regard that as both a "badge of fraud" that could be used for a tax evasion prosecution, 26 U.S.C. Sec. 7201 (which has a statutory maximum prison sentence of 5 years) and/or for making a false statement to a Federal agent, 18 U.S.C. Sec. 1001 (which also has a statutory maximum prison sentence of 5 years). In the mid-2000's, Martha Stewart went to prison for making a false statement to an SEC investigator who was investigating her for a questionable stock trades. The moral of the story is that if you decide to speak with an IRS agent (which we generally recommend that our clients don't do, especially if you are interviewed without a tax attorney present) you must tell the truth and not make any false or misleading statements.
From the gist of your question, it sounds like you need to hire an experienced Federal tax controversy attorney who handles both civil and criminal tax matters. For more than 20 years, I was an Assistant U.S. Attorney in the Tax Division of the U.S. Attorney's Office in Los Angeles, and tried 8-10 criminal tax cases and disposed of many other criminal cases. We would gladly speak with you to discuss your legal options. Good luck!
Richard G. Stack, Esq.
Brager Tax Law Group, A P.C.
Telephone: (310) 208-6200
Facsimile: (310) 478-8030
Solutions to IRS and State Tax Problems
The answer to this question does not establish an attorney-client relationship. Moreover, this attorney is licensed to practiced law ONLY in the State of California. Answers to questions from users in other jurisdictions or states are meant to provide only general information. Users should contact a local attorney in their jurisdiction or state to address their specific tax issue.