Per the IRS, "if you are a U.S. citizen or resident alien, you must report income from all sources within and outside of the U.S. This is true whether or not you receive a Form W-2 Wage and Tax Statement, a Form 1099 (Information Return) or the foreign equivalents. Additionally, if you are a U.S. citizen or resident alien, the rules for filing income, estate and gift tax returns and for paying estimated tax are generally the same whether you are living in the U.S. or abroad."

Hiding Income Offshore
The IRS has stated that "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
Per the IRS, "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:

1. You have financial interest in, signature authority, or other authority over one or more accounts in a foreign country, and

2. The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year."

More information on foreign financial account reporting requirements is in News Release FS-2007-15, Foreign Financial Accounts Reporting Requirements and Publication 4261, Do You have a Foreign Financial Account?

Consequences for Evading Taxes on Foreign Source Income
The IRS states that taxpayers "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."

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