What is likely the consequence of failing to report foreign income?

Failing to report foreign income can lead to significant repercussions, with potential audits and penalties being among the most direct consequences. Tax authorities are increasingly focusing on international income reporting due to globalization and the need for transparency in tax compliance. When foreign income goes unreported, it raises red flags for tax authorities, which can result in investigations to ensure that taxpayers are meeting their obligations.

In addition to audits, if the omission is deemed to be negligent or fraudulent, taxpayers may face substantial financial penalties, including fines that can accumulate over time. Moreover, this could also lead to interest charges on any underpaid tax resulting from the unreported income.

This option directly aligns with the realities of tax compliance and emphasizes the importance of accurate and complete reporting, especially for income earned outside one's home country. The potential for audits and penalties is a very real consequence that taxpayers must consider, thus making this the correct answer.