Offshore Banking Could Be Beneficial As Long As You Comply With IRS RulesOffshore Account Update
Posted on January 31, 2019 | Share
Placing funds in certain foreign banks and investments overseas might be sound financial planning, but there are strict Internal Revenue Service reporting rules that must be followed.
Before making the decision to move your money into offshore bank accounts, it is a good idea to consult with a Boston tax attorney to determine what the potential tax consequences of your plan could be. It is also a good idea to consult with counsel to make sure you understand all federal reporting requirements and how to comply with them.
As the overview provided below demonstrates, maintaining offshore accounts could end up either being beneficial to your bottom line or could do you and your financial health more harm than good.
IRS FBAR Reporting
Under the IRS Foreign Bank and Financial Accounts Program (FBAR), every U.S. person affiliated with any foreign financial accounts must to report the income derived from those accounts if the aggregate value is more than $10,000.
Failure to file the required FBAR forms exposes the taxpayer to civil and or criminal penalties. In fact, violators face fines and could potentially be sentenced to prison.
Benefits and Drawbacks of Offshore Banking
The following sets forth some of the most-cited benefits and drawbacks of entering into banking and investment strategies overseas.
Investors are often drawn to the fact that certain countries require all bank transactions to remain confidential. In fact, several countries make it a crime for a bank or person affiliated with banking to disclose the name of account holders or anything about their accounts. Anonymity is considered one of the biggest benefits of offshore banking.
Additionally, many offshore bank depositors are attracted to the higher interest rates they can obtain on their money in foreign banks. With U.S. interest rates remaining low for the past several years, the attraction of banking offshore has grown.
Depositing funds overseas has some hard costs attached to it, however. There are fees associated with opening and maintaining accounts as well as fees associated with currency conversion. In fact, these fees could outweigh the return you get on your investment.
In addition, deposits overseas do not enjoy the protections that U.S. bank deposits do. The Federal Deposit Insurance Corporation (FDIC) guarantees money deposited in U.S. banks up to certain amounts. When you keep money offshore, especially in banks located in smaller and/or lesser-developed nations, there is no guarantee that the institutions won’t fail or that you will be able to withdraw your funds in the event of another unexpected occurrence.
The Benefits of Consulting With A Boston Tax Attorney
With the IRS continuing to ramp up enforcement of offshore banking regulations, it is in every investor’s best interest to make sure that compliance procedures are in place. It is advisable to consult with Boston tax attorney Kevin Thorn before making a financial move offshore. If you are already invested in offshore accounts, Boston tax lawyer Kevin Thorn can help you determine if you are properly complying with applicable reporting regulations.
Contact us online or call 617-692-2989 to schedule a confidential consultation.