Advice for Offshore Bank Accounts

In the past, stashing money away in an offshore bank account was only something that criminals did. However, there’s nothing illegal about banking in a foreign country. There are plenty of good reasons for opening a bank account offshore. Having an offshore bank account provides for added convenience while traveling and broader diversification of assets. However, the IRS has additional reporting requirements for money in foreign accounts. Before you decide to send your money off to a foreign land, there are some things you should know. Read on for several factors to consider before opening an offshore bank account.

Do You Have A Legitimate Reason To Open An Offshore Bank Account?

Not everyone who has an offshore bank account uses it to hide money and avoid paying taxes. There are numerous reasons why someone may want to open a bank account offshore. For example, people may inherit accounts from an overseas relative. Alternatively, they may want to be able to send gifts to family members in another country easily. Also, some people open foreign accounts in locations in which they frequently visit or vacation. These days, almost anyone with a bank account can take out money from a foreign ATM. However, there are often foreign transaction fees and other costs associated with converting currency. Retired individuals who purchase homes in other countries find it beneficial to have an account in local currency for bills. Others choose to open an offshore bank account for currency diversification. Holding assets in several currencies minimizes the risk of losing value if the dollar weakens.

There Are Downsides To Having An Offshore Bank Account

It’s not always risk-free to keep money in a foreign bank account. A country that gets hit with a recession can see its currency devalued. If that happens, a person’s bank account will be worth much less. Another issue to consider is political instability, which may lead to changes in policy. While it’s unlikely, a new regime could decide to nationalize banks and seize foreign assets. There is also the risk of identity theft or cybercrimes with offshore bank accounts. Not every country has the same security or consumer protection laws as the United States. Consumer protection laws protect people who lose their money as a result of fraudulent transactions on their accounts.

Don’t Use An Offshore Bank Account To Evade Taxes

Previously, taxpayers considered offshore bank accounts as a tax shelter. Taxpayers thought they could invest money in foreign accounts without the IRS knowing about it. However, that strategy is illegal. The law requires that U.S. citizens pay taxes on all income, regardless of where they earn it. You must report any interest or gains made on foreign investments on federal tax returns. However, countries such as Switzerland have historically kept information on U.S. account holders from the U.S. government. Previously, people could easily conceal their earnings and avoid paying taxes. The U.S. has been actively working to eliminate the use of tax shelters. Some agreements exist between countries to facilitate the release of banking information from countries like Switzerland. 

Know What The IRS Requirements Are For Offshore Bank Accounts

The IRS requires taxpayers to declare whether they own any foreign assets or have an offshore bank account. If you don’t declare foreign assets, the IRS will charge a penalty equal to half the existing balance in your account. You must declare any interest or capital gains you earn on foreign money at tax time. Under the Foreign Account Tax Compliance Act, some offshore banks report this information to the IRS. If you have $100,000-plus in foreign accounts, you must submit a Report of Foreign Bank and Financial Accounts form. 

Should I Open An Offshore Bank Account?

There are many reasons why you should open an offshore bank account. However, it’s essential to take precautions when opening an account. You should consider the country in which you will open the foreign bank account. Banks in different countries have different rules for opening an account. Some banks do not allow you to open an account online. It’s essential to take time to find a bank that is safe and worth your investment. You should consider your business goals when deciding to open an offshore bank account. The presence of a staff that speaks your language is also a factor to consider.

What Does It Cost To Open An Offshore Bank Account?

The cost to open an offshore bank account depends on the country and bank. Some foreign banks charge a high fee because you don’t live within their region. However, most banks do not charge high fees. It’s essential to be wary of hidden costs such as transaction and withdrawal fees.

How Many Offshore Banks Exist?

There are approximately 14,600 banks around the world. However, few banks will open accounts to foreigners. Several safe banks provide excellent service. Before deciding to open an offshore bank account, do your research. Also, it’s essential to get advice from a tax resolution professional.

Get Advice On Offshore Bank Accounts from Platinum Tax Defenders

Having money in a foreign bank account isn’t illegal. An offshore bank account can be convenient for those who maintain a home outside of the U.S. or travel frequently. However, before opening an offshore bank account, you must outweigh any risk from negligent consumer protection laws. You also want to consider any inconvenience resulting from IRS regulations. It can also be challenging to choose a stable currency. Take time to do your research on various options. It’s also essential to get advice from a tax professional before opening an offshore bank account. A tax professional can ensure that you follow tax regulation in your home country and abroad. If you want to take advantage of the perks of offshore banking, offshore accounts are waiting for you. Remember to comply with IRS rules. If you’re considering opening a foreign bank account, call Platinum Tax Defenders today for a free consultation.