Are Offshore Bank Accounts Illegal?

You may have heard about the benefits of opening an offshore bank account. But you may be worried about opening an offshore bank account because you think it’s illegal. The truth is, it’s not illegal to have a bank account offshore. However, it is illegal to hide your offshore bank account from the IRS. Additionally, the United States requires foreign banks to report all U.S. taxpayers who have open accounts in an offshore bank. Offshore banks that do not publish information about their customers risk penalties and consequences from the U.S. government. Read on for more information about offshore bank accounts to help you determine if you should open one.

How Does Offshore Banking Work?

As we mentioned above, using the services of a bank outside of your home country isn’t illegal. Also, some people may think having an offshore bank account is only for the wealthy, but that isn’t true. Some foreign banks will allow you to open an account with just $300. Similar to U.S. banks, bank accounts offshore set their account minimums and other terms related to customers’ accounts. Additionally, some foreign banks won’t do business with international clients because there’s more compliance that goes with it. There are rules set by the Organization for Economic Cooperation and Development and the World Trade Organization. These rules require banks to report information about their foreign customers. Every country will comply with the laws differently. Also, some countries don’t comply at all with the regulations.

Should I Offer An Offshore Bank Account In Switzerland?

There are strict privacy laws regarding offshore bank accounts in Switzerland. Previously, Swiss banks didn’t have to have names attached to the accounts. However, Switzerland has agreed to share information to foreign governments on their account holders. Therefore, if you have an account with a Swiss bank, you don’t run the risk of being charged with tax evasion.

What Makes Offshore Bank Accounts Illegal?

It is not illegal to establish an offshore bank account unless you do it with the intent of tax evasion. The Foreign Account Tax Compliance Act requires global banks to report balances and activity of American citizens to the IRS. Some U.S. forms holding foreign money claim to use lawyers to ensure individuals are reporting their international activity legally. However, there will be individuals who use the system to profit illegally. According to the United Nations, hundreds of millions in illicit funds flow through the United States. Some think that Switzerland still stays silent about a significant amount of “secret money.”

Keeping Money In An Offshore Bank Account Isn’t Illegal

The bottom line is, it’s not illegal to hold money in an offshore bank account. However, the money you keep in a bank account offshore is also not tax-exempt. If you’re going overseas for legitimate business reasons, you should feel comfortable having an account.

What Are The Benefits Of Having An Offshore Bank Account?

There are many benefits to holding money out of your home country. Read on for some of the benefits of having an offshore bank account.

Earn Capital Gains, Tax-Free

In many countries, you can earn money tax-free. You can make capital gains and pay zero taxes to the country in which your offshore account resides. The United States has even become one of the world’s favorite tax havens in recent years. States such as Nevada, Wyoming, and South Dakota hold a significant amount of foreign money. 

Stability

One of the main advantages of places like the U.S., Switzerland and other developed countries is their stability. People who live in developing countries fear that their money could be in danger. If the economy collapses, so could their wealth. Additionally, if there’s a civil war, they can risk losing their money. Or, the government may come after them for some reason. If they keep their money overseas overseas, it’s harder for their government to seize it.

More Opportunities for Investment

Bank accounts offshore also provide account holders with more opportunities to invest internationally. An offshore bank account will provide you with funds and investments not usually available in your home country. Investing through a bank account offshore is straightforward. Therefore, there may be advice or tools to help you create an investment portfolio

Foreign Exchange Services

Transferring money between accounts can be fast and free with multi-currency accounts. If you need to transfer money between currencies, some offshore banks give you a competitive foreign exchange rate.

Lending and Credit

Depending on your offshore bank account, some act as a private banking service. You may find more competitive mortgage rates are available for the property.

Tax Advantages for Bank Accounts Offshore

There are also expat tax advantages for using a bank account offshore. However, whether these benefits apply in your case depends on your circumstances. Tax benefits can include keeping your money outside of the tax jurisdiction of your home country. Additionally, tax benefits include protecting your account from taxes in the country in which you currently reside. A bank account offshore can also be useful when it comes to estate planning. 

Have Questions About Taxes On Your Offshore Account? Call Platinum Tax Defenders

U.S. citizens and permanent residents are required to report worldwide income from all sources, including bank accounts offshore. The law states that U.S. taxpayers cannot use offshore accounts to avoid paying taxes. Failing to report money in offshore accounts can lead to civil and criminal penalties. Taxpayers may face penalties of up to $10,000 for failure to disclose. Also, taxpayers can face $10,000 in penalties for every 30 days of non-filing after receiving an IRS notice of a failure to communicate. If you have questions about how your offshore account affects your taxes, call Platinum Tax Defenders. The experienced team at Platinum Tax Defenders can make sure your offshore account is tax-compliant. Additionally, our experienced CPAs can also assist with any help needed to manage your foreign account. Call Platinum Tax Defenders today for a free consultation.