The idea of keeping money in an account outside the U.S. has always held some intrigue for many Americans. Having a Swiss bank account identified by a number rather than your name used to be the epitome of secrecy for the rich and famous who wanted to hide money from the IRS and perhaps their spouses. As a consequence, “offshore” accounts became associated with tax evasion and less-than-legitimate businesses.
However, times have changed, and Switzerland as well as other countries are required to report money held by foreigners to their home countries’ regulatory agencies, as mandated by the Foreign Account Tax Compliance Act (FATCA). Compliance, however, varies significantly among countries.
Legitimate reasons for an ‘offshore’ account
Typically, it’s not illegal for Americans to keep money in accounts outside the U.S. as long as you aren’t doing it to avoid paying taxes on it or for any other illegal reason. There are many legitimate reasons to keep money in an offshore account (which is loosely defined as any account not on U.S. soil).
- In times of economic turmoil in the U.S., some people move money from the stock market or other U.S. investments to a foreign account.
- If you regularly vacation or visit family in another country, having a small account there can be convenient – particularly if that country’s currency is doing better than the U.S. Dollar.
- Keeping money in a foreign account can make it easier to invest internationally.
If you’re keeping any money in accounts outside the U.S., whether for business or personal purposes, it’s essential that you take the necessary steps to remain in compliance with our tax laws. For example, if you have more than a total of $10,000 in foreign accounts, you must file a Report of Foreign Bank and Financial Accounts (FBAR), which is required under the Bank Secrecy Act. Don’t just count on the bank(s) to do the necessary reporting.
It may be wise to seek the guidance of financial and legal advisors before you move money to a foreign account. If you’ve been accused of non-compliance with tax laws, you definitely should get the assistance of an experienced tax attorney.