In today’s financial climate, there is very little you may legally keep a secret from the IRS. This is unfortunately doubly so when it comes to offshore investments.
As most wealthy nations do, the United States taxes all income of its citizens. It doesn’t matter if the income is made inside the US or not. Does this seem unfair?
It does when you take into consideration that many U.S. corporations reduce or avoid taxes by going offshore. But the law is the law, and when a U.S. citizen that was living overseas confronted it almost 100 years ago, the US Supreme Court upheld the right of Congress to tax U.S. citizens living abroad.
Americans are required to comply with widespread reporting requirements as well in regards to their offshore investments.
So what do you have to report? What can you get away with not reporting? If you are going to invest offshore, you need to know.
To stay within the law, there are 3 reporting laws you must know and 3 offshore investments that you will not have to report.
Reporting Laws You MUST Know
If you’re a U.S. citizen, here is what you must know when reporting your offshore investments.
The Bank Secrecy Act in effect finished bank secrecy in the U.S. It is now a requirement for you to file a report every year recognizing any foreign bank account, foreign brokerage account, or any ‘other’ foreign financial accounts you might hold.
There are three separate reporting requirements
1. FBAR requires Americans to report all foreign accounts with an aggregate value in excess of $10,000US each year.
2. June 30 is the deadline for filing a Foreign Bank Account Report (FBAR) form with the U.S. Treasury.
3. FACTA requires Americans to file an IRS form disclosing any foreign financial assets with a value of $50,000US or more, along with their income tax return.
These reporting responsibilities concern every American, anywhere. The penalties for failing to comply are draconian! You may end up having to pay a $10,000US fine per unreported account. Even worse, if you “knowingly” fail to file the FBAR form, you may receive fines of up to $250,000US, an imprisonment of 5 years or both. In addition, your penalties will be doubled if you break any other U.S. law. Failure to file the FACTA form may receive punishment of a $50,000 fine.
Three Offshore Investments You Don’t Have to Report
Trying to figure out if you must file the FBAR form is not easy. Congress, the IRS and the Treasury Department continue to expand the definition of what comprises a “reportable” foreign account. As was stated previously, very little can be kept secret from the tax-man.
1. Precious metals or securities bought direct from an offshore bank, securities dealer, issuer or individual. There are no reporting requirements when you buy precious metals or securities without opening an account as long as the total value doesn’t exceed $50,000US.
2. Safekeeping. Valuables bought outside the U.S. and placed into a foreign bank’s safety deposit box or your own private safe that only you retain access does not require reporting. Once again, if the total value is in excess of $50,000US, then you are required to disclose these holdings.
3. Real estate. Ownership of real property in a foreign country isn’t reportable. Income from your real estate holdings is reportable, wherever they’re located.
Foreign Online Brokerage
The idea of a discount brokerage with small transaction fees does not exist in privacy and tax haven countries. Be prepared to pay at least twice what you usually pay at home. However, the brokerage firms we assist you in opening up an account at do possess all of the latest online trading platforms. Anything doable with your domestic brokerage account is doable with your offshore account, but when structured properly, you will retain your confidentiality while compounding your profits free of taxes. For most, those advantages are well worth the higher transaction fees.
If you have at least $250,000US in assets and are interested in finding out how to protect it, It starts with a phone call, a free consultation, to find out your point ‘A’ and where you want to go.