Got Offshore Accounts? 4 Tips for Staying Compliant

You often hear about people who have opened offshore accounts for illegal or less-than-savory reasons. However, there are many legitimate reasons for having a financial account outside of the US. For instance, banks in the US may not necessarily be the most secure, and we all know what happens when the economy tanks. Regardless of the reason for maintaining offshore accounts, there are complex rules and regulations relating to offshore accounts that you must comply with under the law. Read ahead for some of our best tips on what to consider and how to keep your offshore accounts in compliance with US tax law.

1.   Report! Report! Report!

The first and most important requirement for making sure your bank accounts are legitimate is to properly report them by filing a Report of Foreign Bank and Financial Accounts, a.k.a. “FBAR.” US law requires you to file an FBAR when you have a direct or indirect financial interest, signature authority or other authority over foreign accounts that have had an aggregate value greater than $10,000 at any time during the calendar year you are reporting. Your income tax return also requires you to “check a box” that you have foreign accounts.  There may be other reporting requirements as well. It’s essential that everything is consistent and that you’re honest about your assets in order to avoid civil or even criminal penalties.

2.   Understand Foreign Tax Credits

Opening an offshore account means that you have to stay compliant with both your home country and the country with which your offshore assets reside. As if working with one country’s tax laws wasn’t complicated enough, two can cause more trouble than it may be worth. But for those of you with foreign accounts, you might have heard of a foreign tax credit. If you have paid taxes overseas, you may be entitled to receive a foreign tax credit on your US tax return.  In addition, if you work abroad, you may be entitled to the foreign earned income exclusion. This is quite complicated, and we urge you to work with an experienced tax professional and not try to do this on your own.

3.   FACTA

If you chose in the past not to report your foreign accounts, you may not get away with it for much longer. The Fair and Accurate Credit Transactions Act, or FACTA, is an amendment to the Fair Credit Reporting Act that requires foreign banking institutions to report US citizens who have opened accounts with their banks. In other words, if you haven’t reported your offshore accounts, the other country will report you to the US government.  Why? If they don’t, these foreign financial institutions face harsh sanctions and fines.

4.   Work with an experienced tax professional

Failing to report your foreign bank accounts can be considered result in huge penalties and even criminal charges, so it’s not a good idea to try to hide any of your assets. Willfully failing to file an FBAR carries much bigger penalties than unreported income on your tax returns. One of the easiest ways to make sure you have all of your bases covered is to work with an experienced tax professional every step of the way.

Contact Weisberg Kainen Mark today.

At Weisberg Kainen Mark, we understand how complicated America’s tax laws can get when you have both domestic and foreign bank accounts. If you have any questions about keeping your foreign accounts in compliance with US law, contact us today!

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Weisberg Kainen Mark, PL

As experienced trial lawyers with a passion for justice, our firm provides clients with compelling advocacy, attorney availability, and creative solutions to your tax or criminal law matters.

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