Offshore Accounts Today Equal Transparency was published by JD Supra on 12/18/18.
The days of avoiding taxes through hiding money or assets in unreported offshore accounts are gone. Nonetheless, there are still taxpayers with undeclared offshore accounts, as well as the banks and bankers that are suspected of helping clients hide their reportable assets overseas.
The concept of “hiding money offshore” is outdated due to the following inaccurate perceptions:
- “Privacy”: Is there really privacy in an offshore account? For US Taxpayers there is no privacy due to FATCA.
- “Tax Havens”: Panama, the Seychelles, BVI’s.? The US is considered to be a top ranked tax haven as it is not participating in the Common Reporting standard (CRS) and has favorably opaque state tax laws for incorporation.
- “Don’t have to pay taxes”: Many offshore jurisdictions offer services and products promoting tax sheltered financial accounts. IRS reminds taxpayers: “If it sounds too good to be true, it probably is!”.
- “Cheaper”: The concept of pay zero taxes and sign here has led a number of individuals to incur legal costs and pay penalties when they run into problems with tax authorities and end up having to hire lawyers and accountants to solve their problems.
Legitimate reasons for maintaining financial accounts abroad are:
- diversification (investment and governmental)
- running a business
- asset protection
- some of the banks might be “safer”
- yields on bank accounts could be higher
- expatriate work assignment
- easier access to medical and legal coverage when traveling
Earlier, Bankers were asking clients if they are US citizens or Permanent Residents to comply with FATCA. Now they are asking: Where are you paying taxes?
The Common Reporting Standard (CRS) has made it more challenging for taxpayers to establish unreported offshore accounts. Tax authorities in over 100 countries have been exchanging taxpayer information and are able to crosscheck the status of local tax declarations through this data sharing process (Automatic exchange of information (AEOI)).
Don’t be a victim of your own making
US Taxpayers should report all reportable foreign accounts no matter what. They ought not fall prey to schemes that promise hiding money and income offshore. Since Bank secrecy no longer exists, it is best to consult your financial specialist and get your taxes and filing requirements in order.