Despite the ongoing efforts of the Obama administration and Congress to shut down any tax advantages of investing offshore, you can still achieve substantial non-tax advantages by investing outside the United States. These include:
But along with the opportunities comes the responsibility to comply with Washington, D.C.'s increasingly militant attitude toward all things offshore.
The centerpiece of the anti-offshore vendetta is to require Americans to disclose more information about assets they have offshore. And given the heavy penalties for non-disclosure, not complying is a very high-risk option.
What's reportable? What's not? What are the reporting deadlines? If you invest offshore, you need to know the answers. So do your professional advisors. I'll be discussing the latest requirements at the Offshore Advantage Academy.
Here's a summary of the reporting laws for offshore investments:
A law called the Bank Secrecy Act (which effectively ended bank secrecy in the USA) requires you to file a report each year acknowledging any "foreign bank, brokerage, or 'other' financial accounts" you hold.
There are three separate reporting requirements:
1. You must acknowledge foreign accounts with an aggregate value exceeding $10,000 each year on Schedule B of your federal income tax return.
2. You must file an obscure form with the cryptic name "Form TD F 90-22.1" with the U.S. Treasury Department each year. This form is also called the "foreign bank account reporting" or "FBAR" form. Information requested on the FBAR includes how many foreign accounts you hold, their maximum value, the name of the financial institution where the accounts are held, the account numbers, etc.
3. If you hold more than $50,000 of assets outside the United States, a special reporting regime becomes effective in 2011, and will apply to your 2010 tax returns.
Obviously, if you can legally and unambiguously avoid reporting your offshore account or accounts, you should protect your financial privacy by not reporting them. But in recent months, Congress, the Treasury Department and the IRS have moved to expand the definition of what constitutes a “reportable” foreign account.
See you in Cabo!
- Access to investment and business opportunities not available in the United States.
- Protection from the falling U.S. dollar.
- Reduced portfolio risk.
- Protection from professional liability and other claims
- Increased privacy.
- Investment continuity in the event of disruptions in U.S. markets.
- The ability to create a financial lifeboat for individuals and families threatened by totalitarian governments.
But along with the opportunities comes the responsibility to comply with Washington, D.C.'s increasingly militant attitude toward all things offshore.
The centerpiece of the anti-offshore vendetta is to require Americans to disclose more information about assets they have offshore. And given the heavy penalties for non-disclosure, not complying is a very high-risk option.
What's reportable? What's not? What are the reporting deadlines? If you invest offshore, you need to know the answers. So do your professional advisors. I'll be discussing the latest requirements at the Offshore Advantage Academy.
Here's a summary of the reporting laws for offshore investments:
A law called the Bank Secrecy Act (which effectively ended bank secrecy in the USA) requires you to file a report each year acknowledging any "foreign bank, brokerage, or 'other' financial accounts" you hold.
There are three separate reporting requirements:
1. You must acknowledge foreign accounts with an aggregate value exceeding $10,000 each year on Schedule B of your federal income tax return.
2. You must file an obscure form with the cryptic name "Form TD F 90-22.1" with the U.S. Treasury Department each year. This form is also called the "foreign bank account reporting" or "FBAR" form. Information requested on the FBAR includes how many foreign accounts you hold, their maximum value, the name of the financial institution where the accounts are held, the account numbers, etc.
3. If you hold more than $50,000 of assets outside the United States, a special reporting regime becomes effective in 2011, and will apply to your 2010 tax returns.
Fail to comply with these requirements, and you could face a negligence penalty of US$10,000. If you "willfully" fail to file the FBAR, you face a fine up to US$250,000, imprisonment up to five years, or both. Penalties are doubled if you violate any other U.S. law.
Is it Really a Foreign Account?
Unfortunately, it's not always easy to figure out whether you need to file the FBAR form or not. If you have what most of us think of as an "account" at a foreign bank or brokerage, it's clear you must file the form. But even using the published guidance from the IRS, it's less clear whether you must disclose details of other offshore relationships.Obviously, if you can legally and unambiguously avoid reporting your offshore account or accounts, you should protect your financial privacy by not reporting them. But in recent months, Congress, the Treasury Department and the IRS have moved to expand the definition of what constitutes a “reportable” foreign account.
That makes it more important than ever to have a clear-eyed indication of what’s reportable, and what’s not. It’s not easy to find this information, but in my presentations in Cabo San Lucas, I'll be discussing:
- Why you may need to file more than one FBAR for each offshore account you hold
- Whether precious metals certificates and electronic gold accounts are reportable
- Types of assets you can still legally hold offshore without reporting them…
See you in Cabo!
3. If you hold more than $50,000 of assets outside the United States, a special reporting regime becomes effective in 2011, and will apply to your 2010 tax returns.
Does that include real property??
Posted by: J | July 27, 2010 at 01:32 AM
No, the regime doesn't appear to apply to real estate outside the USA. However, income from the property is reportable and taxable.
Posted by: Mark Nestmann | August 04, 2010 at 01:39 PM