Want a foreign bank account? Think about this first
New York residents have a number of reasons why they may want to open offshore bank accounts. There can be some advantages to doing so, but there can also be some disadvantages. For instance, you may not be aware of some tax implications.
When it comes down to it, the Internal Revenue Service does everything it can to discourage the use of foreign bank accounts. The IRS has placed restrictions on the banks that allow the opening of these accounts and owners of these accounts may have to pay significant penalties if they fail to report the assets to the government.
The Financial Crimes Enforcement Network Form 114
Anyone with assets of $10,000 or more in a foreign bank account must electronically file the FinCEN form in order to declare their assets. The failure to file this form yearly may result in the account owner having to pay a penalty that may equal up to 50 percent of his or her account assets. Obviously, paying a penalty like that is something you would want to avoid.
If you have money in an offshore account that you earned while working out of the country and an employer in that country paid you, you may face double taxation. Not only will you have to pay taxes in the country where you earned the money, but the United States government can also expect you to pay taxes on the income. The government can even gain access to the account to collect any taxes owed.
The Foreign Account Tax Compliance Act has more foreign banks refusing account requests made by United States residents. Banks who fail to report accounts held by U.S. residents with $50,000 or more in assets could face fines from the government and exclusion from U.S. markets. That would be a big hit to any bank. Thanks to FATCA, the government is likely to know if you have a foreign bank account because your bank, if your account has enough assets, will report it even if you do not.
Accusations of tax evasion
Having an offshore bank account may open you up to accusations of tax evasion. You may take advantage of the benefits offered at a foreign bank account and avoid such accusations by making sure you do your due diligence and report the assets. If you do not, legal counsel may be able to help address tax evasion charges.
Having a foreign bank account may sound appealing, but it is just important to make sure you understand all that it entails and the tax and criminal consequences it can have if you do not handle the account appropriately. If you open such an account and find yourself facing tax issues because of it, a New York tax attorney may be able to help you address the situation.