Is it worthwhile to set up a foreign bank account?

People nowadays may not realize that foreign bank accounts are not as waterproof against the IRS as they used to be.

Those in Ohio who are looking for ways to save money on taxes may have heard about the practice of opening an offshore, foreign bank account. It is legal and, as it turns out, very easy for anyone with the initial resources to open a foreign bank account and begin using it. One person writes about having been able to open a bank account in Singapore connected to a corporation in Belize, all for around $1600.

The idea that made this so popular was the fact that money in a foreign bank account will not be taxed by the IRS. However, ever since 2007, things have been different, as the IRS has made efforts to reduce the occurrence of this practice.

What are the added rules?

In February of 2007, the IRS released a set of requirements known as the Foreign Financial Accounts Reporting Requirements. These are intended to prevent people from doing what the IRS considers to amount to circumventing U.S. law. Any citizen of the United States, and any U.S. corporations with foreign accounts whose combined value exceeds $10,000, and who has authority over or financial interest in one or more of those accounts, is required to report these assets to the government.

How are these assets to be reported?

If a person is to report his or her foreign assets, he or she submits a form known as an FBAR, which stands for Report of Foreign Bank and Financial Authority. This is a way to ensure that money that is present in foreign institutions which do not have the same reporting requirements as the U.S. is adequately reported to the IRS, so that it may be properly taxed.

Are there exceptions to the Foreign Financial Accounts Reporting Requirements?

If a person has authority over a foreign account, but he or she has no financial interest in it, and he or she is an employee or officer of a federally-regulated publicly traded corporation or of a federally-regulated bank, then he or she may be exempt from reporting. Also, accounts held in U.S. military banking facilities are not considered to be accounts in foreign countries.

It is possible, if somebody in Ohio is found out to have foreign bank assets that were not reported to the IRS, for he or she to be subjected to criminal or civil penalties, including being accused of tax evasion. In circumstances like these, it can be difficult to get a leg up without some sound legal representation. An attorney in the local area who practices tax law may be able to provide the assistance a person in this situation needs.