For a number of reasons, you may be interested in opening a foreign financial account. Stateside, it is pretty easy to open a bank account but offshore, it pays to know a little bit about the system.
We talked earlier about some of the potential issues involved with opening a foreign account. Overall, much of the difficulty around offshore accounts has to do with compliance—reports that must be filed with the IRS and fines that will be paid if they are not.
As you think about opening an account, remember those same issues pop up on the service side. Many foreign financial institutions no longer spend big marketing dollars trying to attract U.S. business because of the compliance system needed to service the account. With that in mind, consider these points about opening a foreign financial account:
- You do not have to have high wealth to open an offshore account. If you travel frequently, spend part of the year in another country, or find it worthwhile to protect and grow your assets in an offshore tax jurisdiction, it is perfectly legal to open an account abroad. When planning to open an offshore account, take the time to understand how you will open the account. You may need to visit or contact a special bank branch or unit for U.S. persons. You may also need to make an appointment with a particular representative who is familiar with the process.
- As with any bank account, you will need to have your personal documents available. These include your passport, driver’s license, and documents that prove your residency. While you may be able to use notarized copies of your documents, certification with an apostille stamp may be required as well. To discourage tax fraud, other papers may be needed.
- Because of stringent compliance issues, you may be asked the nature of the business you intend to transact with your account and the source of the monies you intend to deposit. Before you protest, remember those compliance measures are directly aimed at deterring money laundering. Investigate exactly what is needed by the banking entity with which you would like to do business.
- When researching a bank to hold your funds, learn about fees and requirements for U.S. citizens. American citizens may have to pay a fee to open the account, higher service fees, and higher deposit requirements. With a larger institution you may qualify to open the account stateside while having access to your account with an online app. If you are already residing abroad, you may be able to open an account using your current residence and foreign identity card. You may also be able to open an Expat account online, which gives you flexibility and access to your money while living abroad.
Banking abroad is a great option for some people. If you are living abroad or planning on it, remember that you will need to report all of your income earned—regardless of your location—to the IRS each year. If you have questions about staying compliant, or the IRS has reached out to you already—speak with an experienced tax attorney about your situation.
Seasoned legal advice on offshore tax strategies, IRS audits, and tax controversy
The tax attorneys at Robert J. Fedor, Esq., LLC help clients and companies here and abroad respond to compliance challenges, allegations of tax crime, or other tax concerns. When you need responsive, legal advice locally or abroad, contact us or call 800-579-0997. We have offices in Cleveland and Chicago for your convenience.