Tips for Staying Compliant with Offshore Tax Investments

staying compliantCompliance is important for realizing the full benefits of offshore investment. Let’s take a look at some relatively easy ways to stay on the right side of the law when considering or maintaining foreign bank accounts or holdings.


Cross-border and international investment strategies can help you save and grow your wealth. There are a number of reasons to consider offshore accounts, including preferential tax rates, privacy concerns, the desire to shelter assets in a relatively stable environment, or interest in international investments operating with a different form of currency.


It is not difficult to go astray when holding assets in a foreign country. The potential for tax crime, evasion, and tax fraud that occurs in many offshore secrecy jurisdictions is well known. New investors may not take a hard look at compliance before setting up accounts—or—seasoned investors may just wish to look the other way. Either way, the regulatory net around foreign investing is tighter than it used to be and it is a good idea to keep compliance in mind. Here are some quick tips:

  • Report of Foreign Bank and Financial Accounts (FBAR): Annual FBAR reporting is critical to maintaining compliance with the IRS. Filing FinCen Form 114 is required for U.S. persons with a financial or signatory interest in foreign funds that exceed (in the aggregate) $10,000 at any time during the reporting year. An FBAR report is due annually on April 15, Tax Day. That said, an automatic extension is applied to allow submission of the report by October 15 without application or penalty.
  • The Foreign Account Tax Compliance Act (FATCA): It is important for offshore investors to understand that their FBAR report is not the singular reporting tool reviewed by the IRS.  FATCA requires foreign financial institutions to report holdings of U.S. taxpayers annually. In order to avoid a civil audit or other criminal tax investigation, U.S. taxpayers with a higher aggregate investment sum must report assets on Form 8938, for “Specified Foreign Financial Assets.”
  • Additional reporting requirements: Depending upon your investment portfolio, the IRS may require submission of additional forms. Ownership in a foreign interest (Form 5471) and receipt of  a gift from a foreign trust (Form 3520) are just two special instances for further scrutiny when setting up your compliance protocol. 


Seasoned tax lawyers in Cleveland and Chicago help you with offshore tax investments

Robert J. Fedor, Esq., LLC offers strategic legal guidance to clients throughout the U.S. and abroad on matters of business or offshore tax, bankruptcy, and IRS civil or criminal audits. When you have questions about individual or business tax compliance, call us at 800-579-0997 or contact us.


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