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Question:


What’s the big to-do about having an offshore account, or a bank account based outside of the U.S.? Why is this illegal...or is it illegal?
-JustWonderingRandomly


Answer:


The term “offshore account” is often used to refer to an account at an institution in a financial center known for maintaining the confidentiality of its clients, but from the point of view of U.S. authorities, all foreign accounts, whether in the Cayman Islands, Switzerland or anywhere else, are the same. It’s not illegal to have one; you just have to report its existence to the Internal Revenue Service if you’ve got $10,000 or more in it.

The big to-do is a result of American citizens and permanent residents parking significant sums in foreign accounts and not paying tax on the interest that they earn or, much worse as the IRS sees it, not paying tax on the money when it was earned in the first place. But there are also benign reasons for Americans to keep money offshore, unrelated to tax or the evasion of it. Anyone with family or business interests abroad, or who is living abroad or expects to retire there, would have a desire and possibly a need to have foreign banking arrangements. Accountholders just need to be open about it.
-Conrad de Aenlle



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