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Offshore Account Update

Posted in on September 15, 2017

Efforts to fight tax evasion have intensified greatly in recent years, but this does not mean that people still don't invest their money in foreign financial accounts. There are many legitimate reasons to invest in offshore financial institutions, but investing funds offshore is typically greeted with strong suspicion by taxing authorities.

If you are investing money offshore and you have an obligation to pay U.S. taxes, there are many requirements you must comply with, including filing an annual Report of Foreign Bank and Financial Account. If you do not comply with the U.S. rules for your foreign investments, you could face substantial penalties and even possible criminal prosecution. A New Jersey tax evasion attorney can provide insight into what your obligations are when you're an investor in foreign funds and can help you to be proactive in fixing any past compliance problems you may have.

By acting before you come under investigation, you can avoid the most serious possible consequences if you have offshore accounts you have not disclosed or if you are otherwise not in full compliance with the rules and requirements imposed by the Internal Revenue Code and other U.S. tax laws.  It is unfortunate that so many taxpayers come under suspicion for putting money offshore, especially as a close look at countries where people make offshore investments shows why there is so much offshore investing going on.

Where are People Putting Money Offshore?

MarketWatch reported recently on the top countries across the globe where people invest their money in offshore foreign financial institutions. The MarketWatch article reported on a study that looked at wealth havens as a proportion of GDP.  The top countries, based on this metric, included the United Arab Emirates, followed by Venezuela, Saudi Arabia, Russia, Argentina, Greece, Taiwan, Portugal and Turkey.

In many of these countries, there is regular political unrest. There is also regular economic unrest and uncertainty in many of these countries as well.  As MarketWatch indicates, high or low tax rates do not seem to have a strong or direct correlation with the use of offshore wealth havens as a proportion of GDP. Instead, the countries with more offshore investments tend to be either close to Switzerland, stacked with natural resources, or the sites of political and economic turbulence. Instability and these other key factors could be a likely explanation for why offshore investing is so popular in these particular locales.

While offshore investing remains very common, there has been a global effort to crack down on tax evasion which is reshaping the way money moves around the globe. Banks are now required to report most offshore accounts to the United States if those accounts are owned by U.S. affiliated taxpayers, for example, and many foreign financial institutions have paid fines and disclosed accountholder information as part of agreements entered into with the U.S. government to avoid criminal penalties for aiding in tax evasion.

The concentrated effort to go after offshore investors leaves you vulnerable if your money is held in a foreign financial institution and you are required to pay U.S. taxes. You should contact a New Jersey tax evasion attorney to take proactive steps to protect your foreign investments and to determine your best course of action for staying out of trouble with the IRS and the Department of Justice.


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