Are Your Funds in Offshore Accounts Safe (3 Important Risks)

Are Your Funds in Offshore Accounts Safe (3 Important Risks)

Are Your Funds in Offshore Accounts Safe  

Back in the day, the idea was that U.S. Taxpayers could put their money into a foreign account in countries such as Switzerland and keep the money away from the prying eyes of the U.S. government — while generating significant growth. Fast forward to 2024 and the United States has significantly shut down various outlets to keep offshore funds. Several foreign financial institutions across the globe, including Switzerland have entered into deferred prosecution agreements where they have offered up U.S. taxpayer information to the IRS and Department of Justice in exchange for leniency. Even for taxpayers who may have been keeping their foreign accounts in numbered accounts, the foreign financial institution has your information and they may have already provided it to the US government without letting you know. Thus, it is important to have a realistic idea of whether your funds are safe in a foreign country and to highlight a few risks that we consistently see with our clients.

How Safe (Really) Are Your Offshore Accounts?

First, just because you put your money in a foreign institution that claims that they would never provide your information to the IRS, does not make it so. Times have changed, and with the introduction of FATCA (Foreign Account Tax Compliance Act), many Foreign Financial Institutions (FFIs) have entered into agreements with the United States where they agreed to turn over U.S. account holder information to avoid larger fines and possibly criminal prosecution.

No FDIC for Foreign Accounts

The United States has FDIC (Federal Deposit Insurance Corporation), which can protect your money, so that if the financial institution goes under — your money is safe. Let’s say for example you had $1,000,000 and you wanted to protect that money and not invest it, feasibly you could open up four or five different bank accounts at different institutions and protect your money. Most foreign countries do not offer FDIC equivalent protection — and even the countries that do offer protection do not protect the money up to the same value as the United States, that is something to keep in mind when considering whether you should keep your money offshore.

Levy/Lien is Possible (FATCA)

The United States has entered into various tax and FATCA agreements with more than 100 different countries. And, it is not uncommon for the United States does cooperate with foreign countries on issues including enforcing compliance, and related issues such as reciprocity agreements and extradition. When it comes to taxes, the United States has various tools they can use in cooperation with foreign countries, including liens, levies, seizures, and a writ ne exeat.

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.