Off-shore Banking Question..

TudorJones · Mar 14, 2008

Hi,

If I deposit my money at an offshore bank and get 5% per year, do I need to report this interest rate on the taxes?

I know I should legally do it since I'm a US citizen etc, but what if the interest was accrued into the account rather than getting paid out.

risktaker · Mar 14, 2008

Depends how "honest" you want to be, I guess.

buzzy2 · Mar 14, 2008

All US citizens (even expatriates) and permanent residents, must report to the IRS offshore bank accounts with balances greater than $10,000.
Of course you have to report also the interest.

Surdo · Mar 14, 2008

You do have to answer Part III, line 7a on Schedule B:

"At any time during 2007, did you have an interest or a signature or other authority over a financial account in a foreign country, such as a bank account.........."

http://www.irs.gov/pub/irs-pdf/f1040sab.pdf

Is it worth it for TAX FREE 5%?

TudorJones · Mar 14, 2008

Quote from buzzy2:

All US citizens (even expatriates) and permanent residents, must report to the IRS offshore bank accounts with balances greater than $10,000.
Of course you have to report also the interest.

But, not if the offshore bank is owned and operated by your trusted associates. The information will never get out.

& for citizens of other countries, they are more free to do offshore banking I think since they don't have as stringent a rule as we have.

TudorJones · Mar 14, 2008

Here is a scenario:

1) Start an off-shore bank.
2) Solicity your family and friends (& non US citizens) with interest rates of 5% tax free, with complete privacy.
3) Invest the money elsewhere and make much higher returns.

Trader KGB · Mar 14, 2008

With today's TIEA agreements, opening an account in any of the once-popular haven countries is the same as opening one at your local Bank of America branch down the street. Don't waste your time trying to be sneaky..

risktaker · Mar 14, 2008

I's be more concerned how you got the funds there and how you plan if ever to repatriate back to the states.

TudorJones · Mar 14, 2008

Quote from risktaker:

I's be more concerned how you got the funds there and how you plan if ever to repatriate back to the states.

There is no reason to ever bring the funds back..

For those that are withdrawing money, start another off-shore investment corp, and invest in amercian assets, stocks bonds etc.

TraderZones · Mar 14, 2008

Quote from TudorJones:

But, not if the offshore bank is owned and operated by your trusted associates. The information will never get out.

I am sure that is what Eliot Spitzer thought. And Roger Clemens. And a host of others. When it comes to illegal activity, there ain't no such thing as trusted...