Offshore Trading
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Hey, let's face it - paying taxes sucks!!!
None of us gets our money's worth - the schmucks in Washington take it and either piss it away in socialist "share the wealth" programs that, while bad enough a principal to begin with, often end up wasting 50-80% of the money put into them in administrative costs (anyone visit the Post Office lately?) or they throw the money down a hole into pork barrel (e.g., building an international airport in the boonies in Arkansas that no one needed except for Wal-Mart and Tyson Foods - wanna guess whether they were big political contributors??) or just outright waste (e.g., spending $5 million to research the history of electrification in Portland, Oregon - yeah, there's a productive way to spend tax dollars - better give Congress yet another salary increase).
Anyway, the point isn't whether you should be happy to pay taxes (if you are actually "happy" to pay them, please share whatever you're smoking - I might be happy to pay them if and only if I thought the tax system was actually equitable and most of the money wasn't simply wasted).
The point is that there's "tax avoidance" which is legal and then there's "tax fraud" which is illegal. Avoidance is reducing your tax liability through legal means. Fraud is hiding or failing to declare income (note that US citizens are taxed on all income earned anywhere in the world).
If you move cash offshore and fail to declare it and/or any income or earnings from it, it's tax fraud. Any US trading firms and/or banks operating offshore and accepting an account from a US citizen have to report the accounts to the IRS. Additionally, foreign banks headquartered in countries with which the US has a tax treaty that accepts offshore accounts regardless of physical location will report those accounts to the IRS (e.g., Bank of England's Grand Cayman branch will likely report your US citizen account). Even the once zipperlipped Swiss will end up spilling their guts to the IRS. The era of drug money laundering has opened up a lot more information flow.
However, I haven't looked into in serious detail but I believe you can legally establish an offshore corporation and fund it and have that corporation open a "foreign" trading account with a US broker and that foreign entity will be exempt from US taxes. For this to be considered legal though you'd certainly have to declare your ownership of the corporation and you'd have to declare all profits you extracted from the corporation for yourself as income. However, I believe that monies you let accrue in the foreign corporation would presumably accrue tax free.
Beware "incorporate offshore" scams though that claim they will hide you from the IRS through a convoluted structure. If you get nailed, you will have a presumption of guilt.
Even with a legal structure, you'd probably move up a few orders of magnitude on the "most likely to be audited" list, so you'd have to play things pretty straight. But you should also be able to get the foreign corporation to pay for legitimate or justifiable expenses (which would probably include travel to the country in which the corporation was domiciled).
Might be worth looking into if you have substantial income that you want to let accrue for a few years and the potential tax savings would offset the cost of setting up and operating the foreign corporation and expending all the effort involved.
Good luck.
None of us gets our money's worth - the schmucks in Washington take it and either piss it away in socialist "share the wealth" programs that, while bad enough a principal to begin with, often end up wasting 50-80% of the money put into them in administrative costs (anyone visit the Post Office lately?) or they throw the money down a hole into pork barrel (e.g., building an international airport in the boonies in Arkansas that no one needed except for Wal-Mart and Tyson Foods - wanna guess whether they were big political contributors??) or just outright waste (e.g., spending $5 million to research the history of electrification in Portland, Oregon - yeah, there's a productive way to spend tax dollars - better give Congress yet another salary increase).
Anyway, the point isn't whether you should be happy to pay taxes (if you are actually "happy" to pay them, please share whatever you're smoking - I might be happy to pay them if and only if I thought the tax system was actually equitable and most of the money wasn't simply wasted).
The point is that there's "tax avoidance" which is legal and then there's "tax fraud" which is illegal. Avoidance is reducing your tax liability through legal means. Fraud is hiding or failing to declare income (note that US citizens are taxed on all income earned anywhere in the world).
If you move cash offshore and fail to declare it and/or any income or earnings from it, it's tax fraud. Any US trading firms and/or banks operating offshore and accepting an account from a US citizen have to report the accounts to the IRS. Additionally, foreign banks headquartered in countries with which the US has a tax treaty that accepts offshore accounts regardless of physical location will report those accounts to the IRS (e.g., Bank of England's Grand Cayman branch will likely report your US citizen account). Even the once zipperlipped Swiss will end up spilling their guts to the IRS. The era of drug money laundering has opened up a lot more information flow.
However, I haven't looked into in serious detail but I believe you can legally establish an offshore corporation and fund it and have that corporation open a "foreign" trading account with a US broker and that foreign entity will be exempt from US taxes. For this to be considered legal though you'd certainly have to declare your ownership of the corporation and you'd have to declare all profits you extracted from the corporation for yourself as income. However, I believe that monies you let accrue in the foreign corporation would presumably accrue tax free.
Beware "incorporate offshore" scams though that claim they will hide you from the IRS through a convoluted structure. If you get nailed, you will have a presumption of guilt.
Even with a legal structure, you'd probably move up a few orders of magnitude on the "most likely to be audited" list, so you'd have to play things pretty straight. But you should also be able to get the foreign corporation to pay for legitimate or justifiable expenses (which would probably include travel to the country in which the corporation was domiciled).
Might be worth looking into if you have substantial income that you want to let accrue for a few years and the potential tax savings would offset the cost of setting up and operating the foreign corporation and expending all the effort involved.
Good luck.
I'm not recommending them but there is a direct access firm called Satallite Trading located in the Bahamas that might be of interest to you.
It's better to pay a small but fair share of taxes. The goverment does do things for us. It's also always better to be giving as the world will return it to you ten fold. If you want to pay less than normal form corporations, and limited Partnerships. The tax structure favors business and not individuals. A C -Corp (that you own) can expense out everything imaginable(well almost) before taxes. Pay yourself just a small salary (which is taxed a normal rate)and have the C_Corp write off all the business expenses. DOn't elect an S COrp. They can't expense everything.
C-Corp is taxed on whatever is left after spending all of the money before taxes. (I've said too much already here)
rtharp
It's better to pay a small but fair share of taxes. The goverment does do things for us. It's also always better to be giving as the world will return it to you ten fold. If you want to pay less than normal form corporations, and limited Partnerships. The tax structure favors business and not individuals. A C -Corp (that you own) can expense out everything imaginable(well almost) before taxes. Pay yourself just a small salary (which is taxed a normal rate)and have the C_Corp write off all the business expenses. DOn't elect an S COrp. They can't expense everything.
C-Corp is taxed on whatever is left after spending all of the money before taxes. (I've said too much already here)
rtharp
Well said ArchAngel,
I'm 23 and I just paid $30,000 in federal taxes, plus $6,000 for state. And someone says I should be happy for that? I agree we should all pay our share of taxes, but we are highly overtaxed right now. Most people don't pay attention to politics to understand what's really going on. I don't even own a house yet and I had to pay $36,000 in taxes! Give me a break, I worked for it, I earned it, I was smart to make the money, let me use it how I want. Don't take it from me and send it to Haiti..or to some crackhead mother with 7 kids on welfare.
I'm 23 and I just paid $30,000 in federal taxes, plus $6,000 for state. And someone says I should be happy for that? I agree we should all pay our share of taxes, but we are highly overtaxed right now. Most people don't pay attention to politics to understand what's really going on. I don't even own a house yet and I had to pay $36,000 in taxes! Give me a break, I worked for it, I earned it, I was smart to make the money, let me use it how I want. Don't take it from me and send it to Haiti..or to some crackhead mother with 7 kids on welfare.
TradeRX.....I didn't say that I prefer not to have the "privilege". If you are interest there are many books of Tax Haven and offshore accounts (type in "Tax Haven" on Amazon.com home page search.
ArchAngel....What you need is an IBC (International Business Corp.) and there is a loop hole to the legality if you open an offshore Bank. FYI - I believe that countries identified as a "Tax Haven" (there are at least 8) do not report to the IRS including desposit made my Americans (they don't ask your nationality...the accounts have numbers not names.)
ArchAngel....What you need is an IBC (International Business Corp.) and there is a loop hole to the legality if you open an offshore Bank. FYI - I believe that countries identified as a "Tax Haven" (there are at least 8) do not report to the IRS including desposit made my Americans (they don't ask your nationality...the accounts have numbers not names.)
I'm really surprised that there are no daytrading firms offering such services. They could really clean up and get a good chunk of really top traders with lots of commission business. I think the first firm to move that way could get a greater share of the daytrading world's commissions.
Banks that operate in tax havens but that also have branches in the US or a tax treaty country have already set the precident of divulging account info (most especially if they have any operations in the US). Most legitimate banks now require a copy of your passport before opening an account due to drug money laundering.
Would be the same for a broker - i.e., if a Merril Lynch had an office in the Turks & Caicos for instance, the IRS would be on them for record disclosure and with all the anti-laundering regulations it would be tough for them to hold out.
To set up your own bank isn't trivial, although some books out there make it seem so. The cost is fairly high - usually $20,000+ and you have to demonstrate some level of experience.
It would be easier and cleaner to buy yourself Belizean citizenship and then use a Belize passport to open "foreign citizen" accounts. It's easier and cleaner, but the IRS would still consider it fraud as long as you continued to also hold your US citizenship.
While you can form a foreign corporation anonymously (at least for the most part - there is still a potentially accessible record if you use a company with any operations in the US to form that corporation for you), but the point is that "legally" you are still required to report earnings and the fact that you control the accounts and (I think) own that company.
They've tied up or embroidered around most of the old loopholes so if you're caught, you've got no grey area to wiggle in. Failure to report (especially earnings) is tax fraud. As I recall, there are some specific questions on the tax forms now that ask if you control any foreign accounts or corporations. If you lie and get caught, you're automatically presumed (and easily proven) to have committed fraud.
Committing a crime and not getting caught (at least right away) isn't the same as being legal.
Also, the effort to do all of this isn't trivial (and would be a lot of effort to try to keep all of your tracks covered if you were engaging in tax fraud), so you'd need a pretty good chunk of annual deferrable earnings to make it worthwhile. Even then, repatriating the funds later could also open you to being caught.
I absolutely agree about the 50%+ tax issue. Adding up all the various Fed, State, FICA, etc. taxes, it's easy to hit 50%+. Which of course is absolutely ridiculous. It's been proven time and again that every dollar the government takes is dead money, while every dollar they leave in our pockets ultimately works to benefit the economy.
The problem is that the bafoons in Washington (who keep giving themselves raises because they think they're doing such a bang up job) don't understand basic monetary and economic principles, have completely disconnected themselves from reality, and are only interested in pandering to those who can help keep them in their kooshy jobs the best - even to the detriment of the rest of us.
Afterall, does anyone really believe that Strom Thurmond is interested in looking out for the best interests of the country? Besides, between Civil War flashbacks and insuring a continuing supply of tannis leaves, he can't possibly have much time left in the day.
Would be the same for a broker - i.e., if a Merril Lynch had an office in the Turks & Caicos for instance, the IRS would be on them for record disclosure and with all the anti-laundering regulations it would be tough for them to hold out.
To set up your own bank isn't trivial, although some books out there make it seem so. The cost is fairly high - usually $20,000+ and you have to demonstrate some level of experience.
It would be easier and cleaner to buy yourself Belizean citizenship and then use a Belize passport to open "foreign citizen" accounts. It's easier and cleaner, but the IRS would still consider it fraud as long as you continued to also hold your US citizenship.
While you can form a foreign corporation anonymously (at least for the most part - there is still a potentially accessible record if you use a company with any operations in the US to form that corporation for you), but the point is that "legally" you are still required to report earnings and the fact that you control the accounts and (I think) own that company.
They've tied up or embroidered around most of the old loopholes so if you're caught, you've got no grey area to wiggle in. Failure to report (especially earnings) is tax fraud. As I recall, there are some specific questions on the tax forms now that ask if you control any foreign accounts or corporations. If you lie and get caught, you're automatically presumed (and easily proven) to have committed fraud.
Committing a crime and not getting caught (at least right away) isn't the same as being legal.
Also, the effort to do all of this isn't trivial (and would be a lot of effort to try to keep all of your tracks covered if you were engaging in tax fraud), so you'd need a pretty good chunk of annual deferrable earnings to make it worthwhile. Even then, repatriating the funds later could also open you to being caught.
I absolutely agree about the 50%+ tax issue. Adding up all the various Fed, State, FICA, etc. taxes, it's easy to hit 50%+. Which of course is absolutely ridiculous. It's been proven time and again that every dollar the government takes is dead money, while every dollar they leave in our pockets ultimately works to benefit the economy.
The problem is that the bafoons in Washington (who keep giving themselves raises because they think they're doing such a bang up job) don't understand basic monetary and economic principles, have completely disconnected themselves from reality, and are only interested in pandering to those who can help keep them in their kooshy jobs the best - even to the detriment of the rest of us.
Afterall, does anyone really believe that Strom Thurmond is interested in looking out for the best interests of the country? Besides, between Civil War flashbacks and insuring a continuing supply of tannis leaves, he can't possibly have much time left in the day.
If you renounce your U.S. citizenship, your U.S. assets are subject to an expatriation tax, and you may be required to file tax returns to the U.S. for 10 years after your renunciation. The expatriation tax began in Feb. 1995. The presumption is that you are renouncing for tax reasons. The burden is on you to prove otherwise. I know this has nothing to do with trading, so feel free to delete.