How to Open a Legal Offshore Account

Often corporate tax planning is far more complex than small business planning because the entity involved is much larger and no longer qualifies as a sole proprietorship, meaning it necessitates all sorts of different taxes.

You’ve likely heard stories of people stashing cash and assets offshore to avoid extreme taxation. The recent Panama Papers scandal poured gasoline on the fire. Is offshore banking legal? Technically yes, but you’re going to want to have a solid corporate tax planning and accounting strategy in place before opening your first account. Don’t even dream of trying to hide it from the IRS.

Here’s what you need to keep in mind if opening an offshore account is part of your corporate tax planning strategy:

Be Transparent About Your Account

Get the famous Swiss bank accounts of the silver screen out of your mind. Other countries, including Switzerland, will gladly turn over your financial information to the IRS if it’s requested. Offshore accounts aren’t illegal. There’s no reason to be cloak and dagger about saving some of your money in a foreign country, so stop thinking about clandestine meetings and start thinking mundane bank transactions. If you have $10,000 or more tucked away overseas you must file a FBAR IRS form, which allows the federal government to tax the money in that account.

It’s Not Just for Companies

An offshore account is a good part of your corporate tax planning strategy, but it’s not limited only to corporations. Plenty of individuals open overseas accounts to reap benefits from lower tax rates and also save in a stable currency. For people from war-torn countries, or countries experiencing political instability, an off-shore account provides an enormous sense of stability.

Don’t Try It Alone

The US Tax code is nearly 70,000 pages long. No layperson, no matter how financially savvy, could ever dream of being able to understand all of the nuances. Make sure you’re armed with the best team who can help you navigate the complexities of tax laws and lay out exactly what you need to do to keep your offshore accounts legal and above board. If you’re a corporation, you’ll need an accountant, lawyer, and tax advisor to begin with, so lean on your team and listen to their advice. The professionals at Advanced Accounting have years of experience in working with businesses of all sizes and can help you. See us for a consultation before you make any decisions that could impact your company.

The Penalties for Failing to Disclose are Severe

It bears repeating- do not try to hide your offshore account from the IRS. When you sign your personal or corporate tax returns you are vouching for the truth of the documents. To willfully (or even ignorantly!) withhold information is perjury and can be severely punished by the authorities. If you lie or omit information on your tax return the IRS will hit you with a massive civil fraud penalty. Additionally, depending on the size of your account and whether or not the failure to disclose was deliberate, you could be facing a fine that ranges from $10,000-$100,000. In severe cases you can face jail time for tax evasion, so make sure you have your ducks in a row before you file!

Pick Your Place Wisely

Corporate tax planning experts will agree that opening an offshore bank account is more complicated than spinning the globe and throwing a dart. Be pragmatic and deliberate in your choice, find a country where you can further your business interests in an intelligent way, and look out for any political or social instability. Many offshore accounts require larger minimum deposits, even if the dollar is strong again that country’s currency. You have comparably fewer safeguards if something goes horribly wrong. Speak with your team, lawyer, tax advisor and accountant about where you’d like to take the business and make an educated decision. After your initial investment keep an eye on the political and social climate to ensure that your hard-earned money is not in danger.

For all of your corporate tax planning needs, consult the seasoned experts at Advanced Accounting. Their staff has multiple certifications and many years of experience working in business, personal and corporate tax. They can help you develop a strategy that is right for your company, and can scale as you grow!  Whether you are looking to open an offshore account or just need a solid tax plan, we’re the experts who can  process.

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