Offshore Assets/Accounts – Things You Should Know
When people hear the words ‘offshore account’ or ‘offshore assets’ they instantly think of the super-rich, with bank accounts in a tropical paradise somewhere far, far away. Offshore accounts and assets however, are not simply for the super-wealthy. As well as conjuring up thoughts of the super-rich, offshore accounts also have certain negative connotations attached to them, as people often think of them as questionable ways for people to avoid paying their taxes. In reality however, there are countless honest, reliable, and reasonable reasons for everyday individuals to consider opening an offshore account. Before you do however, there are certain things you will need to know. These include the following:
You should seek professional advice – When it comes to matters regarding tax payments, you should always seek advice from tax professionals and firms. Remember, despite the fact that you probably performed a quick online search on Google, you aren’t an expert. The pro tax service providers however, are experts, and they know everything there is to know about offshore assets and accounts.
Worldwide incomes must be declared – When you submit your income tax return to the IRS, all earnings must be declared, no matter where they were made or where they were stored. Thanks to the FATCA act, tax evasion is now harder than ever, so all earnings made overseas, must be declared, whether they are kept in an offshore bank account or not. No matter how small the figure may seem to you, the IRS will still want to know about it, especially if it was made overseas. Put simply, every single penny you earn, must be declared when you submit your taxes.
You should go as far back in history as needed – Some people seem to think that they can get away with not declaring offshore earnings for a certain amount of time in the past. Say for example, they’ve had an offshore account for ten years, but they only disclosed their earnings five years ago, they may think that the other five years don’t matter. They do. When you submit your tax returns, you should submit info from as far back as needed. Again, this is where it pays to hire pro tax services, as they know exactly what you need to do when filing a return.
Offshore accounts are perfectly legal – There also happens to be some discrepancies as to whether or not it is legal to open an offshore bank account. Well, we’re here to tell you that, straight off the bat, offshore bank accounts are perfectly legal, and if you wanted, you could open one up right now. Of course there are different jurisdictions with different requirements, but as long as you adhere to the rules and guidelines necessary for accounts in the region that you have your eye on, you will be perfectly fine. If you are unsure, simply contact a tax service expert who will tell you what you need to know.
OVDP – Before we wrap things up, here’s a quick look at OVDP. OVDP stands for Offshore Voluntary Disclosure Program. This program is designed primarily by the IRS to ensure that individuals with overseas bank accounts, actually pay their taxes and submit accurate info. Taxpayers entering into this specific program are taxpayers with criminal exposure, in regards to tax noncompliance. In simple terms, those entered into the program are deemed by the IRS, to be individuals who deliberately submitted incorrect info regarding their taxes so as to avoid paying. When entered into this program, the taxpayers in question can avoid facing criminal charges. You see, the IRS will agree not to press charges, in exchange for penalty payments owed to them in back taxes. Generally, this back tax period can be traced back around 8 years. Now, for offshore account holders, this does not necessarily mean that all offshore assets will be entered into the program. You see, only assets which are related to the tax non-compliance will be entered into the OVDP.