Is Offshore Banking Illegal?

While I was reading in regards to U.S Treasury Secretary nominee Steven Munching being grilled about his involvement in business offshore accounts. I wanted to educate myself on its legality.

The media along with some government officials have portrayed it negatively over the years. What I found out was quite surprising.

I learned that it is legal to have an account in another country. In fact for as little as a couple of hundred dollars, foreign banks will let you open one. What makes it illegal is the failure to disclose your money to the IRS. Basically hiding it from them. 

If you have money outside the U.S you must report it to the IRS or face fines, including jail time. This doesn’t come too much surprise because, well, it’s the IRS. 

Now most of the stories I’ve heard have been about offshore accounts being tax havens. But there are good reasons why people have these accounts.

First and foremost having money offshore does not make it tax-exempt. Like I said earlier, the IRS wants you to report money earned and kept overseas. If you hide it, that’s when its illegal.The benefits are that many countries the money earned could be tax free. Not only that but offshore accounts allows you to invest internationally as well as earn more capital. There’s also currency exchanges and the investments you can make off that.

The U.S also accepts money from foreign entities and people too. Not so for the tax benefits but because it offers stability that other countries don’t have. There’s the fears of economic collapse, civil war or political upheaval that drive many to create accounts here. 

So in short, offshore accounts are not illegal. They could a good way to invest and make more money as well to keep your money safe

Source:investopedia.com

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