What are some things that come to mind when you hear offshore account? Many assume tax evasion is the only purpose of an offshore account. But in fact, there are many valid reasons for holding offshore accounts. For U.S. taxpayers living and working abroad, it could be a means of convenience and as business is becoming more global, offshore accounts are used for investments and other international transactions.
Many U.S. Persons are unaware that they must report all income earned worldwide. This includes foreign income. Most taxpayers should just complete Schedule B and acknowledge their offshore accounts and submit it with their tax returns. However, that may not be the end of it as there are other filing requirements. These are based on several factors including the amount in the account, the taxpayer's filing status and residency. For instance, if one has a foreign account where the aggregate value exceeds $10,000 at any time during the year, in addition to schedule B that taxpayer must file a Form 114, Report of Foreign Bank and Financial Accounts, more commonly known as and FBAR.
If you are unsure as to whether you have a filing requirement, it may behoove you to seek the advice of a tax professional. For more information on offshore accounts and filing requirements, please visit www.irs.gov.