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From “Offshore Banking Made Easy” in The Palm Beach Letter: You can open one or more foreign bank accounts and not have to file a special IRS declaration form (called an “FBAR”)… as long as the aggregate amount of the accounts doesn’t exceed $10,000 at any point during the year.
That’s according to the IRS form TD F 90-22.1 Report of Foreign Bank and Financial Accounts (FBAR).
Each individual is limited to $10,000 overall. (That means you can’t have one account with $9,000 and another account with more than $1,000.)
Be careful if your account pays interest. If interest pushes the balance over $10,000, you’ll be required to fill out the FBAR form and report the assets and interest income. If the account pays interest, give yourself a cushion.
Don’t take the FBAR requirement lightly. A “simple, nonwillful failure to file” penalty is at least $10,000.
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A willful failure to file, or a falsified filing, can bring penalties up to 50% of the highest balance in the account… plus possible jail time.
Harry Abrahamsen admitted he failed to file an FBAR report on $1 million hidden in Swiss bank accounts. He was sentenced to three years of probation (one spent under house arrest).
He also lost most—if not all—of the money.
2012 saw the advent of the Foreign Account Tax Compliance Act (FATCA). It’s made it much more difficult for Americans to get bank accounts overseas. The banks don’t want to deal with the IRS’ onerous reporting requirements.
But you’ve still got options. Canada is the easiest place to set up a foreign account. TD Bank is a good place to start.