Romney's Offshore Bank Accounts and Tax Reporting

Like the vast majority of Americans I have never opened an offshore bank account.

It goes without saying a Swiss bank does not send Uncle Sam a 1099-INT or a capital gains form. So how would Romney get the money back? Would he ever do such? How does it effect eventual estate taxes? Is the profit ever taxed for US purposes?

His financial actions are unseemly for a presidential candidate to say the least. From what I understand about such accounts it seems tax evasion (or avoidance) is his primary concern.

Apply Kant to this. What if everyone did this? The US would be drained of working capital.

What if everyone had some of their money is a Swiss Bank account? You’re claiming that there would be no working capital in the US under that scenario?

And just to be clear, are you claiming that Romney paid no taxes on the money in those accounts? Are you saying you know that for sure?

No, offshore banks do not send a 1099-INT to the US government. However many countries, including offshore centers, have Tax Information Exchange Agreements with the United States and other countries. If the IRS thinks a person is a tax cheat they can apply for a court order. Cooperating countries will compel disclosure from the financial institution(s) and report back to the IRS. For example, the US has had a TIEA with the Cayman Islands since 27 November 2001. The Swiss updated their TIEA with the US in 2009.

US citizens, regardless of the country of their residence, are obligated to disclose details of any offshore accounts that they have signatory authority over if the aggregate total at any point during the year is in excess of US$10,000 even if no single account holds that much. Penalties can exceed the value of all sums in undisclosed overseas accounts.

TheseFBAR filings require disclosure of the name and address of the financial institution(s), account numbers, and balances. Do you have to give the IRS your bank account number?

The accounts covered by FBAR need not belong to the US citizen. If the US citizen has signatory authority (via a Power of Attorney) that is sufficient to require disclosure. If a US citizen, for example, has POA over his elderly non-citizen in-laws’ accounts then he must make disclosure. The IRS asserts the authority to seize the assets of non-US citizens in this manner.
Funds held in offshore accounts are most commonly moved by wire transfer. Romney could doubtlessly wire funds from any overseas account to an onshore account if he so chooses.

All funds held in offshore accounts are fully subject to estate taxes. Interest earned is fully subject to the relevant US income and/or capital gains taxes.

People hold funds in offshore accounts for a variety of reasons. To dodge taxes really requires obfuscating the details of the ownership of an account. With Know Your Customer regulations the offshore banks have gotten pretty tight on getting notarized or certified copies of identification for all beneficial owners of a shell company.

I’m not seeing the outrage here. It’s like saying that paying the boy who cuts your grass in cash should be illegal because the IRS can’t trace the money. Or paying for anything in cash should be illegal.

Romney has to report his income to the IRS, even if he doesn’t get a 1099. I’m sure that if there is $3 out there that he didn’t report, someone is the media is on top of it…

Isn’t a lot of the information about these accounts coming from Romney’s tax-returns? Seems obvious he must’ve reported them to the IRS then.

More generally, Romney has been preparing for this Presidential run almost as long as the average marriage lasts. I’d be pretty surprised if he’d been boneheaded enough to do anything illegal with his finances during that window of time.

Can someone please elaborate on that point? I’m one of the common people who feel it is an unpatriotic thing to do, but I’ll admit to plenty of ignorance about being rich. If I had been asked before reading Iggy’s post, I would have said “well obviously to hide it from the IRS,” but that doesn’t seem as obvious to me now.

My next guess is that it is just a matter of the foreign banks taking less of a cut (or offering more interest), because those banks pay less taxes to their home country. Which in a way is still … not quite “taking from America” but not showing any loyalty to invest in America either. If somebody has devotion to this country*, why make an effort not to participate in all business they can here? Seems like Greed trumps Patriotism. Couldn’t he be investing that money in US companies, our stock market, or local banks who were famously short of cash, or CREATING JOBS**, as I have been promised is what rich people do with their money?

I’m willing to try and understand it another way.

*Not talking about my mediocre level of devotion to the USA, but somebody who feels they should be the President is justifiably held to a much much higher standard. Like … if Bill Gates moves his money overseas, whatever. He isn’t trying to be a shining example as The leader. He’s just another filthy rich dude who is honest about wanting to be filthy rich above all. (since it came up, where does Bill keep his money? (When he isn’t giving it away to the poor… probably a bad example here.))

**And doesn’t it shit all over the “rich people need their money to create jobs” argument to see that rich people (and the R candidate for President in particular) just take their money and sock it away overseas?

Here’s an article that has various financial experts speculating on why Romney may have these various offshore accounts. It generally isn’t as nefarious as hiding money from the IRS, or as innocuous as simply seeking higher interest rates.

Generally, its seems most offshore accounts are used by people like Romney to get around US regulations governing what domestic businesses can do. So for example, from the article

Couple of examples:

How about your morning cup of coffee as an example?

There certainly is some coffee production in the US but not nearly enough to meet demand from all the caffeine junkies. So companies are going to buy coffee from Jamaica/Costa Rica/Colombia/Kenya or wherever. Not the US.

There is often a local wholesaler that pays the local farmer in local currency. Then the wholesaler sells to the multi-national Coffee-Corp.

The wholesaler does not want to wait 30 days for the international paymen to clear its bank. There is uncertainty over exchange rates and all sorts of headaches.

The wholesaler may not want a US based account. All of their business is based in their home country and they have no desire to get the IRS involved in their affairs. The buyer may not want to maintain accounts in the seller’s country due to lack of proper financial regulations, risk of some third world government deciding to nationalize foriegn accounts, unpredictable court systems for settling disputes, or whatever.

Instead, seller and buyer each establish accounts in a mutually agreeable third jurisdiction. They choose that jurisdiction for tax neutrality purposes. Payments are routed through those accounts and posted promptly. Adequate funds are maintained in those accounts for expected transactions. As needed funds are wired to/from those accounts.

Now I’ve no idea if Folger’s, Maxwell House, etc… actually have Cayman accounts. But the same general principles apply for some international trade.
Other example.

Not all foreign accounts are bank accounts. Could be a brokerage account (for stocks, mutual funds, bonds, etc…) for example. If you want to invest in such an item you establish the account where the financial instrument is traded.

Amazingly enough some financial instruments for American companies are listed for trade on overseas exchanges.

Insurance companies gather premiums and maintain reserves to cover potential losses. But sometimes they find they might be heavily exposed to potential loss from a particular type of natural disaster. Sometimes they buy a re-insurance policy in the international market and sometimes they issue CAT bonds to spread the risk (essentially allowing institutional or wealthy investors to assume the risk instead of an insurance company)

So if you want to buy insurance CAT bonds from Successor X Ltd which covers insurance risk of hurricanes in the US and windstorms in Europe you wil need to do that on the Cayman Stock Exchange. Which means you’ll be moving money to Cayman.

There is an expectation in the Cayman market that insurers may choose to spread the risk of possible health insurance claims by selling CAT bonds as well. The alternative is that insurers will need to maintain larger reserves if they cannot spread their risk. This means higher premiums for customers - Americans.

One example why someone may have an offshore account: my dad is far from rich but he has some money in a Hungarian bank account. This is because he receives a small pension there and the fees are a lot less if he doesn’t move the money to his American bank account. He lets the money accumulate there and uses it on his occasional trips to Hungary. (He lived in Hungary as a young adult.)

In fact, for people who have lived abroad, it’s common to have a bank account in another country just to pay bills.

Pete Peterson or the Koch brothers probably serve to fulfil the role.

Like giving to cancer research, the Smithsonian museum, Metropolitan Museum of Art, Center for the Arts? That kind of stuff?:confused: