I have some questions I hope someone here can help me with. I tried talking to many different people but have yet to receive a clear answer.
My situation is that I trade forex, live in the US, and would like to lower or eliminate my taxes.
I used to live in Europe and moved here to the US 8 years but I plan to move back to Europe or somewhere else in the next few years. I have dual citizenship from the US and a country in Europe. Since a US citizen is required to pay taxes on all foreign income... I will be obligated to pay taxes for the rest of my life to the IRS, where ever I live in the world. My only choice would be to give it up but I would prefer not to. In much of the world, forex is not taxed or is significantly less then here, I just want to have the same benefits as everyone else.
I also dont plan on withdrawing money from the trading acct for some years, but when it gets to a size i want I will have to regularly withdraw certain monthly sums. Putting money in a US bank account is not an option because the money's origin would probably be questioned.
My questions are...
1) What are my options?
2) Can I some how use my dual citizenship to my advantage?
-maybe open a bank account in Europe under by address there, so the US cant trace anything to me?
3) If I stay in the US and trade through an offshore broker, can the IRS keep track of anything?
4) If they(IRS) sees I have no job but i am getting money from somewhere, will this raise eyebrows?
-what are my options?
5) I was also thinking of trading in my cousins name, he lives in Europe. But I would really like to use my own name but don't know any in-depth info to move further?
6) How does the IRS enforce tax laws for citizens in other countries? How do they know how much these people make, especially if they trade securities outside SEC's jurisdiction.
7) What about opening off shore trusts and using them for further privacy and reduction or elimination of taxes.
-I found a post in another forum and would really appreciate if someone can take a look and see if the information is valid.
-that guy made 5 posts and just left, lol...I cant ask him anything but he seems to know a lot about these matters and i am hoping someone here does also.
I would love to hear you thoughts, suggestions or advise since I am not very familiar in these maters (but i can learn fast).
Any help would be appreciated or if you know someone who might know more please send me their name.
2) Can I some how use my dual citizenship to my advantage?
-maybe open a bank account in Europe under by address there, so the US cant trace anything to me?
3) If I stay in the US and trade through an offshore broker, can the IRS keep track of anything?
4) If they(IRS) sees I have no job but i am getting money from somewhere, will this raise eyebrows?
-what are my options?
5) I was also thinking of trading in my cousins name, he lives in Europe. But I would really like to use my own name but don't know any in-depth info to move further?
6) How does the IRS enforce tax laws for citizens in other countries? How do they know how much these people make, especially if they trade securities outside SEC's jurisdiction.
7) What about opening off shore trusts and using them for further privacy and reduction or elimination of taxes.
-I found a post in another forum and would really appreciate if someone can take a look and see if the information is valid.
I have to tell you legally there is no way to avoid paying taxes as a US citizen on world-wide income, however when you reside outside the US for about 335 days a year (view the IRS site for details below) you are eligible for a Foreign Earned Income credit which is around $87,500.
If you choose to incorporate and bank offshore you absolutely should use your non-US passport and address which no reference whatsoever to the US. Doing this provided you are not transferring money back to a US bank account the chances you will get caught are 1 in a million since the IRS would have nothing to go on. They must find a trail of money or paperwork that leads them to the offshore jurisdiction.
If you remain in the US and declare no income that will set off red flags to the IRS so you will need to report an amount that allows you to live in the manner you currently do. Don't report only $10,000 a year when your style of living is $100,000. Your best bet is to get out of the US for the Caribbean, Mexico, South America where your cost of living can be 50% less and as long as you file a return each year showing you made less than $87,500 you will not have to pay taxes.
As for the offshore broker also use your non-US ID and address and I suggesting visit their site through proxy or VPN so there is no record of your US IP visiting the offshore broker.
The IRS enforces tax laws for citizens outside of the US by reviewing returns past and present. If you do not file returns for example they may not catch it for some years, but they eventually will. File a return and claim the Foreign Earned Income credit.
An offshore trust does not get you out your tax obligations as the IRS code is bullet proof and includes ever conceivable option that basically means if you ever enjoy the benefit of the assets even if you do not have control over them you are reasonable for reporting the trust or account.
If you want to grow your money offshore just open an IBC and corporate account using your other ID and have everything sent to a virtual address outside the US. Report only enough for your lifestyle or...get the hell out of the US :-)
Thanks for a detailed reply. It is a huge help, I really appreciate it.
You mentioned incorporating. What are the best options for my situation?
What countries are the best for this and offer the most protection and privacy?
-Belize seems to be popping up a lot?
Ok, so...
1) I setup a personal offshore bank account using my other citizenship
2) I setup an IBC and corporate bank account with my other citizenship
3) I get out of the US, report $86,000 every year to the IRS, and i dont have to worry about the IRS anymore. Right? Is this a solid route to take?
What if for example i live outside the US, report $30,000, but actually live on 100,000 or more. How do they check to see if you are telling the truth, especially if the average income for that country is around $30,000?
You said the odds of them finding the money trail is 1 in a million, what are some of these ways? I think it would mostly be from my own personal carelessness and less them actually working things out?
If they start investigating or auditing my returns, what can they expect to find? And what if they find an IBC with same name but registered with non US citizenship? What can they charge me with?
As long as the country of incorporation offers private, non-public director/shareholder registration, no corporate taxes and low annual fees your all set -- Belize or Seychelles is usually considered the best, we prefer Belize with all things being equal.
You have summed it up almost correctly, bank using a corporation and the non-US ID, we never recommend using a personal account (see details below), report the bear minimum, 30k is fine, and take the foreign income deduction. I would avoid claiming self-employment as there are additional self employment taxes of around 10-15% that do not fall under the foreign income deduction. As if you I understand it this deduction is not available forever, but at least 10 years, so after 10 years you will have to consider if you want to keep US citizenship. My guess is in 10 years it will not be worth what it is today.
An IRS audit in this case would be held at the local US Embassy -- if you live far from an embassy it is even better. They will want records to prove you were outside the US for the required time each year such as your passport and proof of the income you are claiming. While I guess they could ask for a home visit I have never heard of that in another country. Just don't show up at the embassy in a Ferrari, and dress as an individual earning 30k ;-)
For the IRS to request information about the offshore IBC/bank account they must find evidence of transfers to the US, or SWIFT transfers to a personal account in your name anywhere in the world as all SWIFT transfers are recording and available in the US until 2012.
As long as the country of incorporation offers private, non-public director/shareholder registration, no corporate taxes and low annual fees your all set -- Belize or Seychelles is usually considered the best, we prefer Belize with all things being equal.
You have summed it up almost correctly, bank using a corporation and the non-US ID, we never recommend using a personal account (see details below), report the bear minimum, 30k is fine, and take the foreign income deduction. I would avoid claiming self-employment as there are additional self employment taxes of around 10-15% that do not fall under the foreign income deduction. As if you I understand it this deduction is not available forever, but at least 10 years, so after 10 years you will have to consider if you want to keep US citizenship. My guess is in 10 years it will not be worth what it is today.
An IRS audit in this case would be held at the local US Embassy -- if you live far from an embassy it is even better. They will want records to prove you were outside the US for the required time each year such as your passport and proof of the income you are claiming. While I guess they could ask for a home visit I have never heard of that in another country. Just don't show up at the embassy in a Ferrari, and dress as an individual earning 30k ;-)
For the IRS to request information about the offshore IBC/bank account they must find evidence of transfers to the US, or SWIFT transfers to a personal account in your name anywhere in the world as all SWIFT transfers are recording and available in the US until 2012.
That's a lot of good information, exactly what i was looking for, thank you.
I plan on staying in the US for a few more years and during that time build and compound my account to a size where I feel is good enough to live on. While in the US I don't plan to take any money out of this account, but only if an emergency arises. During this time I will also have a job and will report all my taxes like everyone else.
While I am here in the US, I plan on registering with a Canadian broker using my other ID and funding my trading acct.
-- I currently have money in my US acct, how do I transfer the money to my broker without leaving a trail for the IRS?
-- Is offshore incorporation/banking recommended from the very start so I can transfer money from my IBC to my broker or is it better to set everything up when I decide to leave in a few years?
I guess what I'm asking is...what is the best way for me to transfer money from a personal US acct.... to either an IBC or my broker depending which does a better job of hiding the money trail?
While I am here in the US, I plan on registering with a Canadian broker using my other ID and funding my trading acct.
-- I currently have money in my US acct, how do I transfer the money to my broker without leaving a trail for the IRS?
-- Is offshore incorporation/banking recommended from the very start so I can transfer money from my IBC to my broker or is it better to set everything up when I decide to leave in a few years?
I guess what I'm asking is...what is the best way for me to transfer money from a personal US acct.... to either an IBC or my broker depending which does a better job of hiding the money trail?
1. Check and see if you broker requires you transfer the funds directly from your personal account to the brokerage -- hopefully they do not.
2. Yes, it is best to setup the IBC and bank account first and have new incoming monies sent offshore so you can avoid the hassles of moving new funds around, however there are options as listed below:
A. setup an anonymous (yes, fake info) Liberty Reserve account buy it from a non-US exchanger and then use another exchanger to sell the LR for a wire to the offshore bank. The cost of this is around 5-6% plus banking fees but if done correctly, it will remove any trail from you to the new bank. It is best to do any transfers outbound under 10k also.
B. For clients we offer an offshore trust bank account that can be used to transfer money in/out through a shelf corporation in Cyprus with a UK address so it does not look suspicious. Fees are less than using digital currencies.
reducing forex trading taxes
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