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UK offshore account tax issues?

Lots of big European banks have offshore subsidiaries in Jersey, Guernsey, and the Isle of Man that offer attractive rates on pound and euro deposits. These mostly are marketed to UK expatriates, due to quirks of UK tax law that exempt them from UK taxes, but they're open to anyone. They look like a straightforward way to park money in those currencies. I'm particularly thinking of HSBC, since they're my bank in the US.

Are there any tax gotchas for US residents? I realize that if I were so inclined, I might accidentally forget to report the interest and hope the IRS didn't notice, but that's not my intention.

Regards, John Levine, snipped-for-privacy@iecc.com, Primary Perpetrator of "The Internet for Dummies", Information Superhighwayman wanna-be,

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ex-Mayor"More Wiener schnitzel, please", said Tom, revealingly.

Reply to
John L
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As it sounds like you know, U.S. citizens and residents are taxed on their worldwide income. Thus, you would need to include any income from the account on your U.S. tax return. You would also need to file Form TD F 90-22.1. Lastly, if you invest in a foreign mutual fund, you will be subject to the passive foreign investment company ("PFIC") rules. These are complicated rules that you would likely want to stay away from.

Reply to
jmail7

Yeah, I have a savings account in Ottawa and the forms are pretty simple. The messiest part is coming up with plausible exchange rates, but even that's not hard.

Yuck. Although I'm sure that they offer all sorts of exciting financial instruments, I'm just interested in bank accounts, nothing fancy. See, for example,

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R's, John

Reply to
John L

example,

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One additional item I forgot to mention was that if the accounts are denominated in a currency other than the U.S. dollar then you may have foreign exchange gains/losses. You would also need to translate the interest income into U.S. dollars.

Reply to
jmail7

Well, under the circumstances, that's pretty much the idea.

Would this differ in any way from what I'm already doing with the Canadian account mentioned in the message you were responding to?

I'm more worried about whether the IRS is likely to say, "Aha, an offshore account in Guernsey, let's do the body cavity search style audit to see what he's hiding."

Reply to
John L

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