A U.S. citizen might desire a foreign bank account for several reasons. Perhaps she lives overseas, travels frequently or has inherited money from an overseas relative and finds that maintaining the foreign account is easier or less expensive than transferring or exchanging money. Or maybe she wants currency or investment diversification. Although recent Internal Revenue Service crackdowns and legislation have made access to foreign bank accounts more difficult, it's still possible for Americans to have foreign bank accounts.
Many foreign banks have become reluctant to allow Americans to open bank accounts because of greater IRS scrutiny. In 2009, the Swiss bank UBS was fined $750,000 and was required to provide the IRS with names of Americans who had accounts there. Increasingly, foreign banks that previously welcomed business from Americans have stopped doing so and, in some cases, they have even directed Americans with accounts to move their money.
Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act was passed to ensure that Americans who have foreign bank accounts disclose these to the IRS and, if necessary, pay taxes. Americans who live in the United States and have assets in foreign accounts with an aggregate value of at least $50,000 must attach a Form 8938 to their federal income taxes. Americans who live abroad must attach the form if their balance is $250,000. Banks that house these accounts are required, beginning in 2014, to begin reporting to the IRS and, in 2017, to begin withholding U.S. income taxes. This requirement further reduces the number of banks willing to allow U.S. citizens to open accounts.
Foreign Bank and Financial Accounts
Americans who are signatories on accounts that have held more than $10,000 at any point during the year also are required to file a Form TD F, 90-22.1 Report of Foreign Bank and Financial Accounts, or FBAR, with their taxes. Failure to file either the Form 8938 or FBAR constitutes tax evasion and fraud and can result in cash penalties and jail time.
Still Time to Open an Account
Despite the challenges, though, some foreign banks still allow U.S. citizens to open accounts. U.S. residents moving to Scotland, for example, may open a bank account via the Internet at HSBC, Lloyds, Barclays, Bank of Scotland and NatWest and the Royal Bank of Scotland. U.K.-based banks, such as Barclays and Lloyds TSB, also offer bank accounts for those still living in the United States, although they have minimum balance and income requirements. These accounts require application by mail.
- Lloyds TSB International: Offshore Bank Account in £, € and US$
- Ecosse Direct: Banking
- New York Times: Overseas Finances Can Trip up Americans Abroad
- Forbes: Undisclosed Foreign Bank Accounts? They're Even More Explosive Now
- The Taxdoc Spot: Do You Have a Foreign Bank Account
- Forbes: Most Foreign Banks Don't Want U.S. Clients; How to Find One That Does
- IRS.gov: Information for U.S. Taxpayers on Form 8938 Requirements
- Barclays: Non-resident Bank Accounts
- Medioimages/Photodisc/Photodisc/Getty Images