Dockwalk Magazine. Written by Tom Andrews of AvMar Accounting Services
The answer is… Maybe!! So why take the chance.
One of my goals when meeting with clients is to help clear up some of the misconceptions and rumors that make their way around the yachting industry. One of these misconceptions is the topic of “offshore bank accounts” and a more common questions I am asked goes something like this “if I divert my salary to an offshore bank account from my foreign employer do I need to report that salary to the IRS?” The answer is absolutely!! First of all, if you are a US citizen you are required to report all world wide income to the Internal Revenue Service, not only that there are special reporting requirements if you own or are a signatory in a foreign account
If you have a financial interest in, or signature or other authority over, any type of financial account in a foreign country, such as a bank account, you may be required to report this to the Department of Treasury. Any United States person with one of these connections to foreign financial accounts must complete Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, which is not an IRS form but is available at the IRS web site, if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year. The instructions are fairly straightforward, asking for account numbers, taxpayer identification number, country in which the account is held and the like. Assistance is also available via toll-free call. Remember also to check the appropriate box on Schedule B of Form 1040.
Thanks to the Patriot Act the IRS has begun aggressively enforcing penalties on American citizens who are not reporting their foreign bank accounts so please consult your accountant or tax advisor to insure you are in compliance with these rules. Now if you are a foreign crewmember working for a foreign employer and you fall within the parameters of your countries tax treaty you are probably not bound by the rules that your fellow American peers are required to follow it is still important however to consult a tax preparer in your country of citizenship.
In this day and age of the Patriot Act and the aftermath of September 11th, it is important to follow a common sense approach to reporting your income. The yachting industry has changed over the past several years, owners and captains used to take a casual approach to hiring and paying crew, now the owners are being watched more closely not only by the Internal Revenue Service but also other federal agencies, this puts more pressure on the captains and ultimately the crew.