How Does a Foreign Bank Account Work?

There are two types of foreign bank accounts- the passbook account and secret accounts. Both accounts are secure ways to store money, but both require some legwork to open. Once open you are still responsible to claim that money on tax forms.

Types of Accounts

This type of foreign account is secure, and offers a lot of confidentiality. It is run the same way as many bank accounts in the United States run. Secret accounts are more secure than passbook accounts, and have added security features of passwords and account book verification.

 Opening an Account

To open a foreign bank account you must first find someone in the country the bank is located in. This person can assist you in obtaining the necessary paperwork, fill it out and turn it in. The bank will require you to give a reason why you need an overseas account. Common reasons are business or having family overseas.

Opening a Secret Account

Secret accounts, like those with no names just account numbers require a facilitator to assist in opening the account. The facilitator will confirm the identity of the person opening the account, and make sure the person is not opening the account evade taxes in the U.S. Once this information has been confirmed the facilitator will open the account.

Reporting

You must still report funds in foreign account on a U.S. Tax return. Most foreign banks will make sure that you file a TD F90-22, which is the form to fill out that states you have money in foreign accounts. It is required for individuals or businesses that have more than $10,000 in an overseas bank. If you fail to file this form there can be jail time or expensive fines.