Under a new administration comes the release of a new tax plan. For those who have been taking advantage of tax loopholes with their offshore accounts and keeping profits offshore, they may be finding new ways to submit their taxes since previous incentives may no longer be available through offshore accounts. Below are planned changes that will go into effect immediately for the upcoming tax year, focused directly on offshore accounts and corporate taxes.
Offshore accounts will be subject to taxes also
One of the biggest changes for offshore accounts is making them accountable for tax purposes just like domestic taxes. Over the last decade, businesses that have continued to grow have found it beneficial to move their accounts offshore for a tax loophole. With these accounts outside the United States, the requirement to report taxes on these funds has been relaxed. With the new tax plan released by President Biden in April 2021, the existing 10 percent exemption for business owners with offshore accounts would be eliminated, forcing taxes to be collected on these funds.
Upgrading foreign tax profits
With the tax exemption removed, foreign tax profits will be increased to 21 percent so that all corporations are paying the same percentage. Those who are also paying foreign taxes will have to pay the difference in tax percentage to equal the new 21 percent moving forward. This loophole of smaller taxes due to reduced foreign taxes will no longer be available for offshore accounts.
IRS could gain access to domestic bank accounts
Smaller businesses that use domestic bank accounts could also be more exposed to the IRS, even without offshore accounts. Under the recently released American Families Plan, the IRS could be granted access to the transfers and deposits coming in and out of your bank accounts domestically. This allows the IRS a more accurate look at the deposits coming into accounts and where they are coming from to determine the right amount of taxes.
Multiple bank accounts will also be acknowledged, as banks and other financial institutions will be required to report this information in addition to capital interest. Currently, this obligation is not required to report in banking accounts, including business reports that directly affect smaller businesses. Only time will tell how much this tax plan will become law and when it will be approved.