Not only is it a misconception that Americans can avoid taxes by placing money offshore but also certain offshore stock accounts can have dire consequences for the unwary investor.
Offshore accounts are taxable for U.S. citizens.
U.S. citizens are taxed on worldwide income. That means if even your offshore trust or international business company is domiciled in a tax haven, it is still subject to U.S. tax laws. Offshore tax havens such as the Bahamas, Belize and the Cayman Islands have gained legendary status as places for wealthy individuals from CEOs to drug barons to shield their money from U.S. tax laws. The countries' banks are eager to attract new funds, offering maximum privacy in return. However, the reality of tax havens may not live up to the legend.