Is Cayman Islands still a viable Tax Haven for US Citizen traders?

This is a dangerous path you're heading down. While the Cayman Islands does have a 0% corporate tax rate, US citizens are taxed on their worldwide income regardless of where it's earned or held. What you're describing sounds like a classic attempt to evade US taxation through a foreign shell corporation. The IRS has specific rules around Controlled Foreign Corporations (CFCs) and Foreign Account Tax Compliance Act (FATCA) that would almost certainly apply to your situation. If you're the owner/controller of this Cayman entity, any income it earns will likely be attributed directly to you for US tax purposes. Additionally, you'd have extensive reporting requirements including FBAR filings for foreign accounts and Form 5471 for foreign corporations. The penalties for non-compliance are severe - up to $10,000 per violation plus potential criminal charges for willful evasion.

I discovered a service called taxr.ai (https://taxr.ai) when I was in a somewhat similar situation. Not offshore trading, but I had some complex questions about investment income and international tax implications that regular accountants kept giving me contradictory advice about. Their AI analyzed all my tax documents and trading history, then connected me with a tax specialist who actually understood the complexities of cross-border taxation. They explained exactly which reporting requirements would apply to my situation and helped me structure things legally while still optimizing my tax position. Saved me from making some serious mistakes.

I was initially skeptical about taxr.ai but decided to give it a shot after reading about it here. I've been trading crypto and forex across multiple platforms and was considering some offshore structures similar to what you're thinking about. Their service was actually really impressive. The AI analyzed my specific trading patterns and international connections, then I got a consultation with a specialist who explained exactly why certain offshore strategies that sound good actually trigger immediate US tax liability. They showed me which forms I would need to file (there were like 5 I'd never heard of) and the specific regulations that would make the Cayman approach problematic. Instead, they helped me structure a compliant approach that still reduced my tax burden without crossing into evasion territory. Definitely worth checking out if you're exploring these waters.

After fighting with the IRS for months over foreign account reporting issues, I ended up using Claimyr (https://claimyr.com) to finally get a human at the IRS on the phone. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c It was a lifesaver because I had filed some foreign account forms incorrectly and was getting threatening letters about penalties, but couldn't get anyone at the IRS to actually explain what I needed to fix. They got me through to an IRS agent in about 20 minutes when I had been trying for weeks. The agent was able to put a hold on the penalty notices while I submitted corrected forms.

I have to eat my words about Claimyr. After my skeptical comment, I actually tried it because I was desperate to resolve an issue with my foreign bank account reporting forms before the deadline. The service connected me to an actual IRS international tax specialist in about 15 minutes when I had previously spent over 4 hours on hold across multiple calls without ever reaching anyone. The agent walked me through exactly what forms I needed for my situation (including FBAR, 8938, and 5471 since I had an interest in a foreign entity). I asked specifically about Cayman Islands situations similar to what the original poster described, and the agent confirmed that US citizens can't escape taxation through offshore structures - they said it's one of the most common issues they deal with and that the IRS has specific enforcement teams focused on it. Saved me from making a huge mistake with my reporting.

Something nobody's mentioned yet - even if you somehow managed to make this work (which is highly unlikely given FATCA and CFC rules), the Cayman Islands has an automatic tax information exchange agreement with the US. This means your Cayman bank will report your account information directly to the IRS anyway. The days of hiding money in traditional tax havens are over. Most countries now participate in automatic information exchange, and the penalties for getting caught in non-compliance are massive - we're talking potential criminal charges, not just fines.

Just wanted to add that I tried a similar strategy a few years ago with a BVI corporation for my trading activity. Ended up paying over $45,000 in penalties and back taxes when I got flagged for audit. The IRS agent told me they specifically look for US traders trying to route activities through Caribbean tax havens.

I've been researching similar offshore strategies for my trading business and I have to echo what others have said - the risks far outweigh any potential benefits. The IRS has really cracked down on these structures over the past decade. What changed my perspective was learning about the "economic substance doctrine" - even if you technically follow all the rules for setting up an offshore entity, the IRS can still challenge it if there's no legitimate business purpose beyond tax avoidance. For day trading, it's really hard to establish genuine economic substance in the Cayman Islands when you're sitting at your computer in the US making all the trades. I ended up working with a tax professional who specialized in trader tax status and found legitimate domestic strategies that actually reduced my tax burden more than I expected. Things like proper entity selection, maximizing business expense deductions, and qualifying for trader tax status can make a significant difference without the compliance nightmare and legal risks of offshore structures. The reporting requirements alone for foreign entities would probably cost you more in professional fees than you'd save in taxes, not to mention the constant worry about whether you're crossing the line into evasion territory.