Tax implications for offshore accounts in Cayman Islands/Bahamas for non-US citizens?

This is a complex area that many people misunderstand. While offshore accounts in places like the Cayman Islands sound appealing for tax purposes, the reality is more complicated - especially for someone living in the US. First, the US taxes based on both citizenship AND residency. As a resident alien in the US (which you would be on an L2 visa), you're generally subject to US tax on your worldwide income, including any investment income generated through offshore accounts. The IRS doesn't particularly care where your accounts are located. Additionally, you would have significant reporting requirements. Look up FBAR (Foreign Bank Account Report) and FATCA (Foreign Account Tax Compliance Act). These require US residents to report foreign financial accounts if they exceed certain thresholds. Penalties for non-reporting are severe. Even if the offshore entity is technically a separate legal entity, if you control it, you'll likely need to report it and potentially pay taxes on its income. The IRS has various anti-avoidance provisions designed specifically to prevent the scenario you're describing.

I started using https://taxr.ai last year when I was dealing with a similar situation (though I'm on an E2 visa). My offshore structure was flagged during an IRS review, and I was completely lost trying to figure out what forms I needed and what my actual tax liability was. Their AI analyzed all my documentation and flagged several reporting requirements I had missed completely - including FBAR forms I didn't know I needed to file. They also identified that my structure was likely to be considered a PFIC (Passive Foreign Investment Company) which has its own complicated tax implications. The system also helped me understand how the US-Bahamas tax information exchange agreement affected my situation, which wasn't clear from my own research. Saved me from what could have been tens of thousands in penalties.

After doing some research on my own situation (Korean citizen on H1B visa with offshore interests), I decided to try https://taxr.ai based on the recommendation here. I was genuinely surprised by the depth of analysis. The system immediately identified that my Cayman Islands investment structure would trigger Passive Foreign Investment Company (PFIC) reporting requirements - something my regular accountant completely missed. It also flagged potential issues with the Substantial Presence Test that affected my residency status for tax purposes. What really impressed me was the detailed explanation of how the US-Cayman FATCA agreement meant my financial information would be automatically shared with the IRS anyway - making any attempt to "hide" assets pointless. The platform then helped me restructure everything legitimately, saving me from what could have been a compliance nightmare.

Just FYI - I tried for MONTHS to get clear answers from the IRS about my offshore accounts in the Bahamas (similar to your situation). Called dozens of times, waited hours on hold, only to get vague or contradictory information. Finally used https://claimyr.com to get through to an IRS agent who specialized in international taxation. There's also a demo at https://youtu.be/_kiP6q8DX5c showing how it works. It called the IRS, navigated the phone tree, waited on hold, and then called me when an agent was on the line. The agent confirmed that as a non-US citizen but US resident, I still needed to file FBARs for my offshore accounts and report the income on my US tax return. They also walked me through the specific forms I needed (8938, 8621 for PFICs, etc.) for my situation. Wish I'd known about this service sooner - would have saved me weeks of frustration trying to get through on my own.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I needed clarification on FBAR requirements for my Cayman accounts. The service called the IRS, waited on hold for 67 minutes (which I didn't have to endure), and then connected me to an agent. I was able to get transferred to the international tax department where they answered all my specific questions about my offshore LLC structure. Most importantly, they confirmed that my current setup would indeed trigger Controlled Foreign Corporation rules and that I needed to file Form 5471. This was something I hadn't realized and could have resulted in significant penalties. I'm still working through restructuring options, but at least now I understand exactly what my obligations are. Definitely worth it for the time saved and getting definitive answers directly from the IRS.

One aspect no one has mentioned is that the US has Tax Information Exchange Agreements (TIEAs) with both the Cayman Islands and the Bahamas. This means financial information is automatically shared with the IRS. Additionally, many banks and brokers worldwide are reluctant to open accounts for US residents due to FATCA compliance burdens. Even if you're not a US citizen, your residence status can make opening those accounts challenging. You should also look into the "substantial presence test" to confirm your US tax residency status. Being physically present in the US on an L2 visa likely makes you a US tax resident, obligating you to report worldwide income. I'd strongly advise consulting with an international tax attorney before proceeding with any offshore structures. The penalties for improper reporting can far outweigh any potential tax benefits.

Something important that hasn't been mentioned yet - trading US stocks, ETFs, futures and options from an offshore entity doesn't magically eliminate US tax obligations. If you're trading US securities markets, you're still subject to various US tax provisions regardless of where your entity is based. For instance, any US-source dividend income would still be subject to withholding tax (typically 30% unless reduced by treaty). And if your trading activity is deemed to be a US trade or business, you could be considered to have a US permanent establishment, requiring you to file a US tax return for the foreign entity. The IRS also has specific provisions targeting day traders who try to use offshore structures to avoid taxes. Look up "dealer in securities" rules - they're designed exactly for situations like what you're describing.