Offshore Precious Metals: IRS Reporting Risk for U.S. Investors -

Offshore Precious Metals and Reporting Myths: What U.S. Investors Need to Know

Over the last few years, a wave of offshore physical precious metals dealers—and structured storage programs—have flooded the market with a dangerously misleading claim:

“Because your metals are held directly, you don’t need to report them to the IRS.”

This language is not only deceptive—it can lead U.S. investors straight into serious IRS trouble.

The Misuse of “Held Directly”

Offshore metals dealers will tell investors they don’t need to file IRS Form 8938 or FBAR because their metals are “held directly.” But here’s what these promoters conveniently leave out—the IRS has made it clear that context matters, especially when a foreign institution or agent is involved.

IRS Reference (Source: IRM 4.26.16)

https://www.irs.gov/irm/part4/irm_04-026-016

According to IRS guidelines, the following are not considered reportable accounts:

Stocks or bonds held directly
Real estate
A basic safe deposit box
Precious metals held directly by the person

However, the IRS then adds:

“A reportable account relationship may exist where a foreign agency holds precious metals on deposit or provides insurance or other services as an agent of the person owning the precious metals.”

In other words, if the storage facility is a financial agent, depository, or custodian—or affiliated with one—you likely have a reportable relationship. Most foreign private vaults, especially those doubling as dealers or promoters, fall under this category.

Allocated vs. Segregated: You Can’t Have Both

Another red flag is the claim that metals are held in both an “allocated and segregated” fashion. From an industry standpoint, that’s an oxymoron.

Allocated: Your metal is assigned to you but stored in bulk with others
Segregated: Your specific bars are stored separately and physically isolated

They are not interchangeable terms. A legitimate program will choose one method and disclose it clearly.

Penalties for Non-Compliance Are Severe

If you buy into one of these offshore programs and fail to report it properly, the consequences can be brutal.

Form 8938 (FATCA) Non-Filing Penalties:

$10,000 minimum fine, automatically
Can increase to $50,000 for continued noncompliance
Additional 40% penalty on any underreported tax
Plus interest

FBAR (FinCEN 114) Non-Filing Penalties:

Non-willful violation: Up to $12,459 per incident
Willful violation: The greater of $124,588 or 50% of the account balance at time of violation

These aren’t theoretical risks—they’re enforced. And the IRS has become increasingly aggressive about foreign asset disclosures.

Digital Precious Metals = Reportable Tokens

Even if the metals are technically stored inside the U.S., digital metal tokens or structured representations may still be subject to reporting. Why?

Because:

The token is what you legally hold
The physical metal remains under the sponsor’s control
You’re not taking legal possession of the underlying bar

Until you convert or redeem those tokens, you’re holding a derivative—not actual metal.

Most Programs Are Lightly Regulated or Not Regulated at All

Physical and digital offshore programs operate in regulatory gray zones. In most cases:

There’s no federal oversight
Their legal structures favor promoters—not clients
Their “disclosures” are often just marketing copy in disguise

If you’ve invested in one of these programs—or are considering it—and haven’t filed with the IRS, speak with a qualified accountant or tax attorney immediately.

Don’t rely on the platform to protect you. Their job is to attract assets, not defend yours.

Final Word: Protect Yourself, Not Their Marketing Funnel

As a U.S. investor, it’s your responsibility to understand how IRS rules apply to your offshore or digital metals holdings. Don’t assume these programs offer legal clarity. Many are designed to maximize revenue—not reduce your tax risk.