Record Number of Americans Renounce Citizenship
Nearly 3,000 people renounced their American citizenship or voluntarily handed over their green cards in 2013, exceeding the previous record by more than 1,000, according to the Treasury Department. Many of those expatriating say they’re doing so because of provisions of the U.S. tax law.
“Above all, fear seems to be driving this increase in expatriations," tax attorney Andrew Mitchel told The Wall Street Journal characterizing the actions of the 2,999 people who expatriated last year. The Treasury Department is required to publish a quarterly list of those who have expatriated.
The United States, alone among developed nations, requires its citizens and permanent residents to file tax returns regardless of where they live or where their income is earned. And those requirements are about to get more onerous. The Foreign Account Tax Compliance Act, which goes into effect this year, requires foreign financial institutions to report account information for U.S. citizens and permanent residents to the U.S. government. Some foreign banks, faced with having to file more documentation on their U.S. customers, have simply closed accounts held by Americans, according to Andrew Mitchel’s International Tax Blog.
This additional requirement is causing more Americans living overseas to consider giving up their U.S. passports, according to the BBC. One expatriate who gave up her citizenship in 2011, who asked to remain anonymous, said the new law would have cost her several thousand dollars to have her taxes done, even though she wouldn’t owe any money to the U.S. government. “In the end, I sleep better now knowing that I no longer have to worry about the US requirements,” she told the BBC.
Potential penalties for failure to file required informations can be heavy, up to $10,000 per unfiled form, per year, or in some cases, up to 50 percent of an account balance per year of non-compliance.
The federal government has increased its scrutiny of expatriates’ tax issues since 2009, when Swiss bank UBS admitted it had helped U.S. taxpayers hide their money. The bank was fined $780 million and turned over records on more than 4,400 account holders. In 2012, Swiss bank Wegelin & Co., closed down and pleaded guilty to helping U.S. taxpayers hide more than $1.2 billion.
"I don't know any Americans abroad who aren't thinking about giving it up but what I say to myself is that I will fight as long and as hard as I can,” Victoria Ferauge told the BBC. Ferauge has lived abroad, mostly in France, for about 20 years.
To Learn More:
2013 Expatriations Increase by 221% (by Andrew Mitchel, International Tax Blog)
Expatriations Rose to Record Last Year (by Laura Saunders, Wall Street Journal)
Why are Americans Giving up their Citizenship? (by Tom Geoghegan, BBC News)
Number of Americans Renouncing Citizenship Set to Break Record (by Noel Brinkerhoff, AllGov)
Tax Evaders Renounce U.S. Citizenship (by Noel Brinkerhoff, AllGov)
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