Tax Evaders Renounce U.S. Citizenship

Tuesday, January 24, 2012
Rather than deal with the complexities of U.S. tax law, Americans living overseas are increasingly renouncing their citizenship in order to avoid paying their income taxes.
According to National Taxpayer Advocate Nina E. Olson, approximately 4,000 people gave up their citizenship from fiscal year 2005 to FY 2010. Renunciations increased sharply within the past three years, from 146 in FY 2008 to 1,534 in FY 2010. And during the first two quarters of FY 2011 alone, 1,024 Americans ditched their citizenship.
The advocate’s report cites two reasons for the renunciations. First, many taxpayers abroad say they are confused “by the complex legal and reporting requirements they face and are overwhelmed by the prospect of having to comply with them.”
Second, others have accused the Internal Revenue Service (IRS) of “bait and switch” tactics, telling Americans they can resolve their unpaid taxes under an “older voluntary disclosure programs with the promise of reduced penalties, only to find themselves subjected to steeper penalties.”
According to tax attorney Andrew Mitchel, another factor has been a change of law in 2008 that means “non-U.S. citizen, nonresidents can now annually visit the U.S. for 120 or more days without becoming taxed as U.S. residents (under the pre-2008 rules, visits to the U.S. for more than 30 days during any of the 10 years following expatriation caused the individual to be treated as a U.S. resident for that year).”
-Noel Brinkerhoff
Taxpayer Uncertainty Prompts Citizenship Renunciations (by Michael Cohn, Accounting Today)
2011 Annual Report to Congress (National Taxpayer Advocate) (pdf)

More (Wealthy) Americans Are Renouncing Citizenship (by Catherine Rampell, New York Times) 

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Livin Abroad 12 years ago
most of these articles are way off. most americans don't renounce their citizenship for tax reasons alone though it is part and sometimes a big part of it. its about freedoms which the us is starting to become communist slowly eroding freedoms in the name of national security and and deficit reduction using the constitution as a door mat. to all you stupid politicians in washington...wake up the mess is not because of the tax code its because you idiots don't know how to balance a check book or manage a credit card..go to financial classes and learn how to run a better budget. don't get me wrong i love the red white and blue but just not at all happy with the tenants who are in washington who is destroying its meaning. with these taxes and tax laws like fatca and the obama care and the patriot act are just a few examples. the fact that you work and live abroad and uncle same seams to have this delusion that its their money you earned abroad has been another turn off with many americans. also its not just the rich who are turning in their passports its many average americans as well who is doing the same. if you look at history many of the laws and taxes passed over the last 100 years has been done before by the roman empire, persian empire, ottoman empire and the british empire. brittan was the only one that did not completely go away but came close but the rest are just footnotes in history and as much as i hate to say it if we don't change our ways soon we may be joining them. if i lived in the us and was using its roads, kids attending schools there, using its parks and social services then ok i can understand paying the taxes there for income i make there to include interest from savings and money made from trading on the dow or nyse and stuff. if however i am living abroad and not using any services don't own a home and my income is overseas then they have no business touching my money and need to keep their meet hooks off of it as well as any money i make abroad while living overseas. most national economies prosper when they tax their residents and citizens for income made in country not outside because they know eventually it comes back to them since eventually their citizens and residents will come back and spend money generating tax revenue from renovating or buying a house or a new vehicle it eventually comes back. us needs to learn it and quick before its colors fades away into history which will be a really sad day.
Ruth 12 years ago
i just found this article and am insulted and appalled at your inflammatory, slanderous and totally wrong title. this is not about tax evasion at all for many of us. i have lived in canada for a long time due to having married a canadian whose parents were a lot older than mine. therefore, i did not think it was morally right for me to ask him to move to the u.s. my son was born here in canada. educated here. neither my son nor my husband have ever been american. the problem with fatca is that even though i *and many others like me, 50 percent of ex pats are outside of the country due to marriage not tax evasion fact!* i would have to report any account my name is on. such as a joint checking account to do daily banking, pay bills. the issue there is that i have always been a sahm mom, my son had disabilities. therefore no american made a dime in the account the u.s. now wants me to report on. have my name on an account with my son? same thing, have to report it to the u.s. even though he is not american, has never lived and worked in the u.s. no american would allow a foreign government to go rifling through their bank information yet the u.s. is doing this to foreign citizens outside the u.s. simply for having the temerity to be married to an american. even when the american made zero of the money in the account and all monies in the account were made on foreign soil, at a foreign job, by a foreign person. any high penalties for not doing so, fines etc. would therefore be imposed upon a foreign person whose only ties to the u.s. are being married to an american. many foreign spouses will not go along with this meaning that american citizens abroad are being forced to choose between their foreign spouses and their country of birth. people who are average income earners who owe zero taxes, have always loved their country are being forced to make this choice. and heart wrenching as it is, the insulting mis information you spew is insult to injury. get your facts straight. and fyi, not many people this is happening to are rich at all.
cjjacoby 12 years ago
so, i agree... the constitution has been "trashed". if we leave the u.s. and renounce citizenship, any ideas on where to go?
ted herman 12 years ago
bharat, if your son has less than $10,000 in all of his accounts combined, he does not have to file an fbar. believe me i know as we joined the 2011 ovdi and had to do 8 years of them for my wife and i and i still don't get it why we are doing all of this work for the irs and the treasury department. we are not who they are looking for, but the irs wants to waste millions of dollars wading through the 6 million american citizens living outside it's borders who mostly have nil tax returns.
Motormike 12 years ago
once the politicians have finally ruined ssi and medicare, there will be no reason on earth to remain a us citizen. the numbers renouncing will explode in the next few years.
Richard Wicks 12 years ago
yeah, its to avoid paying taxes. it can't have anything to do with this insane government with 3 illegal wars, one which we were clearly lied into, the tsa operating everywhere, the financial system being totally crooked with nobody being prosecuted or the new ndaa that allows indefinite detention of americans without charge or trial. people recognize a sinking ship of corruption and abusive government power when they see it.
Bharat 12 years ago
my son born in the usa when i was on h1 visa and returned to india when he was 3 years old. he is now 19 years old and can barely remember days in the usa. he inherited some property from grandparents and a tax cheat as per irs for not filing taxes and fbar. since income tax brackets are so low, he owes no taxes on his investment income. he is a student. he is treated no differently than millionaires who are living in the usa and intentionally hide money in tax heavens to evade taxes. when i told my son about fbar, he hasn’t yet believed me. i am not sure when he have time to investigate and believe me. he is now busy preparing for his exams and projects. he is insisting that it is impossible that free country like the usa can imprison him for not filing fbar, when no taxes are due. he agreed with me when i said i will file his nill tax returns and fbars. but he said, he is ready to fight fbar in courts, if any penalties are applied. shame on you for calling expats like him tax cheats. i relay on an accountant to file our taxes, so have no clue about filing taxes in india.
brockkthebadger 12 years ago
so 'ron': think a bit harder: - say your parent had been offered a job, or were offered a scholarship next door in canada, and you just happened to be born while they were there, outside of the us ... or, your us born mother met and married a canadian husband - and they decided to live and work, and pay taxes, near his family - in canada, - is that unpatriotic? are americans not allowed to travel outside of the us? or marry non-americans? why is it wrong and 'unpatriotic' of children who became citizens elsewhere by birth (i.e. not a choice), to want to legally live and work and pay taxes only where they grew up and live permanently (i.e. not where their parent or parents just happened to be born - the us)? if they live their whole lives where they were born, in canada (not where their parent was born), what debt do they have to the us? are you saying that it is okay for the irs to snoop into the canadian banking of my canadian spouse and canadian children, or my canadian in-laws if they become disabled and i as an 'accidental' us citizen (living in canada) have power of attorney to sign checks for their everyday needs - in canada? how about if my job in canada means i have to co-sign checks at work - for a canadian company, - in canada? is it wrong and unpatriotic for me to object to being forced to go to my canadian employer and tell them that for me to comply with the irs fbar rules and avoid breaking an american law, i have to declare their canadian account - simply because the irs says so? would the us allow another country to tell it what to do with american accounts in america? is it unpatriotic for us to think that the irs should be looking hard at millionaires living in the us, before making us pay hundreds of dollars to fill out reams of useless forms (ex. fbars and fatca) - when we don't owe any us taxes, just in case we might be secret billionaires? and if i object to filing useless, expensive, confusing and intrusive paperwork - with no taxes owing, year after year after year, forever - with major penalties for any little error; do you think it is okay for the us to make it really hard for me to give up that 'accidental' citizenship that i inherited - when i've never lived in the us as an adult, never worked there, own no property there, and will live permanently where i was born? would you personally pay lots of money to file some empty useless paperwork to the us government in this situation?
bubblebustin 12 years ago
furthermore, mr brinkerhoff, you should apologize to your readers for perpetrating the lie that us citizens can avoid paying taxes by renouncing their us citizenship. as mentioned by several commenters, one must be up to date on us tax filings in order to renounce. you are grossly misleading by stating: "renouncing their citizenship in order to avoid paying their income taxes". if one tax compliant prior to renouncing how can one avoid paying "their" income tax when it is no longer their obligation? it's people like you who leave expats with no regret in renouncing.
bubblebustin 12 years ago
the fact is, the laws that are contentious among us persons living abroad were originally put in place to combat offshore tax evasion. otherwise law abiding us persons living in other countries have been the unintended targets of this legislation. the irs has yet to admit this blunder. they are aware that there are as many reasons for non-compliance as there are people who don't file, and most are innocent and don't deserve being branded "tax evader". the author should come up to speed on the internal revenue manual in it's handling of non-compliance issues and how ovdp and ovdi made a mess of things. it is a very difficult decision for many who renounce their us citizenship, but to be treated as a criminal by your own country is unbearable. the author should know that in order to renounce us citizenship one must be up to date on their us tax filings, so the motivation is not to evade taxes, it's to be free of the continued persecution, surveillance and betrayal. the irs knows they've made a serious blunder here and what's coming down the pipe over the next while will only prove my point. by the way, the "complexities of us tax law" cost my husband and i over $2,000 a year in accounting fees, all to file a nil tax return to a country i don't live in and and haven't lived in since i was 12. my husband became a us citizen through his american father and has never lived there. neither of us are eligible for any benefits from the us. we have a choice to make: to remain us citizens and to fight unjust laws that target innocent people, or to renounce and put an end to our persecution. what would you do?

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