Renouncing American Citizenship Hits All Time Record

Rindfleisch
Published on Jun 9, 2021
Treasury Department records show that 2020 set a new record for the number of Americans who renounced their U. S. citizenship or gave up their long-term green cards. Common reasons for renouncingÂ can be family, tax and legal complications for people who generally live outside the United States. There is an official list published quarterly, and the namesÂ for the fourth quarter 2020 made the annual total 6,707, a 237% increase from 2019. That may not sound like many, but theÂ actualÂ number ofÂ expatriatesÂ is often assumed to be higher, withÂ many apparently notÂ counted. Both theÂ IRSÂ and FBIÂ track Americans who renounce. Some renouncers writeÂ why theyÂ gave up theirÂ U. S. citizenship, but tax considerations are often part of the equation.Â Expats have long clamored for tax relief.Â Adding fuel to the fire isÂ FATCA, the Foreign Account Tax Compliance Act. This U. S. tax law was passed in 2010 and requiresÂ an annualÂ Form 8938Â filed with the IRS if your foreign assets meet a threshold. FATCA spans the globe with an unparalleled network of reporting, requiring foreign banks and governments to handÂ over bank data about depositors.Â Non-U. S. banks and financial institutions around the world mustÂ reveal American account details or risk big penalties.Â SomeÂ renounce because of global tax reporting and FATCA.Â Dual citizenship isÂ not always possible, as thisÂ infographicÂ shows.Â Americaâ€™s global income tax compliance and disclosure laws can beÂ a burden, especially forÂ U. S. persons living abroad. AmericansÂ living and working abroad must generally report and pay tax where they live. But they must also continue to file taxes in the U. S., whereÂ reporting is based on their worldwide income.Â AÂ foreign tax credit oftenÂ does not eliminate double taxes. Then there are annual foreign bank account reports calledÂ FBARs. TheyÂ carry big civil and even potential criminal penalties.Â TheÂ civil penalties canÂ consume the entire balance of an account. Ironically, even leaving America can be costly.Â To exit, you must prove 5 years of IRS tax compliance, and getting into IRS compliance can be expensive and worrisome. If you have a net worth greater than $2 million, or have average annual net income tax for the 5 previous years of $171,000 or more, you can pay anÂ exit tax.Â It is a capital gain tax, calculated as if you sold your property when you left. A long-term resident giving up aÂ Green Card can be required to pay the exit tax too.Â Sometimes, planning, gifts, separate tax returns for married persons, and valuations can reduce or eliminate the tax. However, plan carefully, and run the numbers, as the tax worry can be real, even for those who can sidestep the tax. A more modest cost is administrative, as America chargesÂ $2,350 to hand in yourÂ passport, a fee more thanÂ twenty times the averageÂ of other high-income countries.Â The U. S.Â hiked theÂ fee to renounce by 422%,Â as previously there was a $450 fee toÂ renounce, and no fee toÂ relinquish. Now, there is aÂ $2,350 fee either way.

All data is taken from the source: http://forbes.com
Article Link: https://www.forbes.com/sites/robertwood/2021/02/07/renouncing-american-citizenship-hits-all-time-record/

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