With April 15 looming, the initial deadline for US people to pay their taxes, we take a look at why so many Americans are saying goodbye to the US….for good.
It is said, that in 2013, a record number of US taxpayers renounced their citizenship or green card.
There appear to be several reasons for the increase in expatriations, including increased awareness and complexity of the obligation to file reports and tax returns to the IRS, and to the Department of the Treasury. Furthermore, in 2008, there was a change to the IRS expatriation legislation making it easier for some US citizens to break ties with the US.
The US taxes their citizens (and green card holders) on income and gains regardless of where it is earned, or, where they reside. Furthermore, in certain circumstances annual reports are required to be made to both the IRS and the US Treasury outlining the location and maximum balance of foreign financial assets and bank accounts located outside of the US. This filing requirement can be a significant burden on the US taxpayer, requiring them to seek help to meet their obligations.
Many banks are cutting their ties with American customers to avoid having to comply with the new Foreign Account Tax Compliance Act (“FATCA”). FATCA requires certain financial institutions to report information in respect of their American clients ranging from basic savings accounts, pension funds, investments and more. The cost of compliance can be significant for the institution and penalties are severe should the bank err; a 30% tax on US sourced income should they fail to properly comply. Many banks are choosing to let their US customers go and this act is raising awareness about the obligation to file and as such, a growing number of individuals are choosing to give up their US citizenship.
Renouncing citizenship or giving up a green card is not as simple as it may sound and both immigration and tax advice should be sought before taking any action. Among other hurdles, an individual wanting to expatriate would needs to file US tax returns for at least 5 years prior to the expatriation.
Here at TAP we regularly work with US citizens who for whatever reason haven’t met their US filing obligations and assist them in getting up-to-date with the IRS. We offer an initial consultation during which one of our Partners will discuss your affairs and help you with a plan to become compliant. We also offer advice around the tax consequences of renouncing your citizenship or green card.
If you would any further information about the services we provide, please contact us.