US Citizens Break Record for Expatriation
You may know the impact that recent US tax laws and regulations have had on US citizens living abroad. You may have read our blog on how this has affected The London Mayor Boris Johnson. But did you know that in 2013 expatriations had gone up by 221% and this week the US Treasury Department announced that it’s gone up again.
The chart below shows the trend over past decade based on approximate numbers published through the Federal Register quarterly reports. Nearly 7 million Americans live abroad and the number who expatriate are indeed a fraction, but it is a steady rise and may have some obvious explanations.
We have tried to keep our clients and colleagues aware of the changes in US tax laws and the increasing awareness by the IRS of Americans living abroad. You’ve heard us talk of FATCA, the US legislation recently enacted requiring financial institutions to comply with reporting all bank accounts held by American citizens. This has caught many accidental Americans off guard and could be a driving force to giving up US citizenship. The Department of the Treasury has also just announced a proposal for certain dual citizens wishing to renounce their US citizenship.
There are more than 20 US tax forms that carry a penalty if not filed correctly or filed at all. Some of these forms, including the FBAR – Foreign Bank Accounts Reporting form (FinCEN Form 114), carry stiff penalties. Failure to file the FBAR can set you back $10,000 per account not filed, per year not filed. Some penalties are based on a percentage of the reportable amount. As you can imagine this could become costly and create personal financial chaos, the likes of which cannot be repaired. This fear could be driving people to relinquish their passports.
Some US tax returns can become a book when they are complete. The annual burden of US tax compliance, in additional to tax compliance in the country of residence, could easily force a taxpayer to consider expatriation/renunciation.
Overt the past few years of combating tax avoidance/evasion, the IRS has also created several programmes designed to help US taxpayers get back into the system in several ways. One of those way is the Streamlined Voluntary Disclosure program. Many Americans living abroad have simply been unaware of what has been required of them since they left the US. These people, and many others, are able to get up-to-date with their past US tax returns provided they meet the criteria, and then be allowed to file annually going forward. This program has been a lifeline for many.
If you have any questions about your tax status or tax returns, please contact us. We will be able to help.