Many expatriates who have left the United States are considering renouncing their U.S. citizenship as a result of increasingly burdensome tax requirements. A record 5,411 people renounced their citizenship last year, which was a 26 percent increase compared with 4,279. people in 2015.
While renouncing citizenship could put a permanent end to efforts on the part of the United States to try to collect taxes from you, giving up your citizenship is not without consequences. In addition to other benefits that could be lost if you give up citizenship, you could also potentially face a big tax bill for doing so.
Maryland international tax attorneys can provide assistance to anyone who is considering giving up their citizenship. Our legal team will explain the tax implications of renouncing citizenship and can help those who are considering giving up their citizenship so they no longer have to comply with the myriad tax obligations imposed by the United States government.
A Growing Trend of Expats Renouncing Citizenship
CNBC reported on the growing number of expatriates who are living abroad and who have made the decision in recent years to give up their citizenship. According to CNBC, a survey of more than 2,100 Americans living overseas revealed that 19 percent of U.S. citizens living abroad were seriously considering giving up their citizenship. Close to half of all survey respondents (four in 10) said they had no active plans to renounce citizenship but that they were not ruling it out.
Among those who indicated they were seriously thinking about giving up their citizenship, half of the respondents said that U.S. tax rules were the reason why they wanted to renounce. These tax rules include the Foreign Account Tax Compliance Act (FATCA), which requires a statement of specified foreign financial assets, as well as the mandate that every U.S. citizen submit an annual Report of Foreign Bank and Financial Account (FBAR) if they have $10,000 or more in foreign accounts at any point during the course of the year.
FBARs must be filed if the accountholder has a total of $10,000 in the aggregate spread across all accounts he has. Many people who live abroad have more than $10,000 in foreign banks simply because they have bank accounts where they live. Yet, if they don't submit FBARs alerting the U.S. government to the existence of these offshore accounts, they could be subject to substantial financial penalties including up to $10,000 for non-willful violations or 50 percent of the account balance or $100,000 in penalties
Expatriates also objected to the requirement that they must file a U.S. tax return every year. As many as 2/3 of the respondents indicated they didn't think they should have to file a return... especially as more than 60 percent of respondents neither received a refund nor owed taxes.
Unfortunately, it is unlikely that rules will be relaxed any time soon. This could mean more people giving up citizenship. Attorney Kevin Thorn can provide insight into all of the financial consequences of renouncing citizenship in the U.S. Give the Thorn Law Group a call today if you need help.
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