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Many renouncing U.S. citizenship to avoid paying taxes
By Catholic Online (NEWS CONSORTIUM)
April 17th, 2012
Catholic Online (www.catholic.org)
April 17th, 2012
Catholic Online (www.catholic.org)
Record numbers of Americans living abroad have been renouncing their
U.S. citizenship - and not for political reasons. They're just trying to
avoid the difficulties of filing for their income taxes while residing
in foreign lands. This year, more people than ever before renounced
their citizenship, a disheartening trend.
Part of the issue is that the U.S. is one of the only countries to tax its citizens on income earned while they're living abroad. And just as Americans stateside must file tax returns each April, an estimated 6.3 million U.S. citizens living abroad brace for what they describe as an even tougher process of reporting their income and foreign accounts to the IRS in June of this year.
The National Taxpayer Advocate's Office in a report released last year listed the difficulties of filing taxes from overseas; heavy paperwork, a lack of online filing options and a shortage of local and foreign-language resources.
In order to escape the tax filing requirements, Americans abroad can only formally renounce their U.S. citizenship. IRS records show that at least 1,788 people did last year, a figure believed to be an underestimate. The IRS publishes in the Federal Register the names of those who give up their citizenship, and some who renounced say they haven't seen their name on the list yet.
In contrast, the State Department reports that renunciations have remained steady, at about 1,100 each year.
The decision by the IRS to publish the names is referred to by lawyers as "name and shame." That's because those who renounce are seen as willing to give up their citizenship primarily for financial reasons.
There's also an "exit tax" for the wealthy that choose to leave. A number of U.S. millionaires and billionaires have renounced their citizenship over the past 25 years -- among them Ted Arison, the late founder of Carnival Cruises and Michael Dingman, a former Ford Motor Co. director.
But those of more modest means renounce saying that leaving America is about more than money -- it's about privacy and red tape.
There are two filing requirements that affect Americans abroad: the Report of Foreign Bank and Financial Accounts - which has been around since 1970 but now carries penalties for noncompliance - and the Foreign Account Tax Compliance Act, passed in 2010 with the aim of reducing offshore tax evasion.
The first regulation requires all Americans, including those living abroad, with at least $10,000 in overseas bank accounts, to file a supplementary form disclosing all of their foreign accounts. The tax compliance act - the newer law - asks foreign financial institutions such as banks, hedge funds, and private equity funds to provide the IRS with information on U.S. clients.
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