Is The IRS Really Driving Americans Overseas To Renounce Citizenship?
More American citizens living abroad are thinking about giving up their U.S. citizenship thanks to a new set of tax laws and agreements between the Internal Revenue Service and thousands of foreign banks.
The Foreign Account Tax Compliance Act (FATCA) took effect on July 1, four years after Congress agreed to use international banking institutions to target U.S. citizens who were living abroad and not paying their taxes.
A new poll from finance advisory deVere Group has found that 79 percent of its expat clients are now tempted to renounced their citizenship, an increase of 11 percent since they took the same poll last year.
“It seems that the burden of FATCA is becoming more ‘real’ and one way to avoid the negative effects of this highly controversial law is to relinquish citizenship,” deVere chief executive Nigel Green said in a press release.
After surveying 414 expat clients, 327 said they had “actively considered,” “are thinking about,” or “explored the options” of renouncing their U.S. passport because of the new rules. Many cited problems opening and maintaining bank accounts in their new countries and disliked the costs and paperwork associated with compliance.
“Some told us that they felt they were now under suspicion by the IRS, even though there was no question of any wrongdoing or having any taxes owing,” Green said.
U.S. Treasury Department data shows that passport relinquishments were up 220 percent in 2013 from the year earlier, as the Wall Street Journal reported.
This month, Treasury officials announced that more than 80,000 financial institutions in almost 100 jurisdictions had already registered to comply with the Internal Revenue Service in its crackdown on tax evasion. The agreements require foreign banks or governments to disclose information on their accounts held by American citizens.
There are reportedly 7.6 million U.S. expatriates worldwide.
“FATCA demands rigorous compliance with arcane rules that the IRS has until now never even attempted to enforce on a widespread basis,” David Kuenzi, founding partner of U.S. investment firm Thun Financial Advisors, wrote in a Wall Street Journal op-ed last week.
“For Americans abroad, desperately trying to comply, the outcome to family finances is often disastrous,” he wrote, citing various examples of Americans abroad facing financial turmoil trying to comply with the conditions.
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