While there are millions of people all over the world waiting for their chance to gain U.S. citizenship and residency, a small minority of Americans are taking the opposite track and renouncing their U.S. citizenships. While there have always been Americans who have renounced their U.S. citizenships – about 1000 per year average over the past 5 years – 2013 saw an explosion of citizenship renunciations as over 3000 people reportedly gave up their U.S. citizenships in that year alone.
While some may think that those giving up their citizenships may be motivated by ideology or wanting to move to another country in order to be with a loved one, the statistics say that the number one reason people are giving up their citizenships is in order to avoid U.S. taxes. Many of those giving up their U.S. citizenship in order to avoid U.S. taxes already live outside the country. But the Unites States requires its citizens to file tax returns, even when income earned was not earned in the country. This means that many citizens living aboard must file two tax returns, one for the country in which they live, and another for Uncle Sam. This double tax filing requirement can make an already complicated tax filing situation doubly so, and has driven many people to seek to check out of being an American altogether.
Another factor in the renunciations is the fact that several components of the Foreign Account Tax Compliance Act of 2010 are causing Americans to have to seek expert advice with respect to their taxes, due to the law’s complexity. Hiring an expert is not just a hassle, but can also be expensive. Nevertheless, many expats are finding that the law’s reporting requirements are too arcane to be deciphered by a layman. For example one provision indicates that Americans must report foreign assets worth $50,000 or more. Another provision says that U.S. citizens must report foreign bank account holdings of $10,000 or more. A provision which will require financial institutions to report any foreign accounts held by Americans is also set to go into effect. Given the number of reporting requirements and the headaches that many expats face when filing taxes, it seems that a number of them are giving up their citizenships out of protest as much as principle.
The Lyttle Law Firm is an immigration law firm based in Austin, Texas. If you have any questions or issues concerning immigration, please contact us immediately at 512-215-5225.