Fed up with what they regard as the federal government’s ever-encroaching tax system, a record number of Americans now live abroad, many of whom are considering abandoning their U.S. citizenship altogether.
According to a survey conducted by Greenback Expat Tax Services, a Grandville, Mich., based tax service which devotes a large share of business counsel to American expatriates, a majority of the 2,100 Americans living outside of the country say tax hardships drove them overseas.
The number of Americans living abroad is slightly above 9,000. Over the last three year period, the number of Americans renouncing citizenship nearly doubled from 3,415 in 2014 to 5,411 in 2016.
Despite fleeing the country, many Americans who do not choose to renounce citizenship remain bound by U.S. income taxes, a matter which inspires many expatriates to consider abandoning their citizenship.
Those surveyed admit they have considered renouncing U.S. citizenship, 4 in 10, and another 19 percent of respondents say it is under serious consideration. About 50 percent who indicated they may officially abandon America point to U.S. tax liabilities.
“Tax requirements like the Foreign Account Tax Compliance Act and the report of foreign bank and financial accounts start to become more painful for people and they write to their congressperson, seeking action. There’s nobody lobbying on the behalf of these people and fighting for your average American living overseas,” said David McKeegan, co-founder of Greenback Expat Tax Services, who lives in Indonesia.
Under U.S. tax law, Americans permanently living overseas, but do not renounce U.S. citizenship, are required to file annual tax forms. Federal law requires each U.S. citizen to file yearly, although 6 in 10 reported owing no income taxes.
Those surveyed also reported the aggravation of filing additional forms. Chief among the extra forms are the Foreign Account Tax Compliance Act (FATCA) and Foreign Bank and Financial Accounts (FBAR).
FBAR forms require filing if the expatriate’s holding abroad in one or more foreign accounts exceed $10,000 in value. FATCA forms are required for all expatriates to account for all foreign assets.
Failure to submit a FBAR could result in up to a $10,000 penalty. Should the taxpayer deliberately avoid submission of the FBAR, the fines and penalties could rise to $100,000 or up to 50 percent of the value of assets in the account.
Those who renounce citizenship are faced with an exit tax, which opens the door to innumerable taxes imposed on the market value of all assets and could include taxes imposed on heirs to the taxpayer’s estate.
[CNBC] [Photo courtesy ThinkAdvisor]