American Expatriates Renounce Citizenship Over Taxes

Almost 1,800 Americans and Green Card holders renounced their citizenship this year

This year almost 1,800 people renounced their American citizenship and Green Cards as published in the Federal Register, thanks to a costly and timely tax requirement.

That's because the U.S. is one of the only countries in the world that requires its citizens working abroad to file taxes at home, reports Reuters.

American expatriates are exempt from paying tax on the first $95,100 of income earned abroad as long as they fill in the Foreign Income Exclusion form and prove taxes are paid to the country they reside in. But the process is complicated.

Americans expatriates also have to comply with another regulation that calls for them to disclose information on foreign bank accounts with at least $10,000, explains Reuters. Banks are required to provide information on those very clients and their funds to the U.S. government.

Considering that an estimated 3 to 6 million Americans reside abroad, notes TIME magazine, less than 2,000 people relinquishing citizenship isn't too high of a number. Still, the figure is an indication of a growing trend given that only 502 citizens handed in their passports back in 2009.

But relinquishing one's U.S. citizenship isn't as simple as one might imagine.

Some ex-Americans are still required to file and pay taxes for up to 10 years even after formally deemed a "renunciant" by the U.S. State Department.

The person must also prove they have no intention to return to live in the U.S. and in most cases have another citizenship secured, notes Harper's Magazine.

Editor's note: Citations in this story have been updated to better reflect where news was first reported by Reuters rather than other media outlets.

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Comments

[Catherina Lucy]

12:42 AM on 04/01/2013

We will get the citizenship in other countries only,when they gave a birth to a child.
http://www.medicareamerica.com/

[whathappenedtofreedom123]

12:15 PM on 06/12/2012

I believe this is inaccurate; you do not have to prove you have no intention to return to the US. Everyone has a right to expatriate, you must just prove that you are of sound mind, you are not being influenced, and you understand the consequences. And since the US is still (perhaps not for long though) a civilized and free country, you are allowed to expatriate and then, afterwards, make trips back to visit those left behind, just like any foreign person in your new country can do.

[michaeldbailey]

06:58 PM on 06/06/2012

Ms. Tara Kelly, the 1800 expatriations to which you refer include only covered expatriates with a net worth of 2 million or more, or, persons with tax liabilities of about US$150,000 per year or persons which have failed to report and pay income tax for the last 5 years, etc. Only these "covered expatriates" are published in the Federal Register, your data source. Moreover, financial advisors have said that even their "covered expatriate" client's names have not appered in the Federal Register. So, no one knows the actual number of expatriates per year, but it is certianly higher than the 1800 you and others mention.

[Thomas Gordon]

10:14 PM on 05/19/2012

1,788 renunciations in 2011 (mostly ex-pats) is just the tip of the ice berg. More will certainly follow.

The US must repeal "citizenship-based taxation." It is forcing ex-pats to pull the plug on citizenship.

Ex-pats have no representation in congress and receive no services from the government. They don't use US roads, bridges, dams, power grid, schools, hospitals, courts, fire, police etc. They cannot collect unemployment benefits and are not eligible for Medicare.

But Uncle Sam still demands pounds of their flesh and complicates their lives with ever-changing incomprehensible reporting requirements -- with the added bonus of penalties from hell for making any errors.

I seem to recall America's founders fighting a war with Great Britain over this very issue.

Wake up Uncle Sam! Get a grip on your moral compass

[Laure Miller]

04:22 PM on 05/11/2012

Now, singalong time! *ahem* I'm proud to beeee an Americannn, 'cause at least I know I'm freeeee.......

[Stephen Harman]

03:12 PM on 05/11/2012

Thought this an interesting add to the story.
http://www.bloomberg.com/news/2012-05-11/facebook-co-founder-saverin-gives-up-u-s-citizenship-before-ipo.html
Here is this quarters list
https://www.federalregister.gov/articles/2012/04/30/2012-10274/quarterly-publication-of-individuals-who-have-chosen-to-expatriate

[LeaderofMen]

12:14 PM on 05/05/2012

Only 1800, out of 300+ million? That's less than the population of my neighborhood.

[Don Crois]

08:22 PM on 05/01/2012

This is a HUGE problem for anyone living abroad.. I am not "evading taxes" I PAY TAXES in my host country. I collect NO social benefits and use NO public infrastructure in the US. The US tax laws for expats are so complex that it requires a specialist lawyer, which means mega $$ even if no taxes are due.

The US is the ONLY country in the world to have "citizenship based" taxes other than Eritrea....amazingly, the US had the audacity to criticize Eritrea due to their worldwide tax: http://isaacbrocksociety.com/2012/01/30/only-the-u-s-may-tax-its-citizens-living-abroad-u-s-condemms-use-of-disapora-tax-for-other-countries/

I couldn't open a bank account with a US passport (local banks don't want the hassle of dealing with American clients) so everything is in my husbands name (very dangerous for me), forget about a pension account, investment accounts, or life insurance, plus, lately companies don't want to hire Americans. The local US embassy has a 2 YEAR waiting list to renounce...plus a $450 fee, but I signed up anyway. Sad to have to do what a few years ago was unthinkable... but I feel I have no choice.

[JustAGurlinSeattle]

09:19 PM on 08/04/2012

Yeah... The USA has had this tax for MANY MANY YEARS.....

[wilray]

10:07 AM on 04/23/2012

The laws are predicated on the belief that any citizen leaving the U.S. is doing so for tax reasons. That is simply not true. People may be leaving the United States simply because they want to improve their quality of life. In the U.S., many have the idea that it would be impossible to improve on the quality of life. Really? If you are gay and want to be treated fairly, that is simply not possible in present day America. Being gay means in the U.S. means second class citizenship. If a person wants to marry, their beloved that is not possible in America. Notwithstanding that there are a few states that have civil unions and civil marriage, gays are precluded from enjoying the hundreds of rights and benefits that heterosexual couples have. If the U.S. is not willing to treat gay persons as full citizens then no gay person should be penalize for wanting to move to a society that recognizes them fully as citizens. That is not emigration for tax reasons, that's emigration because of being screwed over.

[Yes2LoveNo2H8]

02:11 PM on 09/12/2012

Amen, Wilray. I just renounced my citizenship because of this. I have been with my husband for 14 years, married 7. We just adopted a 10 year old boy last year. And when we go through customs, I have to explain to my son that we are not recognized as a family unit and that's why one of us has to step aside. It's disgusting. I never felt such a weight off my back once I paid the $450 and signed the papers. Adios Uncle Sam.

[wilray]

03:07 PM on 09/12/2012

Yes2LoveNo2H8,
I didn't expect a reply to such an old post.  I am sorry for the hurt you feel in crossing customs.  It looks good for Obama's reelection.  I hope he and the Dems are successful in accomplishing marriage equality, and no one have to feel the need to leave the U.S.  Also, that no one be held apart from their family at customs.  Good luck to you.

[OldSurrender]

09:50 PM on 04/22/2012

I filled out a form, and got all my taxes back. Not that hard.

[Stephen Harman]

11:25 AM on 04/23/2012

It's not just the 1040 anymore! Did you fill out the 8938 and FBAR? Did you fill out the 3520 for the foreign trusts (thats IRS speak for a pension fund). Did you have any shares in foreign corporations and fill out the 5471. Did you enter into a business partnership with anyone overseas. Thats the 8865 form! Do you have a Canadian Retirement plan, better get the 8891 form competed also! Oh and there is the passive foreign investment company or quialified electing fund (whatever they are), form 8621.
Most of these are the kinds of accounts you just aquire from living abroad. Not somewhere to stash your millions. Work for an employer with a pension plan. You probably have one of these accounts!

[Hanover Fiste]

07:52 PM on 04/22/2012

Good riddance, if you are willing to sell your citizenship to save a few dollars, America can do without your "patriotism". We don't need people who will jump in any passing car and provide services to anyone waving a ten dollar bill.

[JSDKoeln]

04:18 AM on 04/23/2012

Not the brightest bulb are you? Did you actually read the article?

[doorlie]

06:38 AM on 04/23/2012

Erm, well no. It was too dark for that.

[Hanover Fiste]

09:35 AM on 04/23/2012

I would imagine not all of us can read the article and see anything else but renouncing citizenship based on tax requirements (either filing or paying). Thank God we have you, who single handed will enlighten us all. Do tell genius what else besides "1,800 people renounce their American citizenship and Green Cards ..., thanks to a costly and timely tax requirement" did I miss? Help us Obi Wan, your my only hope, unleash your massive brain power and bring light to my darkness.

[wilray]

11:57 AM on 04/23/2012

Obviously, you don't get the thrusts of the article. You say good riddance. However, the article and the reality is that the U.S. is holding on to them as tightly as it can. Even if you renounce your citizenship, there is still at least a decade long obligation. So you you are not trading your citizenship for a few dollars, since you will actually have to pay more. And if you move to a higher rate country, which is just about everybody, you move into a higher rate bracket. So your immigration is absolutely not about saving anything.

[Hanover Fiste]

01:31 PM on 04/23/2012

Well, that's not exactly true is it? How many people retire to island homes that offer very lucrative tax situations for people willing to shift their assets? I got caught up in the entire nonsense because as the article suggests people are turning in their passports for "tax and the associated hassles that come with it". That being said if anyone feels they need to correct the assertion, I would start with the person who wrote the article. I frankly can not wait to leave this country but it has nothing to do with taxes.

[SDH283]

06:57 PM on 04/22/2012

Some of the comments on here are so silly.. bought right into the 'myth' of USA is the 'best' country in the world .. for sure, it has its good points, most countries do.

However, the ignorance about the rest of the world is just mind-boggling ! It must be a reflection on the Education system and the lack of intellectual interest in the rest of the world.

I spent 35 yrs as an ex-pat, in MANY countries, and the USA is way at the bottom of the list of countries I would 'choose' to live in again -- a LOT of that is due to the type of arrogant ignorance displayed in some of these comments.

[wallinmark]

12:11 AM on 04/23/2012

I am from BC Canada, like to travel ,meet people from alover the world.Americans who travel have eyes wide open as to those who don't choose to. The world is yours to discover become a Human and mmeet others.

[doorlie]

06:39 AM on 04/23/2012

On the other hand, ignorance is bliss and prejudice is a labor-saving device as it allows us to form opinions without the bother of gathering facts.

[chickenflu4]

06:29 PM on 04/22/2012

it's because someone's stupidity becomes policy here!

[Lonnie DeVorak]

05:45 PM on 04/22/2012

Goes back to the old saying, If you don't like it, leave it!.

[foubabou]

04:36 AM on 04/21/2012

The article is about severing ties with the US as a tax strategy. I don't believe most people leaving the US are motivated solely by saving on tax laws that were created to snag rich evaders. Problem is the laws are so broad they cause more trouble for those simply making a middle class living outside the US than the rich.

My motivation was having to go outside the US to find employment in '08. Once working I found I really liked the life here and decided to stay.

If your life outside the US is simple with 1-2 local bank accounts, car, job, house and family the US isn't going to gain any tax revenue. Quite the contrary. There are just more people needed to service the 3-6 million extra IRS filings more monitoring and maintenance with no additional revenue stream except for whatever penalties they can collect. Just more of a drain on the US budget and IRS jobs for a few thousand more people.

A more reasonable number would be $100,000 (or even $50,000) to allow those merely wishing to live and work overseas without having to go to the expense and hassle of disclosing and filing every year. Let's face it, $10K isn't a lot of money for a family living overseas to have in the bank. Especially approaching retirement.

[ezer]

11:44 AM on 04/21/2012

Do you mean the FBAR threshold of $10,000? That amount was set in the 1970s and never readjusted. I agree, it is ridiculously low and the purpose of reporting to the treasury is really unclear as those forms are strictly collecting dust.

[calgary411]

07:22 PM on 04/21/2012

... and worse, there is now FATCA's Form 8938 to be filed with your 1040.

Form 8938 (Statement of Specified Foreign Financial Assets) should be filed by taxpayers withspecific types and amounts of foreign financial assets or foreign accounts. It is important for taxpayers to determine whether they are subject to this new requirement because the law imposes significant penalties for failing to comply. Form 8938 -- including the instructions, regulations implementing this new foreign asset report, and other information to help taxpayers determine if they are required to file the Form 8938 -- is available on the IRS website.