Many expats have a love-hate relationship with their American citizenship. While they may love being American citizens, the ongoing tax-filing requirements can make the burden of remaining a citizen too much to bear. Each quarter the Federal Register publishes the American citizenship renunciation numbers, and the numbers often reflect a number of different trends for expats. Find out what the latest citizenship renunciation trends are!
Citizenship Renunciation and Taxes
Expat taxation issues are often at the heart of citizenship renunciation. Sure, some renounce due to changes in political administration or newfound patriotism toward their resident country, but ongoing taxation affects all expats. Each year, expats must file Federal Tax Returns if they meet the income thresholds even if they do not owe any tax. For single filers, that threshold is only $12,000 annually; for those filing jointly, the threshold doubles. If you’re self-employed, only $400 of income means you’ll need to file.
Filing returns year in and year out can be cumbersome and complicated, so many expats have at least considered renunciation. However, remember that citizenship renunciation comes with more than a few strings attached. For instance, you’ll have to be tax compliant before you renounce. And, if you are a covered expatriate, you’ll face an expensive exit tax. Lastly, renunciation is a very permanent decision, and in general, you won’t get a chance to change your mind.
Citizenship Renunciation in 2019
The first quarter totals of American citizens who renounced came in at 1,018. That total is in line with the past several quarters of renunciation; lately, the first three quarters of each year have had over 1,000 renunciations. With over nine million expats currently residing overseas, this number may seem like a small fraction but is indeed significant compared to years past.
But, the second quarter 2019 citizenship renunciation total came to 609. This is the lowest second quarter number since 2016, and it’s an enormous decline from the numbers we saw throughout 2018. Now, there could be a lot of reasons for this dip. Without wildly speculating, it’s safe to say that the rate of renunciations had to slow down at some point.
The hasty pace of citizens renouncing began with FATCA’s enactment in 2010, which complicated banking matters for expats significantly. Before FATCA, most quarterly citizenship renunciation numbers were below 200. So, the second quarter of 2019 continues to be triple the figure that occurred in the pre-FATCA era.
What Does the Future Hold?
Citizenship renunciation may peak again soon now that the IRS is doubling down on its promise to revoke passports of those who have seriously delinquent tax debt. Plus, the IRS has also rolled out six new compliance campaigns that target those who are not currently tax compliant with a specific focus on expats. These measures may push expats to rid themselves of their American citizenship – and by extension, their American passport reliance – once and for all.
Get Your Taxes in Order Today!
Whether or not you want to renounce your citizenship, becoming tax compliant is your best option. Find out how easy the process is when you get started with Greenback today!