There has been a lot of talk about the rising number of US expatriates who are choosing to renounce their citizenship due to the US expat tax implications they face. Many Americans living abroad find expat taxes downright complicated, not to mention FATCA requirements and more. With that said, the number of renunciations continues to rise.
The Latest on Renouncing Citizenship
According to Bloomberg’s Daily Tax Report, the number of Americans giving up their US citizenship rose 9 percent during the first quarter of 2016. The IRS’s quarterly list of expatriates states that 1,158 individuals have renounced their citizenship or gave up their long-term US residency in the quarter ending March 31, 2016. While this is certainly an uptick in renunciations, when compared to the 8.7 million US expatriates living outside the US, it’s still a relatively small percentage!
Why Do Americans Choose to Renounce?
There are many factors that go into the decision to renounce citizenship, but an overwhelming number of individuals who take this action have similar reasons in mind. These are some of the most influential reasons:
- Keeping up with IRS and US Treasury filings are increasingly difficult, especially since most expats have to file taxes in their host country as well
- The US is one of few countries that requires all citizens to report worldwide income on their US expat tax returns
- The Foreign Account Tax Compliance Act (FATCA) has put a lot of pressure on taxpayers and foreign banks to report all foreign assets exceeding the reporting threshold
- US citizens must report their foreign bank accounts on the Foreign Bank Account Reporting (FBAR) form each year, in order to prevent the hiding of assets overseas
- Penalties can be quite large for incorrect expat taxes or failure to file altogether
Is Renouncing Right for You?
While there are obvious reasons why US expats choose to renounce their citizenship, the act of doing so doesn’t come without its challenges when it comes to US expat tax implications. One simply can’t toss their passport and erase their ties to the US. There are costs involved that are quite high – the fee quadrupled to $2,350 since Fall 2014 – and you have to pay an ‘exit tax’ if you fall into a certain tax liability threshold and have assets worth over 2 million. It will also take some time to renounce, as the rising number of renunciations is causing waiting lists at US embassies and consulates, where you will have to sign an oath of renunciation in person.
We’ve heard from many expats regarding their thoughts on renouncing citizenship in our annual US Expat Opinion Survey, and we’d love for you to share your opinion, also! There are still two days to let your expat voice be heard for a chance to win a $500 Airbnb gift card, so don’t wait – take the survey today!
Have Questions Related to US Expat Tax?
Greenback can help! Our expat-expert CPAs and IRS Enrolled Agents are here to help you navigate the often-complex nature of US expat taxes – contact us today!