Thousands of expat Americans renouncing citizenship to avoid new tax laws
As the start of FATCA looms, Americans living permanently overseas are rushing to renounce their US citizenship.
The IRS’s five-year campaign to uncover undeclared, taxable assets held by US expats is having an unexpected result, as many middle-income Americans living abroad are deciding to hand in their citizenships. Those who renounce are due for unpaid taxes in the two previous years, but most are more concerned about the effects of drastically rising taxation on themselves and their families in the future.
Immigration law attorneys believe the increase in numbers of renouncees is being caused by anticipated future changes as well as the problems of banking overseas once FATCA kicks in. A good number of overseas banks are now withdrawing existing banking services from US expats and refusing to take on new accounts due to the demands of FATCA reporting.
The rush to renounce is believed to eventually involve millions of Americans living and working overseas who are totally honest about their tax liabilities to the IRS and also pay tax in their present countries of residence. Middle-class Americans approaching retirement are considered to be most at risk from the new rules with their complicated paperwork and potentially massive fines for getting it wrong.
The IRS’s five-year campaign came into being as a result of a number of Swiss banks including UBS and Credit Suisse’s admission that they were involved in hiding wealthy Americans’ money overseas. The banks avoided criminal charges by paying billions in fines to the IRS and the disclosure of thousands of American-held offshore accounts, thus ending the traditional secrecy of Switzerland’s banking system.