In 2011, nearly 1,800 people renounced their American citizenship or handed in their green cards, and many said it was for tax reasons.
This is a record number since the Internal Revenue Service started publishing a list of resignations in 1998. This is also almost eight times the number of citizens who resigned in 2008 and more than the total number for 2007, 2008 and 2009 taken together.
The United States is one of the only countries to tax its citizens on income earned while living abroad. And just as U.S. states must file tax returns every April – this year, the deadline was yesterday, April 17 – approximately 6.3 million U.S. citizens living abroad are preparing for what they see as an even tougher process. of reporting their income and foreign accounts to the IRS. For them, the deadline is June.
The National Taxpayers’ Attorney’s Office, part of the IRS, published a report in December detailing the difficulties in filing taxes from abroad. He cites difficult documents, lack of opportunities for online submission and lack of local and foreign language resources.
For those who want to legally evade filing requirements, the only way is to formally renounce their American citizenship.
In 2011, IRS data showed that at least 1,788 people had done so, and this was probably underestimated. The IRS publishes in the Federal Register the names of those who renounce their citizenship, and some who renounce themselves say they have not yet seen their name on the list.
In fact, Superman announced his plans to relinquish his American citizenship a year ago in Action Comics.
“Truth, justice and the American way are no longer enough,” the comic said the superhero after the Iranian and US governments criticized him for joining a peaceful anti-government protest in Tehran.
The State Department said the archives it maintains are different from those published by the IRS. They point out that failures remain stable – about 1,100 each year, an official said.
The IRS’s decision to publish the names is referred to by lawyers as “name and shame.” This is because those who give up are considered ready to give up their citizenship mainly for financial reasons.
There is also an “exit tax” for the very rich who decide to leave. Over the past 25 years, a number of millionaires and billionaires have renounced their citizenship. Among them: Ted Arison, the late founder of Carnival Cruises, and Michael Dingman, former director of Ford Motor Co.
But those with more modest means also give up. They say leaving America is more than money, it’s about privacy and bureaucracy.
Two filing requirements apply to Americans abroad: the Foreign Bank and Financial Accounts Report – which has existed since 1970 but now imposes sanctions for non-compliance – and the Foreign Account Tax Compliance Act, passed in 2010 with to reduce tax evasion by offshore companies.
The first regulation requires all Americans, including those living abroad, with at least $ 10,000 in foreign bank accounts, to submit an additional form disclosing all of their foreign accounts.
This includes all accounts in which the US citizen has a financial interest. This may include a joint account with a spouse or child, corporate accounts in which the American holds more than 50% of the value of the shares, or some trust or inheritance that benefits the American citizen.
The Tax Compliance Act – the newer law – requires foreign financial institutions such as banks, hedge funds and equity funds to provide the IRS with information about US clients.
The United States and five European Union countries recently announced their intention to allow institutions to report information through their own governments rather than directly to the IRS.
Non-compliant institutions will be subject to a 30% withholding tax on certain payments and income from property sales in the United States beginning in fiscal 2013, such as dividends from investments in U.S. companies.
Some immigrants say they have not known about the first ordinance for years or even decades. In 2008, the IRS received only 218,840 such declarations. U.S. citizenship law grants citizenship to almost anyone born in the United States or born abroad to American parents, regardless of how long they have spent in the United States. Many may not even know the extent of their ties to the United States.
In 2004, the stakes for non-compliance increased. Lack of declaration means potential fines and criminal charges. Americans abroad can be punished for non-compliance, even if they do not owe income tax – and IRS data show that most of them do not owe money.
Income up to $ 95,100 is not taxed under a rule called Exclusion of Foreign Income. In 2009, the income limit was $ 91,400, and 88% of all taxpayers claiming to exclude foreign income owe nothing.
Since 2008, the IRS has offered several grace periods for voluntary disclosure, during which immigrants can file taxes back without facing criminal charges, but with the possibility of imposing sanctions.
Marilouise Serrato, head of American Citizens Abroad, a Geneva-based nonprofit, says many members feel intimidated by reporting requirements they didn’t know existed. Their frustration, she says, prompts some to give up.
“Americans abroad are horrified. We’ve made people pay tens of thousands of dollars in fines. We had people … they pay huge sums of taxes back, ” Says Marilouise Serrato.
“So far, we have never heard of anyone giving up, or if they did, they didn’t talk about it.” says Marilouise Serrato, who says her group is not advocating for a waiver.
“Now we see a lot of people talking openly about it and coming to us for information.”
Congress notes. “While I fully support measures that reduce fraud and deal with offshore shelters, the United States should not have policies that impose an undue burden on legitimate Americans abroad.” says Representative Carolyn Maloney, D-NY, and chairwoman of the Congress of American Parties Abroad.
Carolyn Maloney says she has referred the matter to the Treasury, which oversees the IRS.
The IRS did not respond to requests for comment.
Lawyers say banking is a big reason people give up.
“I hear about banking problems over and over and over again,” says Phil Hodgen, a lawyer who has been helping Americans emigrate since 2008.
The new reporting rules, he says, represent “a huge administrative burden. That’s what made Americans too expensive to behave. “