US Citizens Turning in their Passports
The number of Americans choosing to give up citizenship has risen this past year to over 1,000 Americans! This is caused by the government implementing a new disclosure laws intended to stamp out tax evasion. Some Americans are hoping to avoid the disclosure requirements; while other Americans abroad say that they are done dealing with the complicated tax filings.
Most countries tax based on residency, while the US taxes based on citizenship. Since US citizens are not double taxed, for most American expats this simply means that they are forced to file twice, once n the country they live and the US.
The U.S. government plans to launch a new law with the Foreign Account Tax Compliance Act (FATCA) that will require foreign institutions to report all assets owned by Americans. This will trigger FBAR compliance and as a result require additional forms to be filed.
If you have not filed or paid your taxes, giving up your U.S. citizenship is not your way out, since all returns are required before your renunciation is accepted. Also, the IRS can still come after you as a former citizen if evidence of tax evasion surfaces. There is no statute of limitations and the IRS can still collect the back taxes.
If you have assets that exceed $2 million, you could also face paying a large exit tax.
It is a hard decision to decide to give up your American citizenship. You may be asking yourself would I still be American if I left, or feel like you are losing a part of you. Usually the answer depends on personal situation.
The process for giving up your citizenship is as follows:
– Need to have citizenship of another country
– Appear in front of the consular or diplomatic officer (in person)
– File form 8854
– Sign an oath of renunciation
– Not be in the United States