Tax Rules Are Causing More Americans to Cut Ties With the United States
According to CNBC, many Americans have begun to renounce their United States citizenship in recent months and years. One of the big reasons why so many people are giving up their citizenship and cutting ties with the United States is because of complex new tax rules. Strict rules for retirement savings and for other types of financial accounts have made it difficult or impossible for many to comply with requirements and have imposed unnecessary costs and complexities.
The Americans who are taking this action are largely people who spend most of their time living abroad, but who are still subject to burdensome U.S. tax laws because tax rules are based on citizenship and not residency. Many experts have urged the United States government to change the rules so it imposes taxes not based on whether someone is a citizen or not, but instead based on where that person lives.
A Washington DC international tax attorney can provide help to U.S. citizens in understanding their tax obligations and in making certain they are in full compliance with even complicated tax rules to avoid legal problems.
Americans are Giving Up U.S. Citizenship Because of Tax Rules
According to CNBC, the United States is one of a small minority of countries that taxes based on citizenship rather than residency. And, in recent years, the United States government has made its tax rules much stricter in an effort to crack down on hidden offshore accounts – but this has had the effect of making life very difficult for Americans who live abroad.
One of the problems is that financial institutions often deny people bank accounts if those individuals are U.S. citizens as a result of the fact that allowing an American to have an account can trigger complex reporting requirements for the bank. Banks that do not want to have to file paperwork on U.S. affiliated accountholders may simply decide not to allow Americans to have accounts at their financial institution at all.
Americans are also required to file annual Reports of Foreign Bank and Financial Accounts in many situations when they have funds offshore – and this can affect Americans who live in foreign countries and simply have bank accounts in the location where they live. One American citizen living abroad, for example, told CNBC that he spent tens of thousands of dollars to get caught up on filing tax forms even though he hardly owed anything in taxes. The costs came from paperwork expenses and accounting fees.
And, some Americans living abroad find it difficult to find people who will become involved in business ventures with them because any companies they create could be considered American companies and trigger tax liability. CNBC explained this also happened to the same American citizen living abroad.
Because of all of the laws that impact the ability of U.S. citizens living in foreign countries, Americans are steadily renouncing citizenship. In the first quarter of 2018 alone, an estimated 1,099 Americans gave up their U.S. citizenship status. And, in both 2016 and 2017, more than 5,000 people over the course of the year gave up citizenship.
Giving up citizenship is a big deal, but so too are the penalties for not filing FBARs and other related tax paperwork. Kevin Thorn, a Washington DC international tax attorney, can provide help to taxpayers who are concerned about their obligations to the IRS. Contact our office online or by calling 202-349-4033 today.