1,500 Americans renounced their citizenship in 2010

Discussion in 'Wall St. News' started by misterno, May 16, 2011.

  1. Rising every year and in 2010 it was over 1,500 an all time high. In 2009, it was 230.


    A growing number of Americans living overseas are renouncing U.S. citizenship. The reason? Mounting tax and reporting obligations, lawyers say.

    With the U.S. government struggling with huge budget deficits, government bodies such as the Internal Revenue Service and Securities and Exchange Commission have been cracking down on tax evasion and implementing new reporting requirements. In February, the IRS introduced a second offshore voluntary disclosure program aimed at noncompliant American taxpayers with unreported offshore bank accounts and assets.

    Getty Images The program promises Americans won’t face charges if they step forward voluntarily — they are given a deadline of Aug. 31 to do so — but they will still have to pay taxes and penalties. Those who don’t step forward voluntarily could face stiffer penalties or even jail time.

    The U.S. is the only industrialized country that requires citizens to pay income tax on offshore earnings, and many are finding the complications and cost of maintaining U.S. citizenship abroad to be increasingly burdensome.

    “Once they find out what the tax and reporting obligations are, it’s a bit onerous,” said Jay Krause, partner at Withers in Hong Kong, a law firm that specializes in tax law, trusts, estate planning and family law. He says Withers has seen an “exponential increase” in American clients giving up citizenship and green card holders renouncing their status.

    Now expatriates in Asia, in particular, are coming under scrutiny by the U.S. government. Last month, Doug Shulman, commissioner of the IRS, said the bureau is targeting Asian bank accounts and that taxpayers should expect new criminal investigations and prosecutions.

    “We definitely have been tracking migration of assets out of Europe and into Asia,” Mr. Shulman told reporters when introducing the disclosure program in February. He said the IRS is looking for offenders in places “you might not expect.”

    Adds Joe Field, Asia senior partner at Withers: “Many Hong Kong companies were set up for purposes of evading U.S. tax, so now the IRS is going after those. They say they’re doing this, but don’t say what they are doing or to whom.”

    Indeed, the IRS opened an office in Beijing in late 2008 to improve compliance for overseas tax payers. It also has an office in Hong Kong that handles criminal investigations.

    Asia is historically home to a large number of “incidental” and “accidental” Americans — people who took on U.S. citizenship as insurance against political instability, or who have one parent who is a U.S. citizen but perhaps have never stepped foot in the U.S. For decades, many Chinese in Hong Kong and Taiwan got U.S. passports or green cards as protection against mainland Chinese takeover in the two regions. With these loose ties to American nationality, giving up citizenship can be seen as an attractive option.

    “Many people who looked to America as the protector now see America is bent on coming after them,” said Mr. Field. “We’re getting a whole new class of client who is someone who says, ‘I want to go into the disclosure program and as soon as I complete it, expatriate.’ ”

    The hassle of maintaining American citizenship overseas goes beyond taxes. New laws have made it difficult for Americans to handle finances while living overseas. American Citizens Abroad, a Geneva-based advocacy group for American expats, says that some Americans have had accounts closed or have been turned away by banks and other financial institutions because of the increasingly complicated and expensive reporting requirements involved in serving U.S. clients.

    Some provisions in the 2001 Patriot Act — which among other things aims to curb financing of terrorism — have inadvertently made it more difficult for some overseas Americans to keep U.S. bank accounts because of difficulties proving a U.S. address. Meanwhile, the Hire Act, which will take effect in 2013 and requires foreign banks to report to the IRS account information of U.S. citizens with more than $50,000 in savings, is expected to make it harder for Americans to open investment or bank accounts overseas.

    According to the Federal Register, a government publication that publishes a list of Americans that have given up their citizenship, more than 1,500 expatriates gave up their U.S. citizenship last year, or an average of almost 400 each quarter. Compare that with all of 2008 when a total of about 230 Americans renounced their citizenship. The Federal Register does not indicate where the renunciations take place.

    One Hong Kong-based banker, who gave up his citizenship in 2009, said he came to his decision after living and working in China for a number of years.

    Under what’s known as the Reed Amendment provision of immigration reform, enacted in 1996, former citizens who expatriate primarily for tax avoidance purposes are barred from re-entry to the U.S. Lawyers say this rule has never been implemented or enforced but it keeps many mum on their reasons for expatriation.

    “The hardest part was emotional,” said the banker, who was born and raised in the U.S. by immigrant Chinese parents. “My parents worked so hard to raise us in the U.S. and give us a better life. They weren’t sure about [me] giving up citizenship.”

    But after living and working in Hong Kong, financial reality overshadowed emotional attachment.

    “For what you pay in U.S. taxes, you can pay for your kids’ schooling,” he said.

    To be sure, the 1,500 who renounced citizenship last year make up only a small portion of the overall number of Americans living abroad. An estimated 60,000 U.S. citizens live in Hong Kong alone, according to the consulate general’s office. And a far greater number apply to become U.S. citizens every year. Matthew Dolbow, spokesman for the U.S. Consulate General in Hong Kong and Macau, noted that in 2010, approximately 2,700 Hong Kong and Macau residents successfully applied to immigrate to the U.S.

    More In Personal FinanceWhat to Know About the IRS in Asia Weighing Whether to Buy a Vacation Home Investing in Asia in 2011 The figure “illustrates the close ties between the United States and Hong Kong and Macau and the attractiveness of the United States as a destination,” he said.

    Still, lawyers expect the new disclosure program to draw in many Americans in Hong Kong and Singapore seeking expatriation, especially wealthy ones who have to pay extensive taxes.

    Americans who have a net worth of at least $2 million and seek expatriation are subject to hefty taxes, including a mark-to-market tax on assets world-wide, including unrealized gains. But a new estate tax law allows Americans to give up to $5 million tax-free until the end of 2012. That means a high-net individual could potentially give enough money to avoid the high net-worth expatriation tax.

    The process of expatriating is fairly straightforward, but can be extensive because Americans must first provide documents showing they have been paying income tax for the past five years.

    For those who have not paid taxes, the process has gotten more expensive. Five years ago, under an informal program, expatriates who hadn’t filed taxes could frequently reach an agreement with the IRS whereby they could pay three years of back taxes and interest. Now, under the new voluntary disclosure program, the fee is eight years of back taxes with interest, plus a penalty of 25% of the individual’s highest account balance during that period.

    Corrections & Amplifications: A 2008 U.S. tax-law change eliminated a tax on expatriates who give up their citizenship that required them to pay income tax if they spend more than 30 days a year in the U.S. An earlier version of this article incorrectly said that expatriates who give up citizenship are liable to pay income tax for 10 years under those circumstances.
  2. Read this comment and shocked

    "The fact that waiting times to renounce at many US diplomatic missions is now up to two years proves that the number given by the WSJ is completely off and is only the “official” figure, not taking into account the vast majority of renunciations that are not “covered”."

    Is this true? Can someone confirm?

    The figure is probably closer to 10,000 to 15,000, as I have been told that the main consulates handle three or four renunciations per day! Again, why doesn’t the WSJ do a little bit of investigative journalism and get the facts, instead of just cutting and pasting what they find on “official” lists. The link to the article cited above follows and I would advise readers to share this widely, as it can save many estates a lot of money if they divest of ALL US shares as soon as possible.

  3. Say as an American you move to Sweden and decide not to pay US taxes anymore.

    What are the implications?
  4. Same as living in US and not paying taxes


    But how will they catch you?
  5. So you can not return to the US, or do they actively ask for extradition?
  6. Wow, is that newsworth? 1500? How many frickin' Mexicans cross the border a day to get in here? How many from other nations? Someone is always disatisfied, but 1500 seems pretty small. Alot of things piss me off, but to go elsewhere and express my opinion would be death. I guess that is a good option. Or most of my income would go to sloths who do minimal work for me, and I guess that is good.
    I see no other place in the world to live that would provide a better product. At the same time we nee to reverse the direction we are going and a drastic chnge quickly. Goverment employement should be a priviledge, not a right, and whether elected or otherwise you shouldn't walk away with the life of Reilly for the rest of your life,
  7. moarla


    this 1500 are maby the ones who have money or are making much money :))
    poor people stay
  8. aka the 1% of successful traders.:cool:
  9. Im surprised it is only 1500.
  10. The figure is probably closer to 10,000 to 15,000, as I have been told that the main consulates handle three or four renunciations per day! Again, why doesn’t the WSJ do a little bit of investigative journalism and get the facts, instead of just cutting and pasting what they find on “official” lists. The link to the article cited above follows and I would advise readers to share this widely, as it can save many estates a lot of money if they divest of ALL US shares as soon as possible.

    (Read the comments section of the article)
    #10     May 16, 2011