U.S. Fee to Drop Citizenship Is Raised Fivefold

[dnoblett]

A new wrinkle on this topic: Americans abroad find citizenship too taxing to keep

 

It seems the State Department has found a way to punish American Citizens when they renounce citizenship.

 

he fee for individuals to renounce U.S. citizenship is jumping to $2,350 as of Sept. 12—more than five times the current charge of $450.

The U.S. State Department, in its explanation for the increase, said that documenting a renunciation is “extremely costly” and requires a minimum of two intensive interviews with the applicant as well as other procedures.

 

The fees charged for a number of other services, such as “fiance(e) visas” and employment-based visa applications, increased far less than those for renunciation and in some cases declined.

 

The large increase in the renunciation fee comes at a time when record numbers of Americans living abroad are cutting ties with the U.S. Last year, 2,999 U.S. citizens and green-card holders renounced their allegiance to the U.S., a record number, and renunciations in 2014 are on track to exceed that.

 

....

 

Helping boost the exodus of U.S. citizens, say experts, is a five-year old campaign by U.S. authorities to track down tax evasion by Americans hiding money abroad. While the campaign has collected more than $6 billion in taxes, interest and penalties from 43,000 U.S. taxpayers, it has also swept up many middle-income Americans living abroad who pay taxes in their host country and say they weren’t trying to dodge U.S. taxes.

 

Scrutiny of these Americans by U.S. authorities is intensifying under the Foreign Account Tax Compliance Act, known as Fatca, which Congress passed in 2010. The law’s main provisions took effect in July and require foreign financial firms to report income and account balances above certain thresholds to the Internal Revenue Service.

 

The heightened enforcement is prompting many to renounce their citizenship.

MORE: http://blogs.wsj.com/totalreturn/2014/08/30/government-fee-to-give-up-u-s-citizenship-is-raised-fivefold/

 

Unintended consequences....

[Randy W]

A new wrinkle on this topic: Americans abroad find citizenship too taxing to keep

 

It seems the State Department has found a way to punish American Citizens when they renounce citizenship.

 

he fee for individuals to renounce U.S. citizenship is jumping to $2,350 as of Sept. 12—more than five times the current charge of $450.

The U.S. State Department, in its explanation for the increase, said that documenting a renunciation is “extremely costly” and requires a minimum of two intensive interviews with the applicant as well as other procedures.

 

The fees charged for a number of other services, such as “fiance(e) visas” and employment-based visa applications, increased far less than those for renunciation and in some cases declined.

 

The large increase in the renunciation fee comes at a time when record numbers of Americans living abroad are cutting ties with the U.S. Last year, 2,999 U.S. citizens and green-card holders renounced their allegiance to the U.S., a record number, and renunciations in 2014 are on track to exceed that.

 

....

 

Helping boost the exodus of U.S. citizens, say experts, is a five-year old campaign by U.S. authorities to track down tax evasion by Americans hiding money abroad. While the campaign has collected more than $6 billion in taxes, interest and penalties from 43,000 U.S. taxpayers, it has also swept up many middle-income Americans living abroad who pay taxes in their host country and say they weren’t trying to dodge U.S. taxes.

 

Scrutiny of these Americans by U.S. authorities is intensifying under the Foreign Account Tax Compliance Act, known as Fatca, which Congress passed in 2010. The law’s main provisions took effect in July and require foreign financial firms to report income and account balances above certain thresholds to the Internal Revenue Service.

 

The heightened enforcement is prompting many to renounce their citizenship.

MORE: http://blogs.wsj.com/totalreturn/2014/08/30/government-fee-to-give-up-u-s-citizenship-is-raised-fivefold/

 

Unintended consequences....

 

 

This is the thing to notice here - when living abroad, FILE YOUR INCOME TAX RETURNS. If you earn OVER the minimum taxable taxable amount (for a married couple in 2014, this is around $20,400), you MAY find yourself owing money. If you DON'T file your tax return, you CAN'T claim the Foreign Earned Income Credit, nor can you deduct or take credit for any foreign taxes paid.

 

Renouncing your citizenship doesn't forgive any of your past taxes.

[dnoblett]

One other point many Americans living abroad are being turned away from banks because the banks do not want to have to hassle with the U.S. Government.

 

 

 

"However, as a result of FATCA, in the past year I have been kicked out of a Swiss bank that said, 'Hey, we love you, but we won't work with Americans.' I have also been kicked out of a Swiss pension fund. They told me they don't want any Americans in the fund. They don't want to work on behalf of the IRS," he says.

http://www.usatoday.com/story/news/world/2014/03/08/usa-citizens-relinquish-passports-tax-filing/5859371/

 

http://dollarvigilante.com/blog/2014/3/25/us-citizen-no-foreign-bank-account-for-you.html

A little more on this:

 

Shut Out Of Foreign Banks

 

Foreign banks looked at the new law and decided that the regulations would be a huge hassle. Many of them decided to wash their hands of American account-holders.

"They canceled the accounts of just about every American in Europe," says retiree John Mainwaring, "including me."

 

Seventy-year-old Mainwaring grew up in Ohio, served in the U.S. Army, and has lived in Munich, Germany, for about 40 years.

After his old German banks kicked him out, he tried to find new ones that would take him in.

 

"I went everywhere," he says, "to every bank in Germany. The problem is, the ones here don't deal with Americans."

 

Congress wanted to catch tax cheats. But the net also snagged Americans whose foreign bank accounts let them pay their bills in the countries they now call home.

 

U.S. Taxes Americans, No Matter Where They Live

 

The United States is very unusual in this respect. Most countries in the world don't tax their citizens living abroad. So, for example, a Spaniard living in Canada won't pay Spanish taxes. Instead, he'll pay Canadian taxes. But the U.S. taxes American citizens wherever they are in the world.

 

"If I can compare it to romance, I say the U.S. is like Fatal Attraction," says Suzanne Reisman, a lawyer in London who advises Americans abroad. "Once they've got you, they never let you go. You have to renounce your citizenship, or you have to die."

 

So today, Americans who don't like the Fatal Attraction relationship are giving up their U.S. citizenship in record numbers.

 

In Switzerland, so many people want to renounce their citizenship that the U.S. Embassy actually has a waiting list.

 

"I want to be clear: It's not about a dollar value of taxes that I don't want to pay," says Brian Dublin, a businessman who lives near Zurich. "It's about the headache associated with the regulations, filing in the U.S., and then having financial institutions in the rest of the world turn me away."

 

Dublin says he is ready to renounce, despite the ties he feels to the country of his birth. "I grew up in America. I love my country. But I just feel that the current regulations are onerous."

Officials from the Treasury Department, the State Department, the IRS and Congress spoke on background for this story. None would talk on tape.

 

They all generally agree on the facts of the situation. Even so, there is very little pressure to change it. As one Senate staffer pointed out, nobody in Congress represents overseas Americans. And government officials think this law is succeeding at catching the tax cheats. That may be worth the side effect of losing a few thousand American citizens every year.

http://www.npr.org/blogs/parallels/2014/02/20/275937138/why-more-americans-are-renouncing-u-s-citizenship

 

[dan1984]

I am utterly confused with all these new regulations and requirements and will do nothing knowingly wrong, but many times I'm worried I'm not abreast of everything I should be doing. In addition to filing taxes, have to watch out if the total of all a person's foreign bank accounts cross a certain threshold. I found these 2 links rather informative:

 

http://www.irs.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements

http://www.greenbacktaxservices.com/faq/foreign-bank-account-reporting/

 

If you have a registered foreign business as well there is a whole sleuth of paperwork/forms that need to be submitted.

 

Anything else those of us living abroad should be sure to do??

[Randy W]

I am utterly confused with all these new regulations and requirements and will do nothing knowingly wrong, but many times I'm worried I'm not abreast of everything I should be doing. In addition to filing taxes, have to watch out if the total of all a person's foreign bank accounts cross a certain threshold. I found these 2 links rather informative:

 

http://www.irs.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements

http://www.greenbacktaxservices.com/faq/foreign-bank-account-reporting/

 

If you have a registered foreign business as well there is a whole sleuth of paperwork/forms that need to be submitted.

 

Anything else those of us living abroad should be sure to do??

 

Nope - that PROBABLY pretty well covers it.

 

There's a LOT of misinformation (and paranoid individuals) out there - nothing beats being on top of it all yourself, even (or ESPECIALLY) if you have to hire or pay someone to help with the paperwork.

 

You MUST file your income taxes if you make more than the minimum amount (even if you owe $0), and file Form TD F 90-22.1 Report of Foreign Bank and Financial Accounts if your foreign bank account goes above $10,000 at any point during the year.

[dan1984]

 

I am utterly confused with all these new regulations and requirements and will do nothing knowingly wrong, but many times I'm worried I'm not abreast of everything I should be doing. In addition to filing taxes, have to watch out if the total of all a person's foreign bank accounts cross a certain threshold. I found these 2 links rather informative:

 

http://www.irs.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements

http://www.greenbacktaxservices.com/faq/foreign-bank-account-reporting/

 

If you have a registered foreign business as well there is a whole sleuth of paperwork/forms that need to be submitted.

 

Anything else those of us living abroad should be sure to do??

 

Nope - that PROBABLY pretty well covers it.

 

There's a LOT of misinformation (and paranoid individuals) out there - nothing beats being on top of it all yourself, even (or ESPECIALLY) if you have to hire or pay someone to help with the paperwork.

 

You MUST file your income taxes if you make more than the minimum amount (even if you owe $0), and file Form TD F 90-22.1 Report of Foreign Bank and Financial Accounts if your foreign bank account goes above $10,000 at any point during the year.

 

 

Definitely agree, Randy.

 

As it stands, pretty sure I'm doing everything correctly, which at this point is just filing my taxes.

 

If my foreign bank accounts do tip over $10,000, filing online is fairly easy and straightforward from what I've been able to ascertain:

http://bsaefiling.fincen.treas.gov/main.html

 

If and when I register a foreign business, I've had a look at that paperwork, and I just can't make sense of it. I think I'll have to hire somebody at that time........

[Randy W]

 

 

I am utterly confused with all these new regulations and requirements and will do nothing knowingly wrong, but many times I'm worried I'm not abreast of everything I should be doing. In addition to filing taxes, have to watch out if the total of all a person's foreign bank accounts cross a certain threshold. I found these 2 links rather informative:

 

http://www.irs.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements

http://www.greenbacktaxservices.com/faq/foreign-bank-account-reporting/

 

If you have a registered foreign business as well there is a whole sleuth of paperwork/forms that need to be submitted.

 

Anything else those of us living abroad should be sure to do??

 

Nope - that PROBABLY pretty well covers it.

 

There's a LOT of misinformation (and paranoid individuals) out there - nothing beats being on top of it all yourself, even (or ESPECIALLY) if you have to hire or pay someone to help with the paperwork.

 

You MUST file your income taxes if you make more than the minimum amount (even if you owe $0), and file Form TD F 90-22.1 Report of Foreign Bank and Financial Accounts if your foreign bank account goes above $10,000 at any point during the year.

 

 

Definitely agree, Randy.

 

As it stands, pretty sure I'm doing everything correctly, which at this point is just filing my taxes.

 

If my foreign bank accounts do tip over $10,000, filing online is fairly easy and straightforward from what I've been able to ascertain:

http://bsaefiling.fincen.treas.gov/main.html

 

If and when I register a foreign business, I've had a look at that paperwork, and I just can't make sense of it. I think I'll have to hire somebody at that time........

 

 

 

The Form TD F 90-22.1 Report of Foreign Bank and Financial Accounts wasn't available for online filing, as of the last time i looked. It had to be mailed in. I always sent it by EMS, figuring a signed delivery receipt was pretty much needed, and that the only way to do that was to pay the $27+ EMS charge.So it's good to know about that online site , in case my Chinese account ever needs to go 9over $10,000 again. Thanks.

Edited September 3, 2014 by Randy W (see edit history)