The newly published names
of individuals who renounced their U.S.
citizenship or terminated long-term U.S. residency is up, with 576 for the
quarter and 1,577 so far this year.
The growing trend is an indictment of what is
happening in this country for some but for others it is just a way to save
money.
The Treasury Department is required to publish
a quarterly list, a kind of
public outing putting Americans on notice of who relinquished their rights.
The law was changed in 2004, so tax consequences do not
hinge on why one leaves.
But that could change. After Facebook co-founder Eduardo Saverin departed
permanently for Singapore with his IPO riches, there was an angry backlash.
Mr.
Saverin’s fly-away prompted such outrage that Senators Chuck Schumer and
Bob Casey introduced a bill to double the exit tax to 30% for anyone leaving
the U.S. for tax reasons.
Most expats are motivated primarily by
factors such as family and convenience. Complex or costly taxes can sway a
decision but are often only one factor. Many now find America’s global income
tax compliance and disclosure laws inconvenient or even oppressive.
For U.S. persons living and working in foreign
countries, it is almost a given that they must report and pay tax where they
live. But they must also continue to file taxes in the U.S. based on their
worldwide income. Claiming foreign tax credit on one’s U.S. returns
generally does not eliminate all double taxes.
U.S. taxes are complex, and enforcement fears are
palpable. Moreover, the annual foreign bank account reports known as FBARs carry civil and
even criminal penalties. Civil penalties alone can quickly consume the balance
of an account. And then there is FATCA, which requires filing an
annual Form 8938 once foreign
assets reach a threshold.
Yet the real teeth of FATCA is reporting and
disclosure by foreign banks, the systematic turning over of American names by
foreign banks all over the world. Even Russia and China have signed on, as have
over 70 countries. Many foreign banks simply do not want American
account holders, period.
To leave America you generally must prove 5 years of
U.S. tax compliance. If you have a net worth greater than $2 million or average
annual net income tax for the 5 previous years of $155,000 or more (that’s tax,
not income), you pay an exit tax.
It
is a capital gain tax as if you sold your property when you left. At least
there’s an exemption of $680,000. to
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