by Brian Mahany
Yesterday the New York Times ran a great piece by Catherine Rampell. She looked at statistics showing the number of Americans renouncing their citizenship. While those numbers certainly show a mass exodus, they are in some case 10 to 20 times higher than just 2 years ago.
While one can speculate on why people are leaving, I have spoken with many dual nationals who are thoroughly disgusted with the civil penalties rules for unreported foreign accounts. The financial press is filled with stories of people who incurred a tax debt of a few thousand dollars on some mistakenly unreported offshore income – usually interest on a small checking account – only to see a penalty of over $100,000.
We are one of the few nations in the world that demands our citizens to continue to file U.S. tax returns even if living abroad full time and paying taxes in the host country.
Our tax rules are so onerous for dual nationals that many may simply be calling it quits. Especially if the current law says they must forfeit up to 50% of their foreign accounts if they failed to report any foreign income, no matter how small.
While the penalty laws make sense for those who intentionally evade taxes and attempt to hide money in Swiss accounts, they treat the recent immigrants from India who send money home to help family the same as the billionaire tax evader.
For those with NO unreported income or those with smaller accounts, there is the ability to avoid all or most penalties. A “last chance” amnesty is available for all others with penalties of up to 25%. The amnesty program (called the Offshore Voluntary Disclosure Initiative), however, ends in August.
The other choice, of course, is to join the thousands of Americans who are simply calling it quits and renouncing their citizenship.
If you want to discuss your amnesty and reporting options, contact attorney Brian Mahany. Our tax lawyers can help you with a wide variety of ex pat tax issues and offshore reporting problems including navigating you through the amnesty program and completing Reports of Foreign Bank and Financial Accounts (“FBARs”).
For more information, contact Brian at (414) 704-6731 (direct) or by email at Offices in Milwaukee, Wisconsin; Detroit, Michigan & Portland, Maine. Services anywhere in the U.S. and beyond.