Buried in the center of today’s Wall Street Journal is an article entitled, “More Taxpayers Are Abandoning the U.S.” It is a story we have carried in this blog before. Record numbers of U.S. citizens and green card holders are renouncing their citizenship, turning in their passports and leaving. Leaving for good.
The government doesn’t require a reason to expatriate nor does it collect that information. Ask any of the folks that have left, forever, and they will tell you the same reason. Taxes.
Taxes in other developed countries may also be high but the folks we have talked to – and helped expatriate – are concerned about FATCA, tax policy in general and the perceived crackdown on individual freedom including the freedom to put money offshore.
FATCA is a 2010 law that requires foreign financial institutions such as banks, brokerage firms, hedge funds and life insurance companies to examine their customer base and report those with ties to the United States. It is legal to open or maintain a foreign account but a 1970 law requires those accounts be reported to the IRS annually. Failure to report an offshore account could be a felony and carries huge civil penalties.
Although the requirement to report foreign accounts has been on the books for decades, only in recent years has the law been actively enforced. Many Americans and dual nationals were caught off guard. Now some are afraid to come forward fearing the 50% per year or $100,000 per account penalties.
Expatriating or renouncing one’s citizenship doesn’t necessarily help. Congress passed a law that essentially sets up an exit tax for wealthy Americans and requires several years of tax compliance before one can legally renounce. Sure, some folks will simply mail in their passport and leave but the United States still considers you a citizen and can prosecute you if the IRS so chooses. (In August we wrote about the exit tax and renunciation of citizenship.)
So how many folks have legally left the United States? The numbers are still small but growing rapidly. In 2011, 1,781 U.S. citizens and green card holders formally cut their ties with the United States. For the first three quarters of 2013, the total has grown to 2,369. If that pattern continues, the total this year should be 3,159, nearly an 80% increase.
Where will folks go? It’s hard to know. Many Americans are afraid of FATCA and believe it is the first step towards currency controls and confiscation of wealth. Knowing where your money is the first step towards later taking it, or at least that is how the theory goes.
Obviously, only a few people are that concerned that they would give up their country. We are more disturbed that the trend has increased every since FATCA was enacted by Congress.
If you have unreported foreign accounts, there are ways to come into compliance and avoid the serious penalties associated with FBAR violations. (FBAR is the Report of Foreign Bank and Financial Accounts) While we respect and have helped people who wish to repatriate, most folks come to us looking for advice and help in complying. Unfortunately, you can’t legally expatriate if you are not already in compliance.
Have questions about FATCA, FBAR and foreign reporting issues? Give us a call. We will gladly explain your responsibilities and explore your options. Our FATCA attorneys have helped many taxpayers with a wide variety of offshore reporting problems.
For more information, contact attorney Bethany Canfield at or by telephone at (414) 223-0464. The author may also be contacted at or by telephone at (414) 704-6731 (direct). All inquiries are protected by the attorney – client privilege and kept in strict confidence.
Mahany & Ertl – America’s Tax Lawyers. IRS tax services available worldwide.
Need more information? Our Due Diligence blog has hundreds of articles on FATCA and FBARs.
Post by Brian Mahany, Esq.
FBAR lawyers – FATCA attorneys – Offshore Voluntary Disclosure Program – IRS tax attorneys