In 2013, record numbers of Americans renounced their citizenship in favor of another country for fear of the taxes they may be required to pay. In the 12 years between 1998 and 2010, the average number of Americans that renounced citizenship was around 500 people a year, and it never exceeded 1,000. 2010 saw a dramatic change, and it has continued since then. Almost 3,000 people renounced citizenship last year, and it’s only expected to increase.
The main reason American citizens are renouncing citizenship is because they already live outside of the country but are still required to pay taxes to the United States, in addition to the taxes of the country they live in. For some, it doesn’t matter, but others are afraid that with new laws and regulations, they may be required to pay forward every penny to their name.
Tax Laws for Citizens Living Abroad
Not all of the laws and regulations are new, but the push and enforcement of it is. Expatriate Americans are finding themselves in trouble for not filing a form called the Foreign Bank Account Report, but there’s one simple reason for that: they’ve never heard of it.
Now, if the files aren’t submitted, penalties can be up to 50% of the highest value of the account for each year a report wasn’t filed – enough to make anyone want to give up citizenship.
With more wealthy taxpayers being caught and penalized for hiding money in illegal Swiss accounts, the fear is that even those that are not wealthy will be forced to adhere to the same penalties.
If you live abroad, consult with Tax Crisis Institute today to figure out just how much you should pay in taxes, and to ensure you do it right.