- 7 Ways to Build Your Credit Score Without a Credit Card
- A Simple Way to Invest Your Retirement Savings
- Lower Your Cable Bill With Techniques A Hostage Negotiator Uses
- How to Get Started Investing When You Don’t Have Much Money
- 8 Ways to Save on Life Insurance
- The ABCs of Selecting a Medicare Supplement Plan
Nearly 3,000 Americans gave up their citizenship or terminated their long-term U.S. residency in 2013. While that number may seem relatively small, it’s a 221 percent increase over 2012.
This new data from the U.S. Treasury Department begs the question: Why are people doing this?
While factors like family and convenience motivate a number of expatriations, taxes may be the leading factor.
- New understanding of tax laws. The U.S. is unique in that Americans are taxed both as citizens of the U.S. and residents of wherever they live. Many people were unaware of this until the UBS tax scandal and crackdown on Americans with overseas assets hit headlines.
- It’s difficult to comply. Dozens of complicated U.S. tax forms apply to those living overseas, which requires hiring professional help. Also, the Foreign Account Tax Compliance Act will soon require foreign financial institutions to report accounts held by U.S. taxpayers to the IRS. Mitchel said some banks are opting to instead close the accounts of their U.S. clients.
- Huge penalties. The standard penalty for failing to file many of the tax forms is $10,000 per form, per year.
While the IRS may simply be trying to get what it is owed, there may be some unintended consequences. In a recent BBC article, David Kuenzi, founder of Thun Financial Advisors, said:
I’m all for people paying their taxes, but it’s very expensive to follow the letter of the law. … Some people are spending $4,000 to $5,000 a year to do their tax return only to find out they don’t owe anything to the U.S.