More and more Americans are giving up their U.S. passports and saying goodbye to Uncle Sam. Here's why.
Dear Uncle Sam: So long, farewell, auf wiedersehen, goodbye! That’s the message from an increasing number of Americans as they renounce their U.S. citizenship.
According to new government data, a record 1,426 Americans relinquished their U.S. passports during the third quarter of this year. The new quarterly record for renunciations topped the previous record of 1,335, which was set in the first quarter of 2015.
It’s a growing trend. A record 3,415 individuals gave up their American citizenship or terminated their long-term U.S. residency in 2014, according to the International Tax Blog. That’s 15 times more than in 2008.
So far this year, 3,221 Americans have renounced their U.S. citizenship.
“If a new record is set [in 2015], this would be the third consecutive year with a year over year increase,” the International Tax Blog noted.
Why are a growing number of Americans giving up their citizenship?
“Many are expats tired of dealing with complicated tax paperwork — a headache that has increased lately as hefty tax regulations have kicked in,” according to CNN Money.
Unlike most other countries, the U.S. taxes its citizens based on their worldwide income, regardless of where they live. For Americans living overseas, the complexity of U.S. tax forms often means expats are forced to seek professional help to prepare their taxes, which can be an expensive annoyance.
The controversial Foreign Account Tax Compliance Act (FATCA), which came into effect in 2014, further complicates tax matters and could be driving the surge in renunciations. FATCA is designed to help the government identify potential tax evaders.
It requires that individuals disclose certain foreign assets and also mandates that banks provide the IRS with information about foreign accounts held by Americans or risk steep fines. CNN Money said:
But the campaign is making life difficult for the 7.6 million Americans living abroad. As financial institutions rush to understand FATCA, some overseas banks, both big and small, have kicked out their U.S. clients, leaving some without even basic checking and savings accounts.
The United States has the highest fees in the world to renounce citizenship, according to Forbes, and that fee was raised by 422 percent in 2014. Bidding farewell to Uncle Sam now costs a whopping $2,350, up from $450. Forbes said the fee is 20 times the average renunciation fee in other high-income countries.
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