More Americans Sever U.S. Ties as IRS Gets Tougher

bradlyhale

Registered
From the WSJ:

The number of American citizens and green-card holders severing their ties with the U.S. soared in the latter part of 2009, amid looming U.S. tax increases and a more aggressive posture by the Internal Revenue Service toward Americans living overseas.

According to public records, just over 500 people world-wide renounced U.S. citizenship or permanent residency in the fourth quarter of 2009, the most recent period for which data are available. That is more people than have cut ties with the U.S. during all of 2007, and more than double the total expatriations in 2008.

An Ohio-born entrepreneur, now based in Switzerland, told Dow Jones he is considering turning in his U.S. passport. Mounting U.S. tax and reporting requirements are making potential business partners hesitate to do business with him, he said.

"I still do dearly love the U.S., and renouncing my citizenship is not something I take lightly. But more and more it is seeming like being part of a dysfunctional family," said the businessman, who asked that his name not be used for fear of retribution.

"The tax itself is only a small part of the issue," the Swiss-based entrepreneur said. "It's the overall regulatory environment."

A minority of the recent expatriates are U.S. natives who have started a new life overseas. Most are people with family ties outside the U.S.: foreign professionals who acquired a green card while working in the U.S., or people who have received higher education in the U.S.

"Fifteen or 20 years ago there was a big rush to make sure your kids became U.S. citizens, for access to U.S. schools for example," said Timothy Burns, a tax lawyer at Withers law firm in Hong Kong. "Now we're seeing just the opposite."

Last month, the Treasury Department announced more rigorous requirements for Americans living abroad to report information on foreign bank accounts. The reporting requirement has been in place for years, but only in the most recent couple of years has the IRS gotten tough about enforcing penalties.

The information return must be filed by any U.S. citizen or resident whose balance in all foreign accounts combined exceeds $10,000 at any time during the year. Stiff penalties, up to 50% of the annual account balance, punish failure to file.

Others are giving up their U.S. nationality to avoid tax increases in the U.S., as the government struggles under huge budget deficits. The top marginal tax rate is set to rise to 39.6% from 35% at the end of this year. A proposal to tax fund manager pay at ordinary income rates, instead of the 15% capital gains rate, is gaining currency in Congress.

"Everybody sees the tax rates are going up. At a certain point, it gets beyond people's pain threshold," said Anthony Tong, a tax partner at accounting firm PricewaterhouseCoopers in Hong Kong.

Unlike most jurisdictions, the U.S. taxes the income of citizens and green-card holders no matter where in the world it is earned.

In order to give up U.S. citizenship, a person must obtain or have citizenship in another country. The person surrenders their passport or green card during an interview with a consular officer in their new home country. He or she must also submit a form, including a list of assets, to the IRS to complete the process.

Chris Kavanagh of the American Institute in Taiwan, which represents U.S. interests in Taiwan, said 43 people gave up their U.S. citizenship in Taiwan in 2009, the highest that figure has been since 2003. He cautioned against drawing conclusions from that data, however.

The IRS says some of the swelling of numbers of expatriations toward the end of 2009 occurred because the agency made a push to notify people that had already surrendered their passport, but had not completed the process by submitting the IRS form. Until that form is received by the IRS, these people are still subject to U.S. tax. "There is some catch-up going on," said IRS spokesman Bruce Friedland.

The stock-market plunge of late 2008 and early 2009 may also have played a role in the spike in expatriations. Since 2008, Americans with net worth greater than $2 million have had to pay an exit tax assessed on their assets. With gains reduced or wiped out by the market collapse, those seeking to give up their U.S. citizenship had an opportunity to do so with less exit tax required.
 

bradlyhale

Registered
"Good luck" is right... If you were born in another country and renounced your U.S. citizenship, I can get that. However, I was born in the U.S., and I can't fathom ever renouncing my U.S. citizenship.

If I were to do that (no chance in hell) and obtain citizenship in, oh say, Argentina, I'd have to get a visa like everyone else. That would be quite awkward.
 

SaraSara

Registered
I checked into that when I moved back to Argentina. At that time, assets transferred out of the country were taxed at a very high rate, and US citizens were still liable for taxes for something like ten years after turning their passports in.

Unless one gets a super crooked tax lawyer and an equally crooked investment advisor, I don't see the advantage of renouncing US citizenship.
 

emilyr

Registered
bradlyhale said:
From the WSJ:
Chris Kavanagh of the American Institute in Taiwan, which represents U.S. interests in Taiwan, said 43 people gave up their U.S. citizenship in Taiwan in 2009, the highest that figure has been since 2003.
Woah. 43 people in Taiwan renounced their US citizenship without any data as to why, plus the source cautioning not to draw any conclusions from the data, nor explaining how much of a spike 43 is compared to an average year.

And why shouldn't the IRS get tougher on bank accounts abroad? Technically, it's money laundering.

It sounds like we are in a real crisis here. It MUST be the tax system. PUH-leez.

And people not rushing to get their green card? I wonder if at least as far as the Western hemisphere goes this has anything to do with an increasingly militarized border. I have many friends, legal and not, back home. Some have been deported in a very ugly way. And even some without their papers in order, though still legal, tell me horrible stories of the way la migra treated them or other mayores with such disrespect. I have a friend working on a green card for 3 years, and she has 2 children with her husband and STILL he is on the waiting list for a green card-she has to travel back and forth to visit. Their family is about to give up on waiting; it's not worth it.

This is a little journalistic stretch for a catchy headline for Rupert Murdoch's paper.
 

Alzinho

Registered
SaraSara said:
Unless one gets a super crooked tax lawyer and an equally crooked investment advisor...
Are there any other types of tax lawyers and investment advisors?

;-)
 

SaraSara

Registered
Alzinho said:
Are there any other types of tax lawyers and investment advisors?

;-)
Well, there's also the plain garden-variety crooked. Being super crooked takes graduate work - not everyone qualifies. :D
 

redrum

Registered
emilyr said:
Woah. 43 people in Taiwan renounced their US citizenship without any data as to why, plus the source cautioning not to draw any conclusions from the data, nor explaining how much of a spike 43 is compared to an average year.

And why shouldn't the IRS get tougher on bank accounts abroad? Technically, it's money laundering.

It sounds like we are in a real crisis here. It MUST be the tax system. PUH-leez.

And people not rushing to get their green card? I wonder if at least as far as the Western hemisphere goes this has anything to do with an increasingly militarized border. I have many friends, legal and not, back home. Some have been deported in a very ugly way. And even some without their papers in order, though still legal, tell me horrible stories of the way la migra treated them or other mayores with such disrespect. I have a friend working on a green card for 3 years, and she has 2 children with her husband and STILL he is on the waiting list for a green card-she has to travel back and forth to visit. Their family is about to give up on waiting; it's not worth it.

This is a little journalistic stretch for a catchy headline for Rupert Murdoch's paper.
why shouldn't the IRS get tougher? wow. you'll pardon me as i cough cough. i hardly think that a tougher IRS is a good thing. i do not believe that giving the govt. more power to reach into the daily lives of citizens is a good thing.

oh and there's one other thing. technically, the income tax is illegal according to the constitution. that's right - it's illegal. nowhere in the constitution does is say that the federal govt. has a right to tax the wages of a private person, which means that citizens should not have to pay it.

how would we pay for our infrastructure you ask? roads? education? the same we always have, through state taxes. about .43 cents of every income tax dollar is spent on the military. how much is spent on education? about .03 cents. more money is spent on paying interest on existing debts than on education.

does this sound like a country that's headed in the right direction to you?

our country was built and created before the income tax ever existed. it was instituted in 1913 along with the Federal Reserve Act, you guessed it, the same act that formed the Fed. and we all know what a crooked private central bank that is.

now that the obamacare has passed, they are supposedly planning on hiring another 16,000 IRS agents to police small business and individuals to make sure you are purchasing the insurance.

again, big govt., more IRS, more taxes, more budget deficits - these are all bad things. very bad things.
 
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