More US citizens have renounced their citizenship in the first three months of this year than ever before, mainly because of a new aggressive crackdown by the US Treasury Department and the Internal Revenue Service to enforce tax rules on the foreign income and savings of American expatriates.
The surge in US nationals renouncing their citizenship is taking place in recent years following the 2010 introduction of the Foreign Account Tax Compliance Act (FATCA). This legislation allows the Internal Revenue Service to obtain information on the bank accounts held abroad by US taxpayers. FATCA was enacted after major banks such as HSBC and UBS were accused of helping American taxpayers conceal money overseas.
The rise in the number of people renouncing citizenship correlates to the number of individuals who are becoming aware of their US tax filing obligations and the potential penalties that can be imposed for failure to file certain disclosure related forms, believes one tax expert.
For US citizens, the rules for filing income tax returns and paying estimated taxes are generally the same regardless of where they reside. US taxpayers caught up in the aggressive tax law enforcement regime are finding themselves having to choose between obtaining a secondary citizenship and keeping their assets while minimizing taxes, or retaining their US nationality. For many this becomes a pure economic business decision.
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