Record number renounce U.S. to avoid income tax
Would you renounce your U.S. citizenship if it meant you didn’t have to pay an income tax?
More Americans than ever are saying “yes” to that proposition, according to the Internal Revenue Service.
A Reuters article says 1,800 people either renounced their citizenship or relinquished their ‘Green Card’ in 2011, the highest number since the IRS began publishing a list of those who’ve quit Team U.S.A.
The number that walked away in 2011 is eight times larger than those who renounced their citizenship in 2008, Reuters reports, and more than 2007, 2008 and 2009 combined.
Why are people doing it? Probably taxes.
The United States is one of the few countries to tax citizens living abroad. An estimated 6.3 million Americans living overseas have until June to file income taxes, but some apparently find the liability is greater than the benefit.
Longstanding federal law requires U.S. citizens to list offshore bank accounts, but a new law — 2010’s Foreign Account Tax Compliance Act — asks foreign banking institutions to provide the IRS with financial information that some Americans may have “forgotten” to provide. This new law likely explains the 2011 spike.
The IRS publishes the names of those who’ve decided not to pay up, a practice referred to as “name and shame” by lawyers representing the expatriates.
There’s an “exit tax” for the very rich who choose to leave. Reuters says Ted Arison, the late founder of Carnival Cruises, and Michael Dingman, a former Ford Motor Co. director, both paid to no longer be considered American.
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106 comments Add your comment
KMoore
April 24th, 2012
1:10 pm
You might be interested in seeing this interview (from the Wall Street Journal), which does a good job of describing the true nature of the problems – which have nothing to do with trying not to pay taxes, or leaving the US for better jobs or better pay. http://online.wsj.com/video/opinion-what-us-citizenship-worth/C7C8DFE0-064F-401E-BDEA-8E45285D0A99.html If after you see it, you still think that those of us born outside the US are trying not to pay a ‘fair’ share of tax, then there is nothing that will change your mind.
Angry and frightened expat in UK
April 24th, 2012
1:32 pm
I have spent all my adult life in the UK, married to a British citizen and now have dual citizenship. I was only a student when I first came here so hadn’t understood about all the filing and reporting requirements. I went native and invested into local mutual funds like a Brit. Last year, I learned about FBAR and how the the tax treaty still allowed for double taxation for US persons. I wound up having to pay a five figure sum in phantom capital gains taxes on holdings in my mutual funds due to obscure US tax rules. I felt particularly screwed because these were held in tax free accounts and had assumed that I could invest like my fellow Brits and hadn’t realized about this double standard.
But going forward, it’s the ongoing costs of compliance that will really wear me down. My tax situation is simple locally and I can e-file my UK tax returns without having to rely on a professional; but I will have to budget at least $2000 if not more each year for a specialized US accountant. I may still suffer some double taxation as well due to difference in how passive income and future pension income will be taxed.
This is onerous, especially when I am not seeking any US government services. I have had to move all my investments into a US-compliant account which has higher charges and thus lower income. I have to rely on my accountant because I’m so frightened of potential penalties for possibly filling the complicated tax forms incorrectly. Of course, it’s in her interest for things to stay the same, as she earns a living from people like me who hadn’t understood the rules. There’s a whole industry being created around all this but it’s not serving our best interests longterm.
KMoore
April 24th, 2012
6:06 pm
The title of this article is either a mistake, or a deliberate distortion: “Would you renounce your U.S. citizenship if it meant you didn’t have to pay AN income tax?” What country would that be?
More Americans than ever are saying “yes” to that proposition, according to the Internal Revenue Service.” Another deliberate distortion – as we’re paying plenty where we were born, or moved, or married citizens of other countries. We didn’t arrange to be born outside the US, or have our parents move us as children, or deliberately decide to marry a non-US citizen. Life happens, and tax was the last thing on our minds – plus the laws have gone through plenty of changes, for US citizenship and dual citizenship as well as US taxation and US bank reporting – for us, just as it has within the US.
What makes you think we don’t pay already in the countries where we were born, or moved and work? For example – in Canada, our taxes are usually higher – and we didn’t arrange to be born here in order to escape from US tax.
Some, as in countries where the US doesn’t recognize their tax system, or where the tax treaty terms dictate – routinely pay US social security, or other US taxes on top of what they pay where they live.
Why would you start an article with such false propositions? We play plenty of taxes – outside of the US – sometimes higher than we would as citizens inside the US – but most of us are paying first to the country we actually work, earn and live in – the countries that actually provide us with services. Then, if we’re over the tax treaty caps, or have US source income – we pay additionally to the US.
Are any of you volunteering to pay MORE than you owe? I didn’t think so.
Atlanta Native
May 1st, 2012
8:43 am
Wendell (and all others who blame Obama for the way our government has been operating for the past 50 years): In case you didn’t know, big corporations are what have been running this country through many administrations, not just the current one. Ralph Nader was the only presidential candidate to run solely on a policy of electoral and campaign reform, whereby corporations would be prohibited from giving candidates payola to serve their greedy needs. Behind every president or presidential candidate is a filthy-rich company waiting for a handout (i.e. pet project, subsidy, tax supports, etc.)
Mr. Thomas Anthony Jones, SR
May 11th, 2012
5:32 pm
George Romney has renounced his citizenship to save on income taxes and announced he will no longer beat up on Minorities and gays. Good!!!
Mr. Thomas Anthony Jones, SR
May 11th, 2012
5:45 pm
Mitt Romney has renounced his United States of America citizenship to avoid filing his 2011 Income Taxes. Slick. He has announced that he will not beat up any more African-Americans and Gays. We are all glad!!!!!!