New IRS Rules Prompting More to Give Up American Citizenship
"'Truth, justice, and the American way' - it's not enough anymore," the comic book superhero said, after both the Iranian and American governments criticized him for joining a peaceful anti-government protest in Tehran.
Last year, almost 1,800 people followed Superman's lead, renouncing their U.S. citizenship or handing in their Green Cards. That's a record number since the Internal Revenue Service began publishing a list of those who renounced in 1998. It's also almost eight times more than the number of citizens who renounced in 2008, and more than the total for 2007, 2008 and 2009 combined.
But not everyone's motivations are as lofty as Superman's. Many say they parted ways with America for tax reasons.
The United States is one of the only countries to tax its citizens on income earned while they're living abroad. And just as Americans stateside must file tax returns each April - this year, the deadline is Tuesday - an estimated 6.3 million U.S. citizens living abroad brace for what they describe as an even tougher process of reporting their income and foreign accounts to the IRS. For them, the deadline is June.
The National Taxpayer Advocate's Office, part of the IRS, released a report in December that details the difficulties of filing taxes from overseas. It cites heavy paperwork, a lack of online filing options and a dearth of local and foreign-language resources.
For those wishing to legally escape the filing requirements, the only way is to formally renounce their U.S. citizenship. Last year, IRS records show that at least 1,788 people did, and that's likely an underestimate. The IRS publishes in the Federal Register the names of those who give up their citizenship, and some who renounced say they haven't seen their name on the list yet.
The State Department said records it keeps differ from those published by the IRS. They indicate that renunciations have remained steady, at about 1,100 each year, said an official.
The decision by the IRS to publish the names is referred to by lawyers as "name and shame." That's because those who renounce are seen as willing to give up their citizenship primarily for financial reasons.
There's also an "exit tax" for the very rich who choose to leave. During the last 25 years, a number of millionaires and billionaires have renounced their citizenship. Among them: Ted Arison, the late founder of Carnival Cruises, and Michael Dingman, a former Ford Motor Co. director.
But those of more modest means renounce, too. They say leaving America is about more than money; it's about privacy and red tape.
Read more HERE.
UPDATE - AllGov:
According to National Taxpayer Advocate Nina E. Olson, approximately 4,000 people gave up their citizenship from fiscal year 2005 to FY 2010. Renunciations increased sharply within the past three years, from 146 in FY 2008 to 1,534 in FY 2010. And during the first two quarters of FY 2011 alone, 1,024 Americans ditched their citizenship.
The advocate’s report cites two reasons for the renunciations. First, many taxpayers abroad say they are confused “by the complex legal and reporting requirements they face and are overwhelmed by the prospect of having to comply with them.”
Second, others have accused the Internal Revenue Service (IRS) of “bait and switch” tactics, telling Americans they can resolve their unpaid taxes under an “older voluntary disclosure programs with the promise of reduced penalties, only to find themselves subjected to steeper penalties.”
According to tax attorney Andrew Mitchel, another factor has been a change of law in 2008 that means “non-U.S. citizen, nonresidents can now annually visit the U.S. for 120 or more days without becoming taxed as U.S. residents (under the pre-2008 rules, visits to the U.S. for more than 30 days during any of the 10 years following expatriation caused the individual to be treated as a U.S. resident for that year).”