Hong Kong (PRWEB) August 19, 2013
In recent years, the IRS has instituted a series of Voluntary Disclosure Programs, which were designed for individuals who were hiding money overseas to voluntarily come forward, pay a penalty and avoid criminal persecution if/when the IRS tracked them down. Basically, the premise was: if you have assets hidden overseas you can come clean, pay a penalty and not be looking over your shoulder wondering if the IRS would ever find you. However, although the programs were designed to target tax cheats, they have a much greater impact on another group of people: American citizens living abroad. These programs treated activities that are everyday- even necessary- such as having a checking or savings account in the country you live in- as a criminal offense.
Data provided by the FederalRegister.gov shows the number of individuals who renounced their US citizenship between 1998 and Q2 of 2013, which we then cross referenced with the launch dates of the three most recent IRS Voluntary Disclosure Programs, the Streamlined Program and the start of the FATCA filing requirements for individuals. The data shows a strong correlation between the increase in individuals renouncing US citizenship and the tax collection efforts of the IRS.
“It’s quite clear from the data that the number of people renouncing their citizenship shoots up at the same time that the IRS began the Offshore Voluntary Disclosure Programs. Then, the number of people renouncing citizenship decreases at the same time that the Streamlined program is announced – which gives US citizens living abroad a less cumbersome way to catch up on back taxes, but then it shoots up again when the FATCA rules start to kick in and people find that the bank they have worked with for 20 years is closing their account because they are a US citizen” said David McKeegan of Greenback Expat Tax Services, a tax preparation company that specializes in helping US expats with their taxes.
As per the Federal Register the number of individuals who renounced their citizenship in 2008 was only 231, but his more than doubles to 743 in 2009 and it doubles again to 1534 in 2010. the data suggests that this is due to more individuals realizing that they are required to file US taxes while living abroad, even if they owe no money to the US government. In the first half of 2013 we have seen 1,809 individuals renounce their citizenship, which is 783% higher than the total for 2008, before the Voluntary disclosure programs began.
“Whatever the original purpose of the Offshore Voluntary Disclosure Programs, it seems that the result has been to encourage people to renounce their US citizenship. This has to in some ways reflect the increased burden placed on Americans living abroad as a result of the additional reporting requirements caused by the Foreign Bank Account Report and the FATCA regulations. Presumably the benefits of having US citizenship are outweighed by the financial burden and time required to comply with the various reporting requirements,” said Mr. McKeegan
Greenback Tax specializes in the preparation of US expat taxes for Americans living abroad. Greenback offers straightforward pricing, a simple, hassle-free process, and CPAs and Enrolled Agents who have extensive experience in the field of expat tax preparation. For more information about US expat taxes, FBAR, FATCA, renouncing US citizenship or other tax matters, please visit http://www.greenbacktaxservices.com.