New Tax Rules: Why Are Americans Relinquishing Their Citizenship?Offshore Account Update
Posted on September 28, 2018 | Share
In the first quarter of 2018, a total of 1,099 U.S. citizens gave up their citizenship. In both 2016 and 2017, more than 5,000 people decided they no longer wanted to be citizens of the United States. A big part of the reason why so many Americans have decided to give up their citizenship is because they are burdened by complex tax laws that make it difficult for them to live their lives.
U.S. citizens who live abroad are subject to strict tax filing rules even if they are not residing in the United States. CNBC indicates the U.S. is one of a small number of countries that assesses taxes based on citizenship and not residency. And, as tax laws have become more complicated and more burdensome in recent years, this has caused major problems for U.S. citizens living outside of the country.
No matter where you live, it is important that you are fully aware of your obligations to the IRS in order to avoid serious financial penalties. A New Jersey international tax attorney can help you to understand the rules and regulations and can assist you in taking action in circumstances where you may not be in compliance with the rules.
More U.S. Citizens are Giving Up Citizenship Because of Burdensome Tax Rules
CNBC provided insight into some of the issues that Americans face when they live overseas. They interviewed an American who is living abroad who has experienced many major complications with doing basic financial tasks because of the United States imposing burdensome tax obligations.
One big issue is that foreign banks who do business with U.S. affiliated accountholders are subject to certain reporting requirements. Rather than taking on the burden of doing extensive paperwork to report information about accountholders to the IRS, foreign banks frequently decide they simply do not want to do business with Americans. This is a problem for people who live abroad and want to have a bank where they live. As CNBC explained, the American they spoke with wasn't able to open a foreign bank account at his bank of choice because of this problem.
Another issue is that U.S. citizens with foreign bank accounts generally need to file Reports of Foreign Bank and Financial Account or be subject to very substantial financial penalties. Many Americans are not even aware of the fact they are supposed to be filing these FBARs. The person CNBC interviewed, for example, indicated he didn't know of the paperwork requirements and ended up having to pay tens of thousands of dollars to get everything resolved – not because he owed taxes, but because of accounting and compliance costs.
Because it can be so difficult to maintain a foreign bank account while retaining U.S. citizenship, even when living in a foreign country, many have decided it's simply easiest to just give up citizenship. However, this choice also has tax implications. A New Jersey international tax attorney can provide insight so you can make informed choices about your citizenship status and your obligations to the IRS. Contact attorney Kevin Thorn today to learn more. Call 201-842-7696.