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U.S. Expats Balk at Tax Law: American Citizen Renunciations Are Soaring

69 points by wikiburner 13y ago

InclinedPlane 13y ago
So stupid, and it ruins the perception of the US worldwide. The result of this change is going to be exactly as described, a lot of US citizens living outside of America are going to renounce their citizenship and not a single dollar is going to flow into the federal budget. No upside, a lot of downside.
- joelandren 13y ago
  The statistics tell a different story. The plural of anecdote is not data.
  - InclinedPlane 13y ago
    Statistics you say? Produce them. Please.
    - vacri 13y ago
      In the article, 6M expats, 1k renouncers. That's less than 0.02%. Taken over a year, it's still not enough to hit 0.1%. It's not like money would be flowing from these people anyway - they were hiding assets, according to the article, and now that those assets have to be disclosed, they want to cut the ties. These weren't people who were already contributing their fair share.
      - InclinedPlane 13y ago
        These are citizens, not statistics. A lot of people are choosing to renounce their citizenship not because they are hiding assets but because the burden of having to prove that they are not is becoming excessively onerous. Moreover, using statistics from when the program has just changed and pretending that a massive uptick in renunciations won't continue and will merely flatten out after a temporary bump is at best intellectually lazy and at worst dishonest and misleading.
        vacri 13y ago
        Assuming that an uptick will increase exponentially isn't intellectually lazy or dishonest and misleading?
        InclinedPlane 13y ago
        Who is assuming that? It's bad enough that it's increased substantially. Even if it increases sub-linearly it will be that much worse. Renouncing US citizenship should be a "big deal", but increasingly the IRS is forcing people into it, that's not the America that anyone should want.
- Aloisius 13y ago
  Really? What upside is there to having US citizens living outside the US and not paying taxes? They enjoy the benefits of being a US citizen without any of the shared sacrifice. I say, let them renounce.
  - vl 13y ago
    Err, how do they enjoy benefits if they are living abroad?
    - northwest 13y ago
      Being a US citizen abroad may even come at a "social" price, given the negative PR campaign the US has been running for a very, very long time now.
      - bloodorange 13y ago
        Yes, I have considered mentioning "No Americans Please" on couchsurfing profile on some days, but eventually decided against it when I felt that an individual traveller may not be responsible for the atrocity that his/her government is.
      - madaxe 13y ago
        It does. I know plenty of Americans or ex-Americans around the globe who tell folks they're Canadian. I'm afraid to say your government is making you intensely unpopular, pretty much everywhere.
        vegasbrianc 13y ago
        I am an American who has lived in Europe (Netherlands and now Switzerland) for over 10 years. I have also traveled all over Europe and Asia without ever having a problem of being an American or apologized for the fact. Nor will I ever put a Maple leaf on my suit case or backpack (Nothing against Canucks BTW)but I am proud of where I come from. If you cannot take criticism from other people from other countries then stay home. I find it a great way to understand other people/cultures.
tdicola 13y ago
The numbers don't seem to be that concerning--1000 people/quarter or let's say 5000 people renouncing per year. Out of 6 million citizens living abroad that's less than 0.1% renouncing their citizenship. Can you really draw any conclusions from such a small group?
- bretpiatt 13y ago
  It could have a massive impact if the ones renouncing are top earners, "Meanwhile, Americans in the highest 0.1 percent of all income-earners — these are the very rich, with incomes of at least $1.974 million — paid 16.4 percent of the total federal tax burden.". ( source: http://www.weeklystandard.com/blogs/top-01-percent-pays-more-income-tax-bottom-80-percent_594000.html http://www.weeklystandard.com/blogs/top-01-percent-pays-more... ) Anecdotally this is happening, ex. Eduardo Saverin. ( source: http://www.forbes.com/sites/briansolomon/2012/05/11/eduardo-saverin-renounces-u-s-citizenship-ahead-of-mega-facebook-ipo/ http://www.forbes.com/sites/briansolomon/2012/05/11/eduardo-... )
  - spullara 13y ago
    Population: 313.9 million Top 0.1%: 314,000 people Lose 5000: 1.6% Revenue paid: 16.4% Revenue loss: 0.26% Total federal rev: $2.7 trillion Total loss: $7 billion
    - vacri 13y ago
      The article is stating that the exflux is due to the additional difficulty of hiding assets, so it's not at all like this is a straight loss.
  - madaxe 13y ago
    They are. I know more than a few ex-US cits who're now exiled in Uruguay (they're pretty uncooperative, which is great for a tax haven), and all of them have a net worth well in excess of $1bn. So it's not the 0.1%, it's the 0.00001%, and they've all been jumping the country for the last few years. Uruguay now has several valleys full of "ranches" (shacks), which said exiles own and visit once in a while in order to retain their domiciled status.
Fizzadar 13y ago
To be expected really when the IRS seems to think that, even if you live outside the US for a full tax-year, you are taxable as a US citizen just because you hold a passport/green card. It was a long time dream/plan of mine to try get sponsored and on to the green card system (because I think the US is a beautiful country - and I would love to live there for multiple years) until I discovered these taxation laws.
- seanmcdirmid 13y ago
  Congress makes the tax laws, the IRS just enforces them. Over the threshold, you only pay taxes if you live in a country where taxes are less than the US, which is, to be honest, not that many countries.
  - a035bb942 13y ago
    > Over the threshold, you only pay taxes if you live in a country where taxes are less than the US, which is, to be honest, not that many countries. It's (sort of) that simple for earned income. In another country you may throughout your life receive money from a wide range of sources (health benefits, health recovery, child benefits, pensions, scholarships, the list goes on...) - the US tax status on these is incredibly complex at best. The punishments for making a mistake can be severe.
    - seanmcdirmid 13y ago
      My income is earned and heavily taxed. I even have to pay taxes for my medical insurance, which are otherwise exempt in the states. Ya, it can be nightmare, and I have no idea what I would do if I ever got audited; its not like we get official documentation about pay since taxes in earning country are deducted automatically. At best, we have some pay stubs.
  - freyfogle 13y ago
    Yes, but you still have the time and pain of filing. This is not minor. To ensure you're not making a mistake you basically have to pay an expert to do it. Also the US has now imposed laws that require financial institutions to report to the IRS if you are a US citizen. I'm not in the financial industry so can't verify first hand, but all reports are that the paperwork and reporting burden is significant. So much so that many banks now have a "no US citizens" policy.
northwest 13y ago
Btw, the whole "I renounce b/c I'm just losing cash" problem also applies to Green Card holders abroad who either haven't "moved in" yet or have temporarily "moved out". AFAIK they also pay US taxes abroad.
- seanmcdirmid 13y ago
  If they don't live in a high tax country, sure.
adamcik 13y ago
This tax scheme also causes a lot of trouble for kids who had the bad fortune of being born in the US, without growing up there or any other real ties to the country. You are still subject to the tax rules, are technically breaking the law every time you entry the US with you real passport (as you must use the US one even if you never got it as you as still technically a citizen). Getting rid of the citizenship is then best done around the age of eighteen, but chances are no one will tell you how much of a pain in the ass all of this is, and likely you won't even be aware of the tax potential tax burden and paperwork. Alternative is to pretend like nothing and hope you never get caught. When you finally get around to renouncing the whole thing becomes a never ending process of getting all the IRS papers and possibly back taxes in if you earn enough, getting a SSN as you can't file taxes without it, actually renouncing, and likely getting the SSN after you renounced as the whole thing takes bloody ages, and then finally figuring out exit taxes and if you are actually exempt from paying them. The exit taxes of course have two loop wholes, one of which is you were born a dual citizen _and_ still pay taxes to the other country, which means you are screwed if you are working abroad. While the other test checks net-worth, average income over the last five years and a few other things. Oh, and for the exit tax the states assumes you have sold all you assets and will tax you on the capital gains of those fictive sales... Whole system is a mess, there is no way in hell expats can fix it as their votes don't in essence don't count and it's "free" money for the state. The level at which taxes kick in for expats of course stopped being adjusted long ago as the state realized that if they stop increasing the min. amount they get more money. Though it is still being moved slightly up, it's long since stopped targeting the truly wealthy and is now hurting more and more regular people (especially if you live in a high cost country with high wages that has crept above the threshold). Throwing money and/or time out the window is no fun, so I have no problem understanding why people want to get rid of their citizenship if they can without becoming stateless.
- jacques_chester 13y ago
  Having access to American universities and jobs on Amercian-citizen terms give those troubled children a helluva worldwide advantage. As an Australian I have no advantage on the education front over any other foreign student. I at least have a leg up in the E-3 visa. Dual citizenship can smooth the edges too, depending on the 2nd citizenship. Lots of countries have reciprocal tax treaties with the US that will excuse American citizens earning in the foreign country from paying American income tax, because they are paying local taxes. And vice versa.
616c 13y ago
I am a citizen that works in an international org abroad and I am exempted from taxes due to my annual income being under the threshold. That aside, I am thinking inevitably I would renounce my citizenship given the opportunity to get a citizenship in Europe. I am no longer interested in associating with the political shithole my nation has become, and it looks like that will not change. Reality tells me however, and from experience: a) whatever country I would establish in would turn to shit and I cannot shop for citizenship every time some country loses its mind (which happens frequently these days) and b) Americans are treated very well as expats in terms of low restrictions on visa requirements and barrier to entry (unless you are going to Iran and the like). Point A is minor, while Point B, having been married to an Arab national for only over a year, has proven that being anything other than American or one of the European countries of high standing is very uncomfortable for anything requiring travel, and often humiliating. That is why, sigh, she is clamoring for her US citizenship ASAP.
- primitur 13y ago
  Australia/New Zealand are pretty attractive, citizenship-wise. As an Australian, I get the 'reciprocal' treatment - i.e., we will treat you as you treat our citizens, and since thats pretty good right now (Australia lets many European citizens in for a working-visa, two years on average), this means I can move around most of the western world without too much fuss. I cringe at the hassle my American friends have to go through whenever they travel through a densely-packaged country region such as Europe .. whereas we Australians seem to get treated pretty well.
  - mixmixmix 13y ago
    "I cringe at the hassle my American friends have to go through whenever they travel through a densely-packaged country region such as Europe" As an American citizen who's been to over 60 countries and as someone who's currently traveling through Europe, I've been treated with nothing but warmth and welcoming attitude by immigration (and other) officials. Never had a single issue anywhere.
  - 616c 13y ago
    What are their requirements? I remember hearing about Wozniak but I never checked. I should do that soon.
spullara 13y ago
Where Facebook users are immigrating: https://twitter.com/Amazing_Maps/status/366328072066187264/photo/1 https://twitter.com/Amazing_Maps/status/366328072066187264/p...
seanmcdirmid 13y ago
It sucks, I go through this every year: file a tax return where I crunch a bunch of numbers to eventually figure out I owe...nothing, and of course file my fbars so the gov knows about all my bank accounts. I'm also never sure if I'm doing it right since its so complicated, and I don't trust tax accountants to do it right either. There is also the matter of double taxation if you do business trips to the states but work in a country without a decent US-oriented tax treaty (e.g. China...). But I wouldn't renounce my citizenship over this, that would just be stupid.
marme 13y ago
How does someone become a citizen of hong kong? hong kong is not a country and all native hong kong people a chinese citizens who hold permanent residence cards in hong kong. If you want to naturalize in hong kong you must become a people's republic of china citizen
- werrett 13y ago
  Hong Kong is only part of China in the same sense Puerto Rico is part of the United States. If you are a citizen then you can hold a Hong Kong passport. The majority of the population is either Cantonese or Han Chinese in ethnicity (Han Chinese being the largest ethnic group in Mainland China). Hong Kong has a pretty liberal immigration policy. After 7 years continuous residence you are eligible for Permanent Resident status. Gaining temporary residence is pretty much as easy as landing a job there. (I'm an Australian who has been living in Hong Kong for the past few years.)
  - barry-cotter 13y ago
    This is misleading. I can't remember if Puerto Rico still issues passports but I do know all US citizens resident in Puerto Rico are/were entitled to them, there is no separate citizenship. One can definitely be a HKSAR passport holder without being entitled to Chinese citizenship. All the people with Right of Abode in Hong Kong who it can be proven don't have Mainland (or Taiwan) ancestry who want a Chinese passport need to be naturalised as Chinese. This is really, really hard. Last I heard about 700 people with Right of Abode had done it. China (including Taiwan), Japan and Korea don't really naturalise foreigners. On a side note Cantonese people are as Han as Northwsterners. It's a strong regional identity and it could have supported a nationalism, like Ukrainian did in the Russian/Soviet context but the time is gone.
chrischen 13y ago
Maybe they should get Chinese citizenship. I hear they're economy is growing and if you have the money you can get away with anything over there. In all seriousness, if you don't at least support the American gov't with your wallet or with your life (military service), you aren't really American. Why should you always have the option to go back to the US?
- tsotha 13y ago
  >In all seriousness, if you don't at least support the American gov't with your wallet or with your life (military service), you aren't really American. Supporting the US government is not a prerequisite of citizenship. Not at all.
  - deleted 13y ago
    [deleted]
  - chrischen 13y ago
    Every US citizen is required to pay tax that they owe to the government. You can oppose the government, but you do that throw voting, civic engagement, not tax dodging.
    - madaxe 13y ago
      Renouncing citizenship is not tax dodging. It's renouncing citizenship. Believe it or not, plenty of folks who have renounced their US citizenship have done so not only for tax reasons, but also because they have the freedom to choose to not associate themselves with a nation that is doing so much wrong in what was their name.
      - chrischen 13y ago
        Yes which is exactly what I'm arguing for. If you're not living in the US, have no immediate intention of returning to the US, then you should renounce your citizenship. The best way to enforce this is to tax overseas so that you really have to value your citizenship.
a035bb942 13y ago
It's all an insane mess. I do feel for US expats that have to go through this, when no other expats have to (the US and Eritrea are the only countries that practice citizenship based taxation [1]), but I'll bring to this thread another group of people that I haven't seen mentioned so far in this thread. Again, I'm not trying to detract from US expats. Your problems are real enough, and you are unfairly treated, but here's a rant about another group of people: Some of us are US citizens born abroad. We are the children of one or two US parents, born outside the US. We have lived our entire lives as citizens of another country, and our ties to the US may be as slim as having been there on vacation a couple of times. We are still subject to all of this. And while it is true that most (all?) won't be double-taxed, the reporting requirements are so complex and so strict - and made all the more complicated by incompatibilities of the tax codes of our native countries and that of the US - that it's almost impossible not to make a mistake. And mistakes are punished severely - at least in theory. Even trying to evaluate whether university scholarships in my country is taxable by the US (an obscene idea on the face of it) seems to take a lawyer or accountant. Where does it end? What about child benefits? Pensions? Yes, we could renounce our US citizenships when we turned 18. In my case, however, I was not told I was a US citizen. It's now more than a decade on, and I've never filed with the IRS because my US parent did not tell me I was a citizen until recently. What on Earth do I do? So far, I've frozen in place and not dared do anything. I am not a US person in any common sense of the word, but I feel entirely trapped by that foreign country. The benefits of a US citizenship that have come up in this thread have an entirely opposite sign for me: I'm a researcher, and would love to spend significant time at US institutions, but now I can't - I can't stay beyond a tourist visa as a foreigner because as far as the US is concerned I'm not a foreigner. And I can't travel on a US passport because I don't know what will happen to me if I get one and do. And I can't fix things with the IRS (which I'd love to do), because I have no idea how many laws I've accidentally and unknowingly broken. I'm sorry that I have, and I wish I hadn't, but how could I possibly have known? You might say that my parent should have told me - and I agree - but that didn't happen. While ignorance of the law is no excuse normally, I certainly am not going to do anything that places me in danger (financially or otherwise) from a foreign nation - so here I am, frozen in limbo. As for any social service the US might provide, I can tell you that every one of these is provided better and more generously by my liberal European homeland. I don't want anything from the US - I only want to either be let go and leave the club, or be treated fairly. Either one is fine by me, but the current situation is not. Incidentally, any pointers from HN would be much appreciated. I know my status quo of "do nothing, sit still" won't be good in the long run, but I also have no damn idea on how to approach the matter. Let me summarize again: I've never earned a dollar in the US. I've never received a dollar from any US entity, save the odd birthday present from relatives as a kid. I've never been to the US for more than a couple of weeks at a time - and only as a tourist. I've never voted in the US. I've never brought money into or out of the US - except ordinary tourist amounts. I pay (comparatively) high taxes where I live - in my country, my home, which is not the US. I never knew I was a US citizen. Now all of these benefits that people bring up apply to me with a negative sign. I'd gladly give up my US citizenship - but you can't unless you've proven that you're good with the IRS going back 5 years, and that you're not renouncing for tax reasons. As for that latter part - some might say I am... I am, afterall, trying to avoid being haunted by a foreign nation's tax collecting agency for the rest of my life. Is that renouncing for tax reasons? God knows... (Sorry for the rant - this has just constanly occupied 10% of my head for a while, and it's not like there's a lot of people nearby in the same situation to talk to... any pointers from you guys would be great). [1] https://en.wikipedia.org/wiki/International_taxation#Citizenship https://en.wikipedia.org/wiki/International_taxation#Citizen...
idan 13y ago
I'm a dual citizen (US and Israel) currently residing in Israel. I'm not remotely wealthy. US tax laws are inconceivably, horribly bad for expats like me, even if you are just a working dude. The amount of paperwork and headache I undergo yearly just to stay within the law on taxes is ridiculous—that translates into direct costs to me, mainly for employing two accountants (one for each tax jurisdiction). They're constantly communicating about how best to structure things—not so I can save some money on the imaginary millions I don't have, but to simply not be a criminal. It gets worse from year to year, as the US passes ever more complex tax laws. Some of them are a major financial burden (double taxation). Some of them are just expensive to comply with (accountant hours). I'm not going to renounce my citizenship anytime soon, and I get that expats are probably a tiny group, but it's a major pain. Almost every other country on earth taxes based on location, not based on citizenship. Don't reside in Germany all year? Great—no taxes, and no state services for you.
gadders 13y ago
For the people that don't know/appreciate the difference, the US taxes its citizens on their earnings globally. You can normally net this out against the taxes you pay locally via double taxation agreements.
- gadders 13y ago
  One other thing - can we set something up so people who renounce their citizenship can give it to someone who wants it? I'm a Brit but I'd love to live and work in the US.
patio11 13y ago
Because people occasionally get worried about this: here is the actual FBAR form: http://www.irs.gov/pub/irs-pdf/f90221.pdf http://www.irs.gov/pub/irs-pdf/f90221.pdf Mine took five minutes to fill out. Four minutes to find the postal address for my bank branch, one to flip through my bank statements to find the peak balance and covert it to USD. It may get slightly more complicated if you control an account in the Cayman Islands with $30 million which you might have forgotten to file on your taxes for the last 30 years.
- a035bb942 13y ago
  > Mine took five minutes to fill out. Four minutes to find the postal address for my bank branch, one to flip through my bank statements to find the peak balance and covert it to USD. Sadly, it's not that simple! Suppose you in the year 2013 have 200k units of Foreign Currency X (FCX) in your non-US savings account, and the money has never had anything to do with the US (it's all been earned and saved abroad, where you live and work). Let's say the conversion rate in 2013 is 2 FCX to 1 USD. OK, so you report 100k USD on your FBAR. Let's say 2013 is a bad year for you, so you haven't been able to put anything in your savings account - in 2014 it still stands at 200k FCX. But lo and behold, the value of the USD has fallen against the FCX, so the dollar equivalent in your account has now in 2014 become 150k USD. This means [1] that you have to put 150k USD on your FBAR and that the difference of 50k USD is taxable as capital gains. This is utterly, entirely, completely insane! It's nothing short of international robbery. (I repeat: I'm not talking about money earned in or brought into or out of the US here - I would understand if it were taxed. This money has never had anything to do with the US, and has never been converted from one currency to another, except on the FBAR form.) This cannot be OK. Not at all. I understand that the laws were made for catching US money hid away overseas. That goal makes perfect sense. But the way it works now is just insane. [1] https://www.youtube.com/watch?v=CfWk6yRdwMo https://www.youtube.com/watch?v=CfWk6yRdwMo
  - patio11 13y ago
    First of all, merely having a number increment on your FBAR in year N and year N+1 does not cause that delta to become taxable income. (And, for that matter, failing to have a delta does not show absence of income. For example, if you earn 100k euros in a year and consume 100k euros, your accounts will show a delta of nothing, but you still earned 100k euros.) Second, the US does not tax unrealized capital gains. In the situation you have just described, you have not realized any capital gains and have no taxable income, even if you believe that receiving currency in year N and disbursing of it in year N+X counts as capital gains if the currency has appreciated against the dollar. This interpretation is contrary to what the IRS will tell you is the law. Should you want to actually use the money, you should say that "My cost basis in the 200k Euros is 200k Euros. I liquidated them at their fair market value, of 200k Euros. This gives me a capital gain of 0 Euros, which when I put it on forms I will convert into dollars, for capital gains of $0." There are more complicated things you'll want to do if you operate a currency exchange business, but that isn't relevant to you. If you disagree that this is the correct interpretation of US tax law, you can do what I did and phone the IRS. They'll explain it to you. If you doubt this is correct, use some of the 200k Euros to have a brief chat with a tax accountant. I know this sounds new and scary for you. It was new and scary for me, too, eight years ago. It's a lot easier than you think it is.
woe 13y ago
Every year when April 15 rolls around I find myself wondering if this is going to be the time when I finally get fed up and renounce my US citizenship. I'm a natural-born US citizen and a naturalized EU citizen. I haven't set foot in the States in over a decade. I receive nothing from the US government[1] and I cost the US government nothing[2]. My only source of income is my salaried job. The very idea that I should be subject to taxation by the US isn't just ludicrous but downright offensive. Don't get me wrong: I am by no means an anti-taxation libertarian. I'm a leftie pinko who loves the high-taxation welfare state and pays into it uncomplainingly. But there is - or should be - an implicit bargain in all taxation: the citizen pays something and the citizen gets something in return. For an expat like myself this bargain doesn't pertain. Now, my circumstances are such that I don't actually pay any US taxes. This is the main reason why I haven't yet gotten fed up and renounced my US citizenship. But I still have to spend at least a full day every spring collecting paperwork and putting together pointless tax returns, and I need to pay for an expensive US tax accountant if I want some reassurance that I'm not unintentionally violating any of the expatriate tax and disclosure laws. (Not that that's any guarantee. A lot of overseas tax accounts aren't even fully up-to-date on the constantly changing regularions. And the penalties for missing or messing up an FBAR are downright terrifying.) If my financial affairs were any more complicated I would end up having to pay US taxes. For example, if I bought a house and then sold it for a profit, the IRS would hit me with an absolutely unjustifiable capital gains tax. Now the US is imposing such intrusive reporting requirements on foreign banks that many of them are starting to refuse to do business with US citizens - expatriates are starting to find it difficult to even open a bank overseas. And spare a thought for my daughter, who will end up in the same situation a035bb942 described above: she's a US citizen through no fault of her own. She might well spend her entire life in Europe, never setting foot in the United States, but if she doesn't file an FBAR every year of her adult life Uncle Sam may come after her with all guns blazing. Faced with such insanity, renunciation is a perfectly rational way out. What am I really getting in return for this heavy and unwarranted US intrusion into my life? Of course, the US gets you coming and going: renouncing costs $450. They might also hit you with an exit tax before they let you go. [1] There's always somebody who wants to argue this point: look at all the wonderful intangible benefits I get from being under the protection of the world's greatest power! Bollocks. Being American doesn't protect me from anything; if anything it exposes me to greatly increased danger in many parts of the world. [2] Someone will say that my very existence as a US citizen imposes a certain administrative cost on the US government. Again, bollocks. I impose an administrative cost on the IRS/Treasury only because they require me to. I pay for my decennial passport renewal. This is the full extent of my interactions with the US government.
FellowTraveler 13y ago
The US tax system is exorbitant and immoral.

69 points by wikiburner 13y ago

So stupid, and it ruins the perception of the US worldwide. The result of this change is going to be exactly as described, a lot of US citizens living outside of America are going to renounce their citizenship and not a single dollar is going to flow into the federal budget. No upside, a lot of downside.

joelandren 13y ago
The statistics tell a different story. The plural of anecdote is not data.
- InclinedPlane 13y ago
  Statistics you say? Produce them. Please.
  - vacri 13y ago
    In the article, 6M expats, 1k renouncers. That's less than 0.02%. Taken over a year, it's still not enough to hit 0.1%. It's not like money would be flowing from these people anyway - they were hiding assets, according to the article, and now that those assets have to be disclosed, they want to cut the ties. These weren't people who were already contributing their fair share.
    - InclinedPlane 13y ago
      These are citizens, not statistics. A lot of people are choosing to renounce their citizenship not because they are hiding assets but because the burden of having to prove that they are not is becoming excessively onerous. Moreover, using statistics from when the program has just changed and pretending that a massive uptick in renunciations won't continue and will merely flatten out after a temporary bump is at best intellectually lazy and at worst dishonest and misleading.
      - vacri 13y ago
        Assuming that an uptick will increase exponentially isn't intellectually lazy or dishonest and misleading?
        InclinedPlane 13y ago
        Who is assuming that? It's bad enough that it's increased substantially. Even if it increases sub-linearly it will be that much worse. Renouncing US citizenship should be a "big deal", but increasingly the IRS is forcing people into it, that's not the America that anyone should want.
Aloisius 13y ago
Really? What upside is there to having US citizens living outside the US and not paying taxes? They enjoy the benefits of being a US citizen without any of the shared sacrifice. I say, let them renounce.
- vl 13y ago
  Err, how do they enjoy benefits if they are living abroad?
  - northwest 13y ago
    Being a US citizen abroad may even come at a "social" price, given the negative PR campaign the US has been running for a very, very long time now.
    - bloodorange 13y ago
      Yes, I have considered mentioning "No Americans Please" on couchsurfing profile on some days, but eventually decided against it when I felt that an individual traveller may not be responsible for the atrocity that his/her government is.
    - madaxe 13y ago
      It does. I know plenty of Americans or ex-Americans around the globe who tell folks they're Canadian. I'm afraid to say your government is making you intensely unpopular, pretty much everywhere.
      - vegasbrianc 13y ago
        I am an American who has lived in Europe (Netherlands and now Switzerland) for over 10 years. I have also traveled all over Europe and Asia without ever having a problem of being an American or apologized for the fact. Nor will I ever put a Maple leaf on my suit case or backpack (Nothing against Canucks BTW)but I am proud of where I come from. If you cannot take criticism from other people from other countries then stay home. I find it a great way to understand other people/cultures.

tdicola 13y ago

The numbers don't seem to be that concerning--1000 people/quarter or let's say 5000 people renouncing per year. Out of 6 million citizens living abroad that's less than 0.1% renouncing their citizenship. Can you really draw any conclusions from such a small group?

bretpiatt 13y ago
It could have a massive impact if the ones renouncing are top earners, "Meanwhile, Americans in the highest 0.1 percent of all income-earners — these are the very rich, with incomes of at least $1.974 million — paid 16.4 percent of the total federal tax burden.". ( source: http://www.weeklystandard.com/blogs/top-01-percent-pays-more-income-tax-bottom-80-percent_594000.html http://www.weeklystandard.com/blogs/top-01-percent-pays-more... ) Anecdotally this is happening, ex. Eduardo Saverin. ( source: http://www.forbes.com/sites/briansolomon/2012/05/11/eduardo-saverin-renounces-u-s-citizenship-ahead-of-mega-facebook-ipo/ http://www.forbes.com/sites/briansolomon/2012/05/11/eduardo-... )
- spullara 13y ago
  Population: 313.9 million Top 0.1%: 314,000 people Lose 5000: 1.6% Revenue paid: 16.4% Revenue loss: 0.26% Total federal rev: $2.7 trillion Total loss: $7 billion
  - vacri 13y ago
    The article is stating that the exflux is due to the additional difficulty of hiding assets, so it's not at all like this is a straight loss.
- madaxe 13y ago
  They are. I know more than a few ex-US cits who're now exiled in Uruguay (they're pretty uncooperative, which is great for a tax haven), and all of them have a net worth well in excess of $1bn. So it's not the 0.1%, it's the 0.00001%, and they've all been jumping the country for the last few years. Uruguay now has several valleys full of "ranches" (shacks), which said exiles own and visit once in a while in order to retain their domiciled status.

Fizzadar 13y ago

To be expected really when the IRS seems to think that, even if you live outside the US for a full tax-year, you are taxable as a US citizen just because you hold a passport/green card. It was a long time dream/plan of mine to try get sponsored and on to the green card system (because I think the US is a beautiful country - and I would love to live there for multiple years) until I discovered these taxation laws.

seanmcdirmid 13y ago
Congress makes the tax laws, the IRS just enforces them. Over the threshold, you only pay taxes if you live in a country where taxes are less than the US, which is, to be honest, not that many countries.
- a035bb942 13y ago
  > Over the threshold, you only pay taxes if you live in a country where taxes are less than the US, which is, to be honest, not that many countries. It's (sort of) that simple for earned income. In another country you may throughout your life receive money from a wide range of sources (health benefits, health recovery, child benefits, pensions, scholarships, the list goes on...) - the US tax status on these is incredibly complex at best. The punishments for making a mistake can be severe.
  - seanmcdirmid 13y ago
    My income is earned and heavily taxed. I even have to pay taxes for my medical insurance, which are otherwise exempt in the states. Ya, it can be nightmare, and I have no idea what I would do if I ever got audited; its not like we get official documentation about pay since taxes in earning country are deducted automatically. At best, we have some pay stubs.
- freyfogle 13y ago
  Yes, but you still have the time and pain of filing. This is not minor. To ensure you're not making a mistake you basically have to pay an expert to do it. Also the US has now imposed laws that require financial institutions to report to the IRS if you are a US citizen. I'm not in the financial industry so can't verify first hand, but all reports are that the paperwork and reporting burden is significant. So much so that many banks now have a "no US citizens" policy.

northwest 13y ago

Btw, the whole "I renounce b/c I'm just losing cash" problem also applies to Green Card holders abroad who either haven't "moved in" yet or have temporarily "moved out". AFAIK they also pay US taxes abroad.

seanmcdirmid 13y ago
If they don't live in a high tax country, sure.

adamcik 13y ago

This tax scheme also causes a lot of trouble for kids who had the bad fortune of being born in the US, without growing up there or any other real ties to the country. You are still subject to the tax rules, are technically breaking the law every time you entry the US with you real passport (as you must use the US one even if you never got it as you as still technically a citizen). Getting rid of the citizenship is then best done around the age of eighteen, but chances are no one will tell you how much of a pain in the ass all of this is, and likely you won't even be aware of the tax potential tax burden and paperwork. Alternative is to pretend like nothing and hope you never get caught. When you finally get around to renouncing the whole thing becomes a never ending process of getting all the IRS papers and possibly back taxes in if you earn enough, getting a SSN as you can't file taxes without it, actually renouncing, and likely getting the SSN after you renounced as the whole thing takes bloody ages, and then finally figuring out exit taxes and if you are actually exempt from paying them. The exit taxes of course have two loop wholes, one of which is you were born a dual citizen _and_ still pay taxes to the other country, which means you are screwed if you are working abroad. While the other test checks net-worth, average income over the last five years and a few other things. Oh, and for the exit tax the states assumes you have sold all you assets and will tax you on the capital gains of those fictive sales... Whole system is a mess, there is no way in hell expats can fix it as their votes don't in essence don't count and it's "free" money for the state. The level at which taxes kick in for expats of course stopped being adjusted long ago as the state realized that if they stop increasing the min. amount they get more money. Though it is still being moved slightly up, it's long since stopped targeting the truly wealthy and is now hurting more and more regular people (especially if you live in a high cost country with high wages that has crept above the threshold). Throwing money and/or time out the window is no fun, so I have no problem understanding why people want to get rid of their citizenship if they can without becoming stateless.

jacques_chester 13y ago
Having access to American universities and jobs on Amercian-citizen terms give those troubled children a helluva worldwide advantage. As an Australian I have no advantage on the education front over any other foreign student. I at least have a leg up in the E-3 visa. Dual citizenship can smooth the edges too, depending on the 2nd citizenship. Lots of countries have reciprocal tax treaties with the US that will excuse American citizens earning in the foreign country from paying American income tax, because they are paying local taxes. And vice versa.

616c 13y ago

I am a citizen that works in an international org abroad and I am exempted from taxes due to my annual income being under the threshold. That aside, I am thinking inevitably I would renounce my citizenship given the opportunity to get a citizenship in Europe. I am no longer interested in associating with the political shithole my nation has become, and it looks like that will not change. Reality tells me however, and from experience: a) whatever country I would establish in would turn to shit and I cannot shop for citizenship every time some country loses its mind (which happens frequently these days) and b) Americans are treated very well as expats in terms of low restrictions on visa requirements and barrier to entry (unless you are going to Iran and the like). Point A is minor, while Point B, having been married to an Arab national for only over a year, has proven that being anything other than American or one of the European countries of high standing is very uncomfortable for anything requiring travel, and often humiliating. That is why, sigh, she is clamoring for her US citizenship ASAP.

primitur 13y ago
Australia/New Zealand are pretty attractive, citizenship-wise. As an Australian, I get the 'reciprocal' treatment - i.e., we will treat you as you treat our citizens, and since thats pretty good right now (Australia lets many European citizens in for a working-visa, two years on average), this means I can move around most of the western world without too much fuss. I cringe at the hassle my American friends have to go through whenever they travel through a densely-packaged country region such as Europe .. whereas we Australians seem to get treated pretty well.
- mixmixmix 13y ago
  "I cringe at the hassle my American friends have to go through whenever they travel through a densely-packaged country region such as Europe" As an American citizen who's been to over 60 countries and as someone who's currently traveling through Europe, I've been treated with nothing but warmth and welcoming attitude by immigration (and other) officials. Never had a single issue anywhere.
- 616c 13y ago
  What are their requirements? I remember hearing about Wozniak but I never checked. I should do that soon.

spullara 13y ago

Where Facebook users are immigrating: https://twitter.com/Amazing_Maps/status/366328072066187264/photo/1 https://twitter.com/Amazing_Maps/status/366328072066187264/p...

seanmcdirmid 13y ago

It sucks, I go through this every year: file a tax return where I crunch a bunch of numbers to eventually figure out I owe...nothing, and of course file my fbars so the gov knows about all my bank accounts. I'm also never sure if I'm doing it right since its so complicated, and I don't trust tax accountants to do it right either. There is also the matter of double taxation if you do business trips to the states but work in a country without a decent US-oriented tax treaty (e.g. China...). But I wouldn't renounce my citizenship over this, that would just be stupid.

marme 13y ago

How does someone become a citizen of hong kong? hong kong is not a country and all native hong kong people a chinese citizens who hold permanent residence cards in hong kong. If you want to naturalize in hong kong you must become a people's republic of china citizen

werrett 13y ago
Hong Kong is only part of China in the same sense Puerto Rico is part of the United States. If you are a citizen then you can hold a Hong Kong passport. The majority of the population is either Cantonese or Han Chinese in ethnicity (Han Chinese being the largest ethnic group in Mainland China). Hong Kong has a pretty liberal immigration policy. After 7 years continuous residence you are eligible for Permanent Resident status. Gaining temporary residence is pretty much as easy as landing a job there. (I'm an Australian who has been living in Hong Kong for the past few years.)
- barry-cotter 13y ago
  This is misleading. I can't remember if Puerto Rico still issues passports but I do know all US citizens resident in Puerto Rico are/were entitled to them, there is no separate citizenship. One can definitely be a HKSAR passport holder without being entitled to Chinese citizenship. All the people with Right of Abode in Hong Kong who it can be proven don't have Mainland (or Taiwan) ancestry who want a Chinese passport need to be naturalised as Chinese. This is really, really hard. Last I heard about 700 people with Right of Abode had done it. China (including Taiwan), Japan and Korea don't really naturalise foreigners. On a side note Cantonese people are as Han as Northwsterners. It's a strong regional identity and it could have supported a nationalism, like Ukrainian did in the Russian/Soviet context but the time is gone.

chrischen 13y ago

Maybe they should get Chinese citizenship. I hear they're economy is growing and if you have the money you can get away with anything over there. In all seriousness, if you don't at least support the American gov't with your wallet or with your life (military service), you aren't really American. Why should you always have the option to go back to the US?

tsotha 13y ago
>In all seriousness, if you don't at least support the American gov't with your wallet or with your life (military service), you aren't really American. Supporting the US government is not a prerequisite of citizenship. Not at all.
- deleted 13y ago
  [deleted]
- chrischen 13y ago
  Every US citizen is required to pay tax that they owe to the government. You can oppose the government, but you do that throw voting, civic engagement, not tax dodging.
  - madaxe 13y ago
    Renouncing citizenship is not tax dodging. It's renouncing citizenship. Believe it or not, plenty of folks who have renounced their US citizenship have done so not only for tax reasons, but also because they have the freedom to choose to not associate themselves with a nation that is doing so much wrong in what was their name.
    - chrischen 13y ago
      Yes which is exactly what I'm arguing for. If you're not living in the US, have no immediate intention of returning to the US, then you should renounce your citizenship. The best way to enforce this is to tax overseas so that you really have to value your citizenship.

a035bb942 13y ago

It's all an insane mess. I do feel for US expats that have to go through this, when no other expats have to (the US and Eritrea are the only countries that practice citizenship based taxation [1]), but I'll bring to this thread another group of people that I haven't seen mentioned so far in this thread. Again, I'm not trying to detract from US expats. Your problems are real enough, and you are unfairly treated, but here's a rant about another group of people: Some of us are US citizens born abroad. We are the children of one or two US parents, born outside the US. We have lived our entire lives as citizens of another country, and our ties to the US may be as slim as having been there on vacation a couple of times. We are still subject to all of this. And while it is true that most (all?) won't be double-taxed, the reporting requirements are so complex and so strict - and made all the more complicated by incompatibilities of the tax codes of our native countries and that of the US - that it's almost impossible not to make a mistake. And mistakes are punished severely - at least in theory. Even trying to evaluate whether university scholarships in my country is taxable by the US (an obscene idea on the face of it) seems to take a lawyer or accountant. Where does it end? What about child benefits? Pensions? Yes, we could renounce our US citizenships when we turned 18. In my case, however, I was not told I was a US citizen. It's now more than a decade on, and I've never filed with the IRS because my US parent did not tell me I was a citizen until recently. What on Earth do I do? So far, I've frozen in place and not dared do anything. I am not a US person in any common sense of the word, but I feel entirely trapped by that foreign country. The benefits of a US citizenship that have come up in this thread have an entirely opposite sign for me: I'm a researcher, and would love to spend significant time at US institutions, but now I can't - I can't stay beyond a tourist visa as a foreigner because as far as the US is concerned I'm not a foreigner. And I can't travel on a US passport because I don't know what will happen to me if I get one and do. And I can't fix things with the IRS (which I'd love to do), because I have no idea how many laws I've accidentally and unknowingly broken. I'm sorry that I have, and I wish I hadn't, but how could I possibly have known? You might say that my parent should have told me - and I agree - but that didn't happen. While ignorance of the law is no excuse normally, I certainly am not going to do anything that places me in danger (financially or otherwise) from a foreign nation - so here I am, frozen in limbo. As for any social service the US might provide, I can tell you that every one of these is provided better and more generously by my liberal European homeland. I don't want anything from the US - I only want to either be let go and leave the club, or be treated fairly. Either one is fine by me, but the current situation is not. Incidentally, any pointers from HN would be much appreciated. I know my status quo of "do nothing, sit still" won't be good in the long run, but I also have no damn idea on how to approach the matter. Let me summarize again: I've never earned a dollar in the US. I've never received a dollar from any US entity, save the odd birthday present from relatives as a kid. I've never been to the US for more than a couple of weeks at a time - and only as a tourist. I've never voted in the US. I've never brought money into or out of the US - except ordinary tourist amounts. I pay (comparatively) high taxes where I live - in my country, my home, which is not the US. I never knew I was a US citizen. Now all of these benefits that people bring up apply to me with a negative sign. I'd gladly give up my US citizenship - but you can't unless you've proven that you're good with the IRS going back 5 years, and that you're not renouncing for tax reasons. As for that latter part - some might say I am... I am, afterall, trying to avoid being haunted by a foreign nation's tax collecting agency for the rest of my life. Is that renouncing for tax reasons? God knows... (Sorry for the rant - this has just constanly occupied 10% of my head for a while, and it's not like there's a lot of people nearby in the same situation to talk to... any pointers from you guys would be great). [1] https://en.wikipedia.org/wiki/International_taxation#Citizenship https://en.wikipedia.org/wiki/International_taxation#Citizen...

idan 13y ago

I'm a dual citizen (US and Israel) currently residing in Israel. I'm not remotely wealthy. US tax laws are inconceivably, horribly bad for expats like me, even if you are just a working dude. The amount of paperwork and headache I undergo yearly just to stay within the law on taxes is ridiculous—that translates into direct costs to me, mainly for employing two accountants (one for each tax jurisdiction). They're constantly communicating about how best to structure things—not so I can save some money on the imaginary millions I don't have, but to simply not be a criminal. It gets worse from year to year, as the US passes ever more complex tax laws. Some of them are a major financial burden (double taxation). Some of them are just expensive to comply with (accountant hours). I'm not going to renounce my citizenship anytime soon, and I get that expats are probably a tiny group, but it's a major pain. Almost every other country on earth taxes based on location, not based on citizenship. Don't reside in Germany all year? Great—no taxes, and no state services for you.

gadders 13y ago

For the people that don't know/appreciate the difference, the US taxes its citizens on their earnings globally. You can normally net this out against the taxes you pay locally via double taxation agreements.

gadders 13y ago
One other thing - can we set something up so people who renounce their citizenship can give it to someone who wants it? I'm a Brit but I'd love to live and work in the US.

patio11 13y ago

Because people occasionally get worried about this: here is the actual FBAR form: http://www.irs.gov/pub/irs-pdf/f90221.pdf http://www.irs.gov/pub/irs-pdf/f90221.pdf Mine took five minutes to fill out. Four minutes to find the postal address for my bank branch, one to flip through my bank statements to find the peak balance and covert it to USD. It may get slightly more complicated if you control an account in the Cayman Islands with $30 million which you might have forgotten to file on your taxes for the last 30 years.

a035bb942 13y ago
> Mine took five minutes to fill out. Four minutes to find the postal address for my bank branch, one to flip through my bank statements to find the peak balance and covert it to USD. Sadly, it's not that simple! Suppose you in the year 2013 have 200k units of Foreign Currency X (FCX) in your non-US savings account, and the money has never had anything to do with the US (it's all been earned and saved abroad, where you live and work). Let's say the conversion rate in 2013 is 2 FCX to 1 USD. OK, so you report 100k USD on your FBAR. Let's say 2013 is a bad year for you, so you haven't been able to put anything in your savings account - in 2014 it still stands at 200k FCX. But lo and behold, the value of the USD has fallen against the FCX, so the dollar equivalent in your account has now in 2014 become 150k USD. This means [1] that you have to put 150k USD on your FBAR and that the difference of 50k USD is taxable as capital gains. This is utterly, entirely, completely insane! It's nothing short of international robbery. (I repeat: I'm not talking about money earned in or brought into or out of the US here - I would understand if it were taxed. This money has never had anything to do with the US, and has never been converted from one currency to another, except on the FBAR form.) This cannot be OK. Not at all. I understand that the laws were made for catching US money hid away overseas. That goal makes perfect sense. But the way it works now is just insane. [1] https://www.youtube.com/watch?v=CfWk6yRdwMo https://www.youtube.com/watch?v=CfWk6yRdwMo
- patio11 13y ago
  First of all, merely having a number increment on your FBAR in year N and year N+1 does not cause that delta to become taxable income. (And, for that matter, failing to have a delta does not show absence of income. For example, if you earn 100k euros in a year and consume 100k euros, your accounts will show a delta of nothing, but you still earned 100k euros.) Second, the US does not tax unrealized capital gains. In the situation you have just described, you have not realized any capital gains and have no taxable income, even if you believe that receiving currency in year N and disbursing of it in year N+X counts as capital gains if the currency has appreciated against the dollar. This interpretation is contrary to what the IRS will tell you is the law. Should you want to actually use the money, you should say that "My cost basis in the 200k Euros is 200k Euros. I liquidated them at their fair market value, of 200k Euros. This gives me a capital gain of 0 Euros, which when I put it on forms I will convert into dollars, for capital gains of $0." There are more complicated things you'll want to do if you operate a currency exchange business, but that isn't relevant to you. If you disagree that this is the correct interpretation of US tax law, you can do what I did and phone the IRS. They'll explain it to you. If you doubt this is correct, use some of the 200k Euros to have a brief chat with a tax accountant. I know this sounds new and scary for you. It was new and scary for me, too, eight years ago. It's a lot easier than you think it is.

woe 13y ago

Every year when April 15 rolls around I find myself wondering if this is going to be the time when I finally get fed up and renounce my US citizenship. I'm a natural-born US citizen and a naturalized EU citizen. I haven't set foot in the States in over a decade. I receive nothing from the US government[1] and I cost the US government nothing[2]. My only source of income is my salaried job. The very idea that I should be subject to taxation by the US isn't just ludicrous but downright offensive. Don't get me wrong: I am by no means an anti-taxation libertarian. I'm a leftie pinko who loves the high-taxation welfare state and pays into it uncomplainingly. But there is - or should be - an implicit bargain in all taxation: the citizen pays something and the citizen gets something in return. For an expat like myself this bargain doesn't pertain. Now, my circumstances are such that I don't actually pay any US taxes. This is the main reason why I haven't yet gotten fed up and renounced my US citizenship. But I still have to spend at least a full day every spring collecting paperwork and putting together pointless tax returns, and I need to pay for an expensive US tax accountant if I want some reassurance that I'm not unintentionally violating any of the expatriate tax and disclosure laws. (Not that that's any guarantee. A lot of overseas tax accounts aren't even fully up-to-date on the constantly changing regularions. And the penalties for missing or messing up an FBAR are downright terrifying.) If my financial affairs were any more complicated I would end up having to pay US taxes. For example, if I bought a house and then sold it for a profit, the IRS would hit me with an absolutely unjustifiable capital gains tax. Now the US is imposing such intrusive reporting requirements on foreign banks that many of them are starting to refuse to do business with US citizens - expatriates are starting to find it difficult to even open a bank overseas. And spare a thought for my daughter, who will end up in the same situation a035bb942 described above: she's a US citizen through no fault of her own. She might well spend her entire life in Europe, never setting foot in the United States, but if she doesn't file an FBAR every year of her adult life Uncle Sam may come after her with all guns blazing. Faced with such insanity, renunciation is a perfectly rational way out. What am I really getting in return for this heavy and unwarranted US intrusion into my life? Of course, the US gets you coming and going: renouncing costs $450. They might also hit you with an exit tax before they let you go. [1] There's always somebody who wants to argue this point: look at all the wonderful intangible benefits I get from being under the protection of the world's greatest power! Bollocks. Being American doesn't protect me from anything; if anything it exposes me to greatly increased danger in many parts of the world. [2] Someone will say that my very existence as a US citizen imposes a certain administrative cost on the US government. Again, bollocks. I impose an administrative cost on the IRS/Treasury only because they require me to. I pay for my decennial passport renewal. This is the full extent of my interactions with the US government.

FellowTraveler 13y ago

The US tax system is exorbitant and immoral.