More Americans ditch citizenship over taxes
Many living abroad are fed up with onerous filing rules.
If you don’t want something, giving it back is often an option. That’s precisely what some Americans, frustrated at what they see as onerous U.S. tax filing obligations for Americans living overseas, are doing with their citizenship.
“I felt like I had gotten a divorce,” says Donna-Lane Nelson, 71, a Geneva-based editor and
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writer who renounced her U.S. citizenship in 2011 in favor of a Swiss passport, in part because of what she felt were the increasingly arduous and punishing tax-reporting requirements from U.S. authorities.
“I was double taxed on my U.S. and Swiss pensions, the cost of having a professional go through the complicated U.S. tax forms, living under the threat if this or that wasn’t properly filed there would be huge fines — U.S. nationality just became a complete burden because of banks not wanting my business, and as an expat not being allowed to have a U.S. account,” Nelson says.
There are around 6 million Americans living and working abroad, and the Internal Revenue Service estimates that international taxpayers owe $40 billion to $123 billion in unpaid taxes.
This summer, in an attempt to start redressing this sizable hole in the nation’s coffers, the first stage of the Foreign Compliance Tax Act, or FACTA, will formally come into effect. The Report of Foreign Bank and Financial Accounts, or FBAR, is already operational. FBAR requires Americans — whether they live in Boise or Bangkok — with foreign accounts that have $10,000 or more held in them to notify the
“U.S. nationality just became a complete burden because of banks not wanting my business.”
Donna-Lane Nelson, 71, of Geneva
IRS annually of that year’s highest balance.
Passed by Congress in 2010, FACTA is designed — using a controversial dragnet-like method — to catch those Americans thought to be evading taxes by hiding their wealth in foreign bank accounts. The way FACTA does this is by requiring that all non-U.S. fi- nancial institutions pass along detailed information about American account holders, or potentially face steep penalties.
But casting such a wide net is producing unintended consequences for some Americans who faithfully pay their taxes.
“I have always filed my U.S. taxes just as I am supposed to,” says Brian Dublin, 47, an American businessman now based in Zug, Switzerland.
“However, as a result of FACTA, in the past year I have been kicked out of a Swiss bank ... (and) kicked out of a Swiss pension fund. They told me they don’t want any Americans.”