From every nation comes a select group of people that, for whatever reason, will eventually immigrate permanently elsewhere. America is no different. But a startling number of American expatriates have now gone one step further by renouncing their US citizenship for good.
Why Cut the Ties?
The answer is simple: The Internal Revenue Service (IRS) is cracking down on both American expatriates and those doing business abroad who haven’t paid their taxes. And to get out of paying high income taxes and penalties, Americans are cutting their ties. However, though the enforcement of this may be necessary for the wrongdoers, it is being applied to many of the wrong people.
For example, in Patricia Moon’s case, she was forced to renounce her US citizenship in fear that she would lose her home in Canada. Though she has lived in Toronto for three decades, having not declared her income and savings – albeit in Canadian accounts – she was at risk for having to pay the IRS almost half a million dollars. Though she has not hidden the money, nor committed a crime, ridding herself of her US citizenship was unfortunately the only solution to her problem.
Who is This Affecting?
The IRS’s campaign is primarily affecting the middle class population. The taxes and penalties that many expatriate families are faced with are often high than the amount in their bank account, hence the problem. Families with poorer incomes wouldn’t have made enough to face such high charges in the first place, and wealthier families can afford to pay it.
Though renouncing their US citizenship will not help people like Ms Moon to avoid paying taxes already owed, it will stop her from having to pay US taxes in the future.
Why is This Happening?
The campaign to retrieve unpaid taxes and charge penalties to the so-called offenders began after UBS bank in Switzerland admitted to helping wealthy Americans hide money in their accounts. So as to avoid a criminal charge, UBS paid the US government a figure of $780 million and gave information on more than 4,400 accounts and instances of tax avoidance.
What Happens to the Expatriates?
Like Ms Moon, those who have been forced to give up their US citizenship will now remain to live in the country they immigrated to, only returning to the US for holidays. Additionally, there’s still a fee to be paid – once the expatriate has renounced their citizenship, they’ll have to pay a processing fee and what Ms Moon described as, “the saddest $450 I’ve ever spend”.
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