Some of the rush may be caused by Americans hoping to avoid the new disclosure requirements. Allowing them to stay in the shadows for good reason. Others living abroad with perfectly legal bundles of cash in the banks are saying they are giving up their US passport because they are tired of dealing with overly complicated tax filings, trying to determine what estates and capital are subject to tax, and all the effort that goes into planning two tax day celebrations. It's especially frustrating when you are having to file such a volume and complexity of taxes without having a representative of persons living abroad to represent you in Congress. I think there was once a slogan that summarized the frustration these citizens are going through.This aggressive practice was first demonstrated in 2008, when federal prosecutors accused the Swiss bank UBS of helping wealthy Americans hide their money tax-free in overseas accounts. It was a big case, leading to indictments, fines and prison time.
The U.S. Congress wanted to make sure these 'shadow' accounts shielding assets from taxation stopped. During the economic recession, lawmakers saw a chance to bring in massive sums of money and stop tax cheats at the same time, and as has been the case too often in our history, we can't allow a good revenue generation opportunity go to waste.
The measure, approved by Congress in 2010, is aimed at recouping some of the hundreds of billions the government says it loses each year in unpaid taxes with that pesky loophole of the money not being anywhere close to our shores.
Admittedly, a lot of the money being targeted should be subject to some level of taxation, usually because it's earned or invested in the US, but as with many things we seem to lock our targets on, there has been an alarming amount of collateral damage. The victims here being US citizens now living under two sets of tax laws and subjigating banks that would do business with them to another set of laws, again, without any representation. The solution for many, to paraphrase the old saying, when in Rome, file your taxes in Latin.
The first wave of renunciations in 2010 coincided with a part of the law that requires individuals to report foreign assets worth as little as $50,000, causing the first wave of banks to start to drop US clients and putting many people in the difficult position of choosing between a passport and a checking account. That was in addition to a separate provision that forces Americans to disclose foreign bank holdings larger than $10,000.
Renunciations dipped in 2012, but now another part of the law is kicking in. The new provision requires financial institutions to report all foreign accounts held by Americans.
These regulations come on the heels of additional regulations that are being imposed on foreign banks operating in the US. The law has prompted some banks to begin kicking out their American clients rather than comply. Penalties can be high if banks make a mistake reporting US-held accounts, even if they are basic checking and savings accounts, leaving American citizens who live abroad incapable of finding a bank who will take their business.
The first wave of renunciations in 2010 coincided with a part of the law that requires individuals to report foreign assets worth as little as $50,000, causing the first wave of banks to start to drop US clients and putting many people in the difficult position of choosing between a passport and a checking account. That was in addition to a separate provision that forces Americans to disclose foreign bank holdings larger than $10,000.
Renunciations dipped in 2012, but now another part of the law is kicking in. The new provision requires financial institutions to report all foreign accounts held by Americans.
These regulations come on the heels of additional regulations that are being imposed on foreign banks operating in the US. The law has prompted some banks to begin kicking out their American clients rather than comply. Penalties can be high if banks make a mistake reporting US-held accounts, even if they are basic checking and savings accounts, leaving American citizens who live abroad incapable of finding a bank who will take their business.
One can hardly blame them, the choice a bank is faced with of either disenfranchising a sliver of their clientele or face the wrath of policy being imposed on them by a foreign power, I'm sure we here in the states would allow the same thing to happen to us.
In summary, once you pay your taxes and have a big old stack of money, what you do with it is still subject to rules and regulations of the US, even if you take your legitimate money as far away from out shores as possible. Piling on burdens of citizenship, more tax revenue for the government, and zero new benefits by being a citizen.
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