Why Are 3,000 Americans Renouncing Their Citizenship or Relinquishing Their Green Cards?
In a country like the United States, where so many people want to become citizens, many might wonder why a U.S. citizen would want to turn in his or her passport and renounce their citizenship.
Well, this trend has become a reality for many, and just last year 3,000 Americans lined up at embassies around the world to renounce their citizenship. The numbers for 2013 represent a dramatic spike -- triple the average for the previous five years, according to a CNN Money analysis of government data.
On the other end of the spectrum, on Monday, Pope Francis proudly renewed his Argentine passport and his national identity card, staying true to his country of origin (he even insisted on paying the fees himself).
So why are Americans singing a different tune and essentially bailing on the U.S.?
As with most things, it all comes down to money -- and complicated tax filings.
CNN Money reports that the uptick in U.S. citizens turning in their passports comes from "expats" who are fed up with dealing with complicated tax filings -- which are increasingly getting worse as more regulations come into effect.
"Unlike most countries, the U.S. taxes citizens on all income, regardless of where it is earned or where they reside. Reporting taxes can be so difficult that expats are often forced to seek expert help, which can cost thousands of dollars."
Brad Westerfield, a tax lawyer at Butler Snow tells CNN Money that there has been a surge in renunciations following the implementation of a new disclosure law, called the Foreign Account Tax Compliance Act that targets overseas tax evasion.
Approved by Congress in 2010, The Foreign Account Tax Compliance Act "is aimed at recouping some of the hundreds of billions the government says it loses each year in unpaid taxes."
"They've become so complicated -- the increased filing obligations over the years," Westerfield added. "You see more people giving up their citizenship or relinquishing their green cards ... Individuals [are] wanting to simplify their financial affairs, and just pay tax and report to one jurisdiction."
In addition, "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. That's in addition to a separate provision that forces Americans to disclose foreign bank holdings larger than $10,000."
While renunciations slowed down in 2012, another part of the law is taking effect, making financial institutions report all foreign accounts held by Americans.
"People find that intrusive," Westerfield said. "Just because you live your life outside of the U.S., most of your assets are foreign assets. [Americans are] saying enough is enough."
The enforcement of the law has caused some banks to part ways with their American clients, instead of complying with the law. CNN Money reports that "penalties can be high if banks make a mistake reporting U.S.-held accounts, even if they are basic checking and savings accounts."
On the other hand, CNN Money also points out that some Americans may be giving up their passports to protect their wealth, which could in turn, raise a red flag. "It's illegal to renounce your U.S. status to avoid paying taxes," CNN Money adds, "and giving up citizenship doesn't mean you're off the hook for back taxes."
"The U.S. used to be the 'Rolls Royce' of destinations -- the land of opportunity," said Hong Kong-based immigration lawyer Eugene Chow. No longer, it seems. "Both naturalized and native-born American citizens are choosing to say goodbye to Uncle Sam today."
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