Americans Abroad Renounce Citizenship to Escape Tax Law’s Clutches
A growing number of Americans are renouncing their citizenship to escape a law that was designed to crack down on offshore tax evasion.
The Foreign Account Tax Compliance Act, or FATCA, requires foreign banks to report the assets of US account holders to the Internal Revenue Service. It was designed to go after wealthy Americans keeping money overseas to avoid taxes, but is also ensnaring regular people living abroad. Rather than risk steep penalties for failing to provide the information, some banks refuse to open accounts for US citizens at all.
This is particularly frustrating for so-called accidental Americans — people who are citizens of the US because they happened to be born there or because one parent is American but don’t have a connection to the country.
In response to European pressure, the US Treasury Department is planning guidance that would offer some relief to foreign residents and banks. The Supreme Court has also agreed to hear a case regarding the tax and compliance burden on expats.
But for some Americans who live abroad, it’s not worth waiting for things to change.