While many taxpayers dread tax-filing season, Americans living abroad face even bigger yearly burdens, and those are now so frustrating that some want to ditch their U.S. citizenship.
Roughly one in four American expatriates is “seriously considering” or “planning” to renounce U.S. citizenship, according to a survey from Greenback Expat Tax Services.
The burden of filing U.S. taxes is the top reason expats want to ditch U.S. citizenship, according to the survey, which polled 3,200 American expats living in 121 countries, according to CNBC.
“You have people doing what seems to them like very normal things, like saving for retirement, or buying a home,” said David McKeegan, co-founder of Greenback Expat Tax Services. “But when you do it overseas, sometimes you can get yourself into a whole lot of trouble.”
American expats must pay annual U.S. income taxes on worldwide earnings, including their salaries, business profits, investment income and more, which involves filing returns and paying taxes in two countries.
While the U.S. has measures to prevent double taxation, such as the foreign-income exclusion and tax credit, many expats still oppose the dual-filing requirements due to the time commitment and expense of preparing those returns.What’s more, nearly 80% don’t feel they should have to pay U.S. taxes while living abroad, the survey finds.
Additionally, some Americans must report foreign accounts to the U.S. Department of the Treasury annually via the Report of Foreign Bank and Financial Accounts, or FBAR, or potentially face stiff penalties.
You must file the FBAR if your combined account values surpass $10,000 at any time during the year, regardless of whether those accounts produce income.
For example, if you have $5,000 in a savings account and $4,750 in an investment account and the investment account jumps to $5,025 for even a single day, you must report those balances.
The penalties for failure to file depend on whether it’s a “willful” or “nonwillful” violation. However, willful violations come with a fee of the greater of $129,210 or 50% of the balance of your account, for each year with a missing form.
Although there was a sharp drop in Americans dumping their U.S. citizenship in 2021 — 2,426 compared with a record-breaking 6,705 in 2020 — the 2021 numbers may have been lower due to U.S. embassy closures amid the COVID-19 pandemic.
There were about 9 million U.S. citizens living abroad in 2020, according to estimates from the U.S. Department of State.
First published in MarketWatch, https://www.marketwatch.com/story/25-of-u-s-expats-seriously-considering-or-planning-to-renounce-citizenship-11655566303
