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Sunday, September 29, 2013

Taxes and Expatriation

A number of posts have discussed expatriation, the process of losing or giving up citizenship.

At the BBC, Thomas Geoghegan reports that 1,131 people renounced US citizenship in the second quarter of 2013, compared with 189 during the same period in 2012. The apparent reason is the Foreign Accounts Tax Compliance Act, a new law that will require financial institutions across the world to report the assets and incomes of all US citizens with more than $50,000 on their books.
Suddenly, some expats are waking up in a cold sweat. They have always had to file tax returns and disclose foreign accounts on a form called the FBAR, although in practice many didn't. But now Fatca means they have to be more rigorous or face huge fines, in the knowledge that the US authorities could know a lot more than they have in the past. 
Many would say the IRS is only trying to get what it is owed, but critics say that in trying to track down the wealthy tax-dodgers, ordinary people are being dragged into an expensive and time-consuming form-filling nightmare. And for some, it's become too much. 
Bridget, who asked the BBC not to use her real name, gave up her US citizenship in 2011, 32 years after leaving for a new life in Scandinavia. 
"This has nothing to do with avoiding taxes. I was never in danger of having to pay taxes in the US since I pay more here. The issue for me was that it was becoming harder and harder to follow the tax code and comply. It was difficult already but when I knew Fatca was coming, I thought, 'Do I want to go through with it anymore?'"