The US Treasury Department published the latest list of those who renounced their US citizenship in 2016. The recent spike in renounced citizenships has been tied to US taxation of worldwide income for all US residents and taxpayers. 5,411 individuals renounced their US citizenship in 2016, and while this may not sound like a large number it is 26% higher than the highest number of renounced citizenships in previous years.
With the implementation of FATCA and US taxation of worldwide income several years ago it has become much more difficult for US citizens to keep money in offshore bank accounts and investments. Foreign banks are sending FATCA letters to account holders worldwide, including foreign nationals who live and work in the United States. Hundreds of thousands of financial institutions worldwide are providing detailed information about the “owner of beneficial interest” in any bank account, investment account or other financial record directly to the IRS. The failure to divulge international accounts and investments on the IRS FBAR and associated forms has resulted in billions of dollars in revenue to the US treasury. Those who wish to come into FBAR compliance must select between the Offshore Voluntary Disclosure Program or OVDP and the Streamlined Domestic Offshore Procedures and make a “thorough, transparent, accurate” disclosure of all offshore bank and investment accounts as well as assets such as foreign corporate ownership and real estate.
While the US marketed FATCA as an attempt to pursue tax evasion by the wealthy, in reality it has become a mechanism to extend the extent of US taxation of worldwide income upon the global assets of US taxpayers and residents. Most nations in the world limit taxation to income earned within their own borders. The US boldly established FATCA and pursues taxation of US residents and taxpayers on their income regardless of where it is earned. Many nations have begun to follow suit, pursuing their own versions of FATCA while requiring the IRS to return the favor and provide detailed information on their own citizens.
If you are a foreign national who lives and works in the United States, or have previously undisclosed offshore assets and income we invite you to contact the experienced international tax attorneys at Allen Barron for a free consultation at 866-631-3470. Ask about the protections of the attorney-client privilege and the extensive legal, tax and accounting services Allen Barron can provide to protect your interests while bringing you into compliance.
And just in case you’re concerned about the drain of US persons renouncing their citizenships and the resulting impact on tax revenue it might interest you to know that roughly 753,000 people became new US citizens in fiscal year 2016 according to the Wall Street Journal and a spokeswoman for the U.S. Citizenship and Immigration Services division of the Department of Homeland Security. That should generate new income for the US Treasury.
