More Americans renounced their citizenship and terminated their long-term residency in the first three months of the year than ever before, courtesy of the crackdown in foreign tax rules.
The upsurge subsided some in the second quarter but has been ongoing since the Treasury Department and the Internal Revenue Service began aggressively enforcing tax rules for American expatriates. The crackdown on the Foreign Bank Account Report is fresh, though the law has been in existence since 1970. Under the law, U.S. taxpayers are required to file if they held one or more foreign accounts totaling more than $10,000 over the course of a year.
“Many people have been getting caught up on their U.S. tax filings and then renouncing,” said Andrew Mitchel, an international tax lawyer who analyzes Treasury Department data.
For a U.S. citizen or resident alien, the rules for filing income, estate and gift tax returns and paying estimated taxes are generally the same whether one is in the country or abroad. A person’s worldwide income is subject to U.S. income tax, regardless of where he or she resides.
The Foreign Account Tax Compliance Act is intended to ensure that the Internal Revenue Service obtains information on accounts held abroad by U.S. taxpayers at foreign financial institutions.
The initiative comes after UBS in 2009 was accused of helping American taxpayers hide money overseas. In 2014, Credit Suisse pleaded to similar claims. UBS paid $780 million to the U.S. and turned over information on more than 4,000 Swiss accounts. Credit Suisse Group paid $2.6 billion.
SOURCE: Linda Dimyan