USA Topic -- Renouncing U.S. citizenship now both more popular and much more difficult

[Jingthing]

No, it's not something I'm currently interested in doing, but who knows about the future.

 

Yet another thing that U.S. embassies are not very helpful with to put it mildly. Not exactly surprising considering what happened here with income letters. 

 

https://www.washingtonpost.com/world/2020/10/27/us-citizenship-renouncement-fatca/

 

Quote

How the coronavirus made it nearly impossible to renounce U.S. citizenship

 

 

[Scott]

Troll post removed.

 

[onebir]

37 minutes ago, Jingthing said:

No, it's not something I'm currently interested in doing, but who knows about the future.

If so & you don't have a second citizenship (that you're comfortable with), it might be worth exploring options for getting one.

[Jingthing]

17 minutes ago, onebir said:

If so & you don't have a second citizenship (that you're comfortable with), it might be worth exploring options for getting one.

Well it won't be in Thailand, that's for sure.

I didn't post this to talk about any plans I might have to renounce my citizenship, because I have no such plans.

Obviously if you renounce citizenship you need another one.

Edited October 27, 2020 by Jingthing

[onebir]

 

16 minutes ago, Jingthing said:

Obviously if you renounce citizenship you need another one.

Sure; my point is just that on top of the difficulties reported in the article, getting a second  second citizenship can be difficult/slow/expensive, effectively imposing another barrier to renouncing one's initial one.

[Why Me]

What I understand from reading about this some time back is that it's mostly very wealthy people who want to a lower tax regime.

 

The IRS annual foreign earned income exclusion for US expats is more than $100k and FATCA reporting is a little more than a nuisance unless you have high value international holdings. So, for little people like me and most TVers I guess there's little to be gained from renunciation even to the Caymans.

 

The cases mentioned in WaPo are different though. People who never really lived in the US  but just got stuck with the citizenship because of birth. Which is strange in that you would think that at some point of time in their "real" country they would have been able to declare themselves as citizens, e.g., get the right passport, SS, etc.

 

Plus, as a US citizen you have to be mindful of SS and investments in the US if you have them, which I do. If the shirt hits the ceiling I want to be able to get in the citizens line for my ration of bread.

[donnacha]

1 minute ago, onebir said:

 

Sure; my point is just that on top of the difficulties reported in the article, getting a second  second citizenship can be difficult/slow/expensive, effectively imposing another barrier to renouncing one's initial one.

More importantly, over the years it has progressively gotten more difficult and expensive, so, anyone who thinks they might need it this in the future should consider sorting it out now.

 

[donnacha]

18 minutes ago, Why Me said:

What I understand from reading about this some time back is that it's mostly very wealthy people who want to a lower tax regime.

That characterization, which was particularly prevalent in the left-wing media, was mostly a justification for rules that made it harder to renounce citizenship, disproportionately affecting people without much money, such as those mentioned in the article. Actual rich people can afford to pay lawyers to sort it out for them.

A few years ago there was a story about an American in her 80s who had been an English teacher in Paris for half-a-century. Her whole life was there but, for sentimental reasons, she held onto her US citizenship. Then, under Obamacare, there was an unfair situation by which Americans abroad had to pay a significant amount of money each year, despite not being able to receive any benefits as non-residents. She reluctantly renounced her US citizenship because she simply could not afford it on her French pension.

Today, she would not even have that option, thanks to laws designed to catch the evil millionaires.

From my perspective, your country should not have any right to tax you or interfere with your ability to open foreign bank accounts once you have lived elsewhere for more than six months.

Equally, your access to benefits in your home country should be tied to having paid certain cumulative amounts into the social security pot during your working life. You should be given the option to continue paying that tax while you live abroad and, if you decide not to bother, you should not be entitled to any public assistance if you return in your old age.

 

Edited October 27, 2020 by donnacha

[Why Me]

2 minutes ago, donnacha said:

That characterization, that was particularly prevalent in left-wing media, was mostly a justification for rules that made it harder to renounce citizenship, disproportionately affecting people without much money, such as those mentioned in the article.

Actually, no, the reason for renouncing, in fact, is mostly wealthy Americans reluctant to disclose their international holdings in FATCA filings. Renunciations were almost unheard of till FATCA came to be enforced. I'll leave you to google the data.

 

5 minutes ago, donnacha said:

A few years ago there was a story about an American in her 80s who had been an English teacher in Paris for half-a-century. Her whole life was there but, for sentimental reasons, she held onto her US citizenship. Then, under Obamacare, there was an unfair situation by which Americans abroad had to pay a significant amount of money each year, despite not being able to receive any benefits as non-residents. She reluctantly renounced her US citizenship because she simply could not afford it on her French pension.

Story is nonsense. Are you a tax-filing American? I am. There's a simple box I check in my return declaring residence abroad to avoid ACA penalty.

[donnacha]

12 minutes ago, Why Me said:

Actually, no, the reason for renouncing, in fact, is mostly wealthy Americans reluctant to disclose their international holdings in FATCA filings. Renunciations were almost unheard of till FATCA came to be enforced.

You state that as the sole reason. I have no idea how many renunciations are tied to that but it is very obviously not the sole reason. Perfectly regular Americans working in regular jobs and living regular lives abroad have to jump through ridiculous hoops compared to other nationalities. There are many non-wealthy Americans who eventually drop their citizenship for that reason. In your zeal to catch the evil millionaires, you crush the regular folks underfoot, even denying their existence.
 

12 minutes ago, Why Me said:

Story is nonsense. Are you a tax-filing American? I am. There's a simple box I check in my return declaring residence abroad to avoid ACA penalty.

What is the case today may not have been the case when Obamacare was originally introduced. The whole scheme has been significantly modified over the years. At initial introduction, this particular woman had this particular problem. Perhaps she missed the simple checkbox, or perhaps it was introduced because of the widely reported stories such as hers.

 

Edited October 27, 2020 by donnacha

[onebir]

15 minutes ago, donnacha said:

Actual rich people can afford to pay lawyers to sort it out for them.

Not only that, for the "actual rich" there are "citizenship by investment" schemes that apparently make it quite easy to get a second citizenship (effectively you can buy one.... for  $100k+, with minimal hoop jumping). No lawyer required (for some of them; some apparently are only available through nominated agents, who I guess are mostly lawyers).

[onebir]

3 minutes ago, donnacha said:

Perfectly regular Americans working in regular jobs and living regular lives abroad have to jump through ridiculous hoops compared to other nationalities.

This seems true; no real need for a UK citizen who's out of the UK for a few years to even file a tax return...

[donnacha]

9 minutes ago, onebir said:

This seems true; no real need for a UK citizen who's out of the UK for a few years to even file a tax return...

Yes, most countries follow that model. The US tax authorities are unusually aggressive. So much for "Land of the Free" if the livestock are not permitted to escape the farm.

Sadly, I have a feeling that many countries, particularly in the EU, will start to shift towards the US model as they struggle to cover the costs of Covid. I expect already high tax rates to increase to 60 or 70% for at least the rest of this decade, along with higher V.A.T. rates.

With working online more acceptable than ever, more citizens will try to escape those higher taxes by moving outside the EU, and this will prompt their governments to change the rules.

 

Edited October 27, 2020 by donnacha

[onebir]

7 minutes ago, donnacha said:

Yes, most countries follow that model. The US tax authorities are unusually aggressive. So much for "Land of the Free" if the livestock are not permitted to escape the farm.

Sadly, I have a feeling that many countries, particularly in the EU, will start to shift towards the US model as they struggle to cover the costs of Covid. I expect already high tax rates to increase to 60 or 70% for at least the rest of this decade, along with higher V.A.T. rates.

With working online more acceptable than ever, more citizens will try to escape those higher taxes by moving outside the EU, and this will prompt their governments to change the rules.

Could be a good time to stock up on citizenships then ????

[Why Me]

14 minutes ago, donnacha said:

I have no idea how many renunciations are tied to that but it is very obviously not the sole reason. Perfectly regular Americans working in regular jobs and living regular lives abroad have to jump through ridiculous hoops compared to other nationalities. There are many non-wealthy Americans who eventually drop their citizenship for that reason.

I never said sole reason but mostly. I am one of those perfectly regular Americans working abroad and you can take it from me the hoops are not arduous at all. FATCA filing is about 15mins. and my tax return takes a couple of hours. And below a certain level of income you don't have to file.

 

I can't compare with other countries but I hear Australians have residency requirements re getting their state pension. None of that for US citizens. And the foreign income exclusion is generous.

 

Repeat, unless you are a seriously wealthy American abroad there's little reason for renunciation. I know because I researched this a couple of years back. Only to find that I am not close to seriously wealthy, doing ok though:-)

 

14 minutes ago, donnacha said:

What is the case today may not have been the case when Obamacare was originally introduced. The whole scheme has been significantly modified over the years.

Why do you say things without doing research? It's always been the case one can exempt oneself by virtue of foreign residence. I know because I've been a filer since long before ACA.

[donnacha]

36 minutes ago, Why Me said:

I never said sole reason but mostly.

Nope. You may have misphrased it, but you referred to "the reason for renouncing", singular. Your placement of the word "mostly" later in the sentence, referring to "mostly wealthy Americans", does not modify the first part of the sentence.

Even if we accept that, in your excitement, you simply garbled the sentence, and that you meant both rich and poor Americans, it still implies that all these Americans, including the poor, are worried about revealing their international holdings:
 

1 hour ago, Why Me said:

Actually, no, the reason for renouncing, in fact, is mostly wealthy Americans reluctant to disclose their international holdings in FATCA filings.

I now accept, however, that what you meant was:

"Actually, while there may be cases such as the ones you refer to in the article, I believe that the majority of cases are wealthy Americans reluctant to disclose their international holdings in FATCA filings."

What I am saying is that, regardless of the intention of the new laws, they disproportionately impact those poorer Americans who, for entirely non-FATCA reasons, want to drop their citizenship. I would guess that, on balance, they are the majority because there are already ways for the wealthy to avoid taxes while remaining a citizen. America is essentially designed to assist the accumulation of wealth.

 

Edited October 27, 2020 by donnacha

[Why Me]

1 hour ago, donnacha said:

Nope. You may have misphrased it, but you referred to "the reason for renouncing", singular. Your placement of the word "mostly" later in the sentence, referring to "mostly wealthy Americans", does not modify the first part of the sentence.

Even if we accept that, in your excitement, you simply garbled the sentence, and that you meant both rich and poor Americans, it still implies that all these Americans, including the poor, are worried about revealing their international holdings:
 

I now accept, however, that what you meant was:

"Actually, while there may be cases such as the ones you refer to in the article, I believe that the majority of cases are wealthy Americans reluctant to disclose their international holdings in FATCA filings."

What I am saying is that, regardless of the intention of the new laws, they disproportionately impact those poorer Americans who, for entirely non-FATCA reasons, want to drop their citizenship. I would guess that, on balance, they are the majority because there are already ways for the wealthy to avoid taxes while remaining a citizen. America is essentially designed to assist the accumulation of wealth.

 

 

I meant what I said. You seem to have little idea of FATCA/IRS and the burdens/advantages of US citizenship (are you even American?).

 

As I said I researched the issue couple of years back because I was paying a significant amount in taxes with little return (that I could see being based in Thailand ). The rule of thumb I found is you have to be worth about 8 figures for it to make sense.

 

For a poor American or even middle class, especially if they have earned in the US, are due SS/pensions and have investments in US securities, the thought of renunciation shouldn't even enter their heads.

 

The WaPo cases are exceptional. People who lived almost all their lives elsewhere and should have sorted out their citizenship status long ago.

[donnacha]

42 minutes ago, Why Me said:

The WaPo cases are exceptional. People who lived almost all their lives elsewhere and should have sorted out their citizenship status long ago.

Oh, I see ... it's their fault!

 

[Pib]

 

Quote

Citizenship renunciation is surging. State Department releases suggested that 5,816 Americans gave up their citizenship in the first half of 2020, heading toward a record.

OK, let double the 5,816 number to get an annual figure....we are now up to 11,632 on an annual basis.  With  US population of a little over 330 million that 11, 632 amounts to 0.0034% of the US population.  And typically the folks wanting to renounce US citizenship are those folks with dual citizenship (and possibly rich) and left the US many years ago with no intention of ever living in the US again.  Like the 59 year old woman in the news article who left the US when a baby.   

[Jingthing]

1 hour ago, Pib said:

 

OK, let double the 5,816 number to get an annual figure....we are now up to 11,632 on an annual basis.  With  US population of a little over 330 million that 11, 632 amounts to 0.0034% of the US population.  And typically the folks wanting to renounce US citizenship are those folks with dual citizenship (and possibly rich) and left the US many years ago with no intention of ever living in the US again.  Like the 59 year old woman in the news article who left the US when a baby.   

Yes you're right.

The desire or in many of these cases the need to renounce is rare but less rare than it used to be.

[JimGant]

Quote

She was told by accountants that she may owe more than $107,000 in U.S. taxes

From the WashPost article. Carrie is a Dutch doctor. Look up the effective tax rates for Holland -- considerably higher than US Fed tax rates. Now, look up the tax treaty between Holland and the US. Per standard, the treaty is designed to eliminate double taxation -- and Carrie's (assumably) much higher tax bill to Holland would generate 100% tax credits toward her US Fed tax filing. Would love to know, then, how she can owe the US $107k in taxes......? (Ok, yeah, there may be a Dutch tax loophole that doesn't apply as a US tax credit.....)

 

Now, for an ironic situation -- suppose Carrie's mom decided to pop Carrie in the US, to intentionally make Carrie a US citizen. This happens all the time, apparently. Now, 51 years later, Carrie has to tell Mom that, because she owes the US mucho back taxes, she can no longer support Mom. Wow, wouldn't I love for that story to be true -- too many pregnant tourists to the US  looking for citizenship for their unborn (well, maybe not in covid times...).