More taxpayers are waking up to the fact that America is toast; Year's Tally for Expatriations Sets Record; Increase Comes Amid Tax Crackdown on Offshore Assets; IT IS TIME: Move Your Money Out of the U.S. Banking System Before Laws Are Enacted TO STOP YOU
THE WALL STREET JOURNAL
By Laura Saunders
11/15/2013
Editor's note: Two major banks that are making it difficult for you to send international wires or draw out large amounts of cash. Both JPMorganChase and HSBC USA have instituted new policies which will make it difficult for you to withdraw your funds in certain ways.
This year will set a record for expatriations by U.S. taxpayers, with at least a 33% increase from the previous high in 2011.
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The Treasury Department published the names of 560 people who either were U.S. citizens renouncing their citizenship or long-term residents who turned in their green cards during the third quarter.
That brings the total so far this year to 2,369, according to Andrew Mitchel, a tax lawyer in Centerbrook, Conn., who tracks the data. For all of 2011, the number of published expatriates was 1,781, he said.
Treasury doesn't report when people renounced, and there could be a gap between that action and a name's appearance on the list. The department also doesn't distinguish between those giving up passports and those turning in green cards.
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Taxpayers who expatriate aren't required to give a reason, but experts said the overall increase was likely because of tougher enforcement of U.S. tax laws.
"Nothing has changed in immigration law that would make people want to renounce," said Freddi Weintraub, an immigration specialist and partner at Fragomen Worldwide, a New York-based law firm.
"Current or anticipated changes in tax law and enforcement are driving this increase."
People who renounced last year might have avoided higher taxes on income and estates—including those on long-term capital gains—that took effect in 2013. Those who renounce citizenship or turn in green cards can be subject to an exit tax.
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The Internal Revenue Service declined to comment.
"The fact that renunciations have increased sharply is not surprising, given increased U.S. scrutiny in this area," said Fran Obeid, a partner at Obeid & Lowenstein LLP in New York, who specializes in offshore-account issues. "Renunciation can be expensive, but it may be easier than staying in compliance with U.S. tax laws that can be onerous for citizens of other countries."
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Taxpayers who renounce aren't required to hold citizenship elsewhere, but as a practical matter they usually do.
Experts said the Foreign Account Tax Compliance Act also may have contributed to rising renunciations. Set to take effect next year, it requires foreign financial institutions to report account information about U.S. taxpayers to the IRS. Affected taxpayers include both U.S. citizens and green-card holders living in the U.S. and abroad.
All income earned by U.S. citizens and permanent residents, even those who live abroad, can be subject to U.S. tax. The U.S. also confers citizenship on people born on American soil. Penalties for failing to report assets can be severe, including up to 50% of an account balance a year.
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Although many of the U.S. laws on offshore accounts have been in effect for decades, experts say there was little enforcement of them until 2009, when Swiss banking giant UBS AG admitted that it had helped U.S. taxpayers hide assets abroad. The bank paid $780 million to avoid criminal charges and turned over the names of more than 4,000 account holders, piercing the veil of Swiss bank secrecy.
Since then, more than 38,000 U.S. taxpayers have confessed to having undisclosed offshore accounts and paid more than $5.5 billion in back taxes, interest and penalties. Lawyers estimate $5 billion more hasn't yet been paid.
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