Tax Law Center Blog

By Parag P. Patel, Esq. | Updated September 13, 2014

US government fees charged to Americans for renouncing their citizenship will rocket from $450 to $2,350 on September 12, 2014.

The fivefold increase is probably related to the recent dramatic rise in renunciations triggered by the US Foreign Account Tax Compliance Act. FATCA forces foreign banks and other institutions to report their US clients’ financial doings to the Internal Revenue Service as from April 2015, after which it will become much more difficult for US expatriates to remain below the US tax radar.

Last year 3,000 US persons applied to renounce, more than treble the previous year’s figure, and ten times that of 2008. The 2014 numbers are expected to break that record. About three-quarters of applicants are in Switzerland (where rock star Tina Turner was perhaps the most famous of recent years), the UK, and Canada.

The US State Department justifies the increase by claiming that documenting a renunciation is very costly, since it requires at least two personal interviews between the applicant and the local American consul. It acknowledges, though, that the rapid rise in demand is one of the reasons for the increase, since these interviews are now ‘consuming far more consular time and resources’. Waiting times for expatriation interviews have soared from a few weeks to six months in some jurisdictions.

However, renunciation is not necessarily an easy panacea for US expatriates. They may not be granted the privilege unless they can prove tax compliance, and in any case, the IRS will impose an exit tax in the form of a capital gains charge on assets declared. It is also legally impossible to renounce citizenship while retaining the right of residence in the USA.

Our firm presented an informational webinar on the new Streamlined Filing Compliance Procedures available to many expats. Materials from the webinar can be downloaded here: Game Changer Streamline. While the streamlined program offers a welcome option for many taxpayers with undeclared accounts, other ways to address past noncompliance remain viable, including the OVDP program and Delinquent FBAR Submission Procedures and Delinquent International Information Return Submission Procedures.

Sources

• Wall Street Journal
• Money News
• Forbes
• Federal Register (PDF file)
• US State Department
• STEP News

About the Author

Parag P. Patel, Esq. brings over three decades of experience to individuals and businesses facing complex tax problems. Holding advanced degrees from Georgetown University Law Center (J.D.) and New York University School of Law (LL.M. in Tax Law), the nation’s top tax programs, Mr. Patel delivers sophisticated and creative strategies in complicated federal and state audits, penalty abatements, and foreign asset/income reporting. His practice emphasizes international tax matters, specifically foreign financial account reporting (FBAR), voluntary disclosures, and penalty defense.

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