Atossa Araxia Abrahimian, writing for Reuters, has a good story up about U.S. citizens who give up their citizenship. The article points directly at some of the important tax reasons for expatriation: the paperwork burden is ridiculous and there is a high probability for innocent mistakes that trigger massive penalties. Noncitizen spouses see no reason to share personal information with the U.S. government.
There are some real-world people making real-world decisions. For those who reflexively think “Traitor!” when they hear of someone canceling U.S. citizenship, this article might be eye-opening.
In short, the cost of U.S. citizenship has gone up. It is no surprise that an increasing number of people are choosing to drop the passport. Price up? Fewer buyers. Simple.
Our firm does a lot of this type of work. We log people out of the citizenship system, then log them out of the tax system. It’s one of the reasons I am on a plane every 7 or 8 weeks to somewhere or another. (I will be in Switzerland May 20-25, Beirut May 27-29, and Dubai May 30-June 3. Meet me. Text or email me to set something up.)
A word for those who are considering this major life step. I do not think it is smart to let tax considerations drive major life decisions. You are on the planet once. Then you die. Don’t be rash. Go. Live there (wherever “there” is for you) for a couple of years and hang on to your U.S. passport. See if you like it. Simplify your life so you can simplify your taxes. Cross your fingers and hope you can open a bank account.
In my experience, this is not a step for everyone. But for many, it is a staggeringly obvious choice to make. As the IRS — through increased regulations, obtuse paperwork, and not-so-smart tax policing — continues to bull its way through the great china shop of life, I expect to see the number of expatriates continue to climb.
(Oh, by the way, in the shameless self-pimping department, let me just point out that Atossa was kind enough to give me a shout-out in the article. Thanks Atossa).
And one more thing. Let’s abuse one more bias commonly held about expatriation. (A bias especially prevalent among politicians, it seems). Did you notice in the article that the people interviewed are living in high-tax countries, both for income tax and death taxes? Isn’t that interesting . . . .Reuters article about expatriation; I am mentioned by Phil Hodgen