What’s the proper way to tax personal saving and investment? It’s a great question, and under current tax law, we have lots of different answers! Specifically, we have four of them, which I’ll get to in a moment. But...
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Taxes Make People Renounce Citizenship, Citing Compliance Costs
I ran across an interesting article on CNBC today, which cites a report by the National Taxpayer Advocate's Office that states that almost 1,800 Americans chose to renounce their US citizenship or turn over their Green Cards rather than pay taxes last year. From the article:
It's also almost eight times more than the number of citizens who renounced in 2008, and more than the total for 2007, 2008 and 2009 combined.
The United States is one of the only countries to tax its citizens on income earned while they're living abroad. And just as Americans stateside must file tax returns each April—this year, the deadline is Tuesday—an estimated 6.3 million U.S. citizens living abroad brace for what they describe as an even tougher process of reporting their income and foreign accounts to the IRS. For them, the deadline is June.
The National Taxpayer Advocate's Office, part of the IRS, released a report in December that details the difficulties of filing taxes from overseas. It cites heavy paperwork, a lack of online filing options and a dearth of local and foreign-language resources.
For those wishing to legally escape the filing requirements, the only way is to formally renounce their U.S. citizenship. Last year, IRS records show that at least 1,788 people did, and that's likely an underestimate. The IRS publishes in the Federal Register the names of those who give up their citizenship, and some who renounced say they haven't seen their name on the list yet.
There's also an "exit tax" for the very rich who choose to leave. During the last 25 years, a number of millionaires and billionaires have renounced their citizenship. Among them: Ted Arison, the late founder of Carnival Cruises and Michael Dingman, a former Ford Motor director.
But those of more modest means renounce, too. They say leaving America is about more than money; it's about privacy and red tape.
More on compliance costs here.
Follow Scott Drenkard on Twitter @ScottDrenkard.
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