US citizens and Greencard holders residing abroad are, nevertheless, still required to file US tax returns and pay taxes in the US, as well as in their country of residence and the US is one of only two countries in the world that subjects its residents (and Greencard holders) to such tax treatment. In addition to the taxation implications, the compliance costs– estimated to average $2000 each year- are placing an increasing burden on overseas filers.
Many US citizens have been contemplating relinquishing their citizenship in an effort to cut tax and compliance costs. According to Bloomberg, in Q2 2012 just 189 renounced their citizenship but in Q2 2013, that figure had jumped to 1,131. There has been a similar increase for those who have held Greencards and who no longer envisage the need to retain their Greencards and so are relinquishing them.
The US FATC (Foreign Account Tax Compliance Act) is also being cited as one of the reasons for the sharp increase. Americans are finding that foreign financial institutions are reluctant to get entangled with the compliance demands of FATCA and, for many, that is the final straw.
“Delinquent filers” – the IRS term for those citizens and Greencard holders who have not been complying with the requirement to file US tax returns - are facing tougher penalties so if you are in this category, then contact us for assistance.