For the last few years, more and more U.S. citizens and green card holders have chosen to give up their passports rather than comply with increasingly burdensome offshore account reporting requirements.
The Foreign Account Tax Compliance Act (FATCA), in particular, has become a major burden for many expatriates. We wrote about this in our first post of 2015.
In today's post, we will update you on that story.
The trend we discussed at the outset of 2015 continued throughout the year. In 2015, a record number of people gave up their U.S. citizenship or long-term residency status. The number, to be precise, was 4,279.
This was the third year in a row that a record was set.
The hassles associated with offshore tax compliance appear to be a major factor in the increases.
It isn't difficult to briefly trace the back story for this. In 2009, the U.S. began stepped-up enforcement efforts aimed at offshore tax evasion. Those efforts have yielded upward of $13.5 billion in taxes and penalties so far. They have also forced many U.S. taxpayers into one of the IRS's voluntary disclosure programs.
In 2010, Congress passed FATCA, greatly expanding and complicating the requirements for offshore account reporting. These requirements have tended to make financial matters more difficult for Americans who live abroad. Many foreign financial institutions refuse to do business with U.S. taxpayers or are reluctant to do so.
To be sure, several thousand passport renunciations out of 7 million or more expatriates is not a huge percentage. But the trend is clear.