Foreign Account Tax Compliance Act (FATCA) opponents are claiming the new tax law is forcing record numbers of Americans to hand back their passports.
According to official figures from the US Treasury, almost 3,000 Americans ‘expatriated’ in 2013 – an increase of more than double compared to the year before.
The Treasury gives no reasons for citizens handing back passports and green cards – but anti-FATCA groups insist the new law is to blame even though only anecdotal evidence is available to support their claims.
Campaigners against FATCA, like the Sovereign Society, argue this is why so many Americans are expatriating.
“If you ask Americans living overseas why they are expatriating, it’s because of the changes FATCA is bringing to tax law,” said Robert E. Bauman, writing for web site personalliberty.com.
Foreign banks dump US customers
“A lot of expat Americans have had their bank accounts closed because of this law because the foreign banks do not want the costs and administration involved with complying with FATCA. Getting rid of American clients makes this easier for them.”
Failing to comply with FATCA involves fines for US taxpayers and potential sanctions for the foreign financial institutions.
The previous expatriation record was set in 2011, when 1,780 Americans left their homeland for good, followed by a slump.
In 2010, the number was around 1,500, but in 2012, the level dropped to below 1,000.
From 1998 until 2009, the figure was stable around 500 people a year leaving the USA.
Who does FATCA apply to?
FATCA is a tax law aimed at making sure that US taxpayers with cash and investments worth more than $50,000 held with foreign financial institutions report their earnings and gains to the Internal Revenue Service (IRS).
The law was passed in 2010 but is not due to start until July 1, 2014.
From this date, foreign financial institutions must identify accounts and holdings controlled by US taxpayers and report the details to the IRS for cross-checking with tax returns.
More than 50 countries have joined the FATCA tax network. The latest to sign agreements are Italy and Australia.
FATCA does not only affect Americans living in the USA, as the country is one of only two that compels expats to file returns and pay tax on their worldwide earnings. The only other country to do so is the African nation of Somalia.
This is the worst written piece about FATCA I’ve read so far and I’ve read a lot of them.
First of all, handing back your passport doesn’t mean you’re off the hook with the IRS or not covered by FATCA. If you have US sourced income, your bank will still need all related information.
Banks do not dump US customers because they don’t want to comply with FATCA. Every foreign financial institution (FFI) needs to comply, although banks with customers that have US indicia (which is different from being a US citizen) have more of an administrative hassle.
It depends on the model agreement that a country has signed with the US where an FFI has to report. Model 1 allows for direct reporting to the IRS. Model 2 has FFIs reporting to their local regualtor who will send collated reports to the IRS.
Banks that are deemed “recalcitrant” are not fined but other banks that deal with those banks have to withhold 30% of all suspected US sourced income and hand it over to the IRS. The same goes for customers that refuse to give information stating that they have US indicia or US sourced income. Your bank will withold 30% of your income. It is than up to you to claim that money back from the IRS.
All the Hype about FACTA, as an Expat its really not that hard to reshuffle your finances to ensure your within FACTA requirements. I guess for the extremely wealthy and those earning over $100K/yr renunciation could make sense. For the average middle class citizen living overseas just restructure where you keep your money and investments. Instead of allowing money to collect dust in a foreign account just withdraw it and lock it in a safe or keep it in a U.S based account and wire transfer it as needed. Unless your trying to hide something, FACTA is fairly easy to comply with.
Personally I keep all my savings in a U.S based account and wire transfer money as needed or withdraw cash on a U.S based VISA debit card. I have my pension, social security, 401K, etc all direct deposited into my U.S based account. I keep a small emergency fund of cash locked in a safe at my house overseas.
read and understand the law, its really not that difficult to conform too, more than likely you already are. Closing the door on American Citizenship seems foolish at best for a middle class Expat.