An interesting read by the Telegraph that walks an Accidental American through the process of renunciation of American citizenship to avoid paying a life time of US taxes, penalties, interest, and potentially criminal offences for non-filing. Read it here. Excerpts below:
Renouncing citizenship was particularly onerous as she had no social security number, which is a requirement for any US tax filing. To obtain one, she had to provide documentary evidence for every year she had not been in the US – almost 50 years. She had to present a record of her life’s movements in person to US tax representatives, via microphone through a glass panel, in a room with other people waiting. Going through a “streamlined” process, she then had to provide five years of US tax returns, and six years of a “foreign bank and financial account” reports, providing specific details of all financial assets. Any mistakes can elicit potential fines of $10,000 (£8,200) per error. The specialist advice she required to go through this process cost $6,000 (£4,900), on top of the $2,350 (£1,900) renunciation fee, plus further costs involved in obtaining documentation. There is also the potential of an "exit tax" for wealthier individuals who pass certain thresholds, and inheritance tax implications. The exit tax applies to their total wealth, as measured at the point of citizenship renunciation.
Updated U.S. Treasury data shows 55,800 taxpayers have come into the Offshore Voluntary Disclosure Program (OVDP) to resolve their tax and financial reporting anti-money laundering obligations, paying more than $9.9 billion primarily in FBAR financial reporting money laundering penalties which are 50% confiscation of foreign assets per year of non-compliance, for up to six years. In addition to the financial reporting asset seizures imposed on US taxpayers, the IRS has also collected tax, interest and tax penalties since 2009. In addition, another 48,000 taxpayers have made use of separate streamlined procedures to correct prior non-willful omissions, such as Accidental Americans, paying approximately $450 million in taxes, interest and penalties in addition to their foreign taxes paid.
Read the Telegraph expose here!
What is FATCA and an Accidental American? download my article here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2742383