Any U.S. citizen is allowed to surrender U.S. citizenship and move to a different country. This is commonly referred to as expatriation. It is a difficult decision, often motivated by politics or taxation. The Internal Revenue Service (IRS) releases a list of expatriated Americans quarterly. In 2013 the total number of expatriations for the year was 2,999, a 221% increase from the year before. The IRS released 1,001 names of individuals who have chosen to expatriate on its first quarterly list of this year. Experts are projecting that the total number of expatriations in 2014 could reach as high as 4,000. It should be noted that the statistics are available only for those Americans who formerly surrender citizenship and obtain a tax clearance from the IRS.
Countless many more simply leave the U.S., blissfully unaware of the formalities of expatriation. The U.S. government’s efforts to eradicate international tax evasion through several aggressive programs and cross-border agreements have been extremely successful. Some say, too successful, as the programs have put both tax-evaders and innocent-but-uninformed taxpayers in a bind. These taxpayers are looking to surrender U.S. citizenship and receive their tax clearance before their foreign bank accounts are discovered and before their privacy is invaded. Due to the extensive coverage on theForeign Account Tax Compliance Act (FATCA) and the Foreign Bank Account Reporting (FBAR), many U.S. persons living and working abroad are now aware of their U.S. tax obligations. Taxpayers are also very aware that even becoming compliant is time and cost-prohibitive and the penalties could be crippling. To make it even more challenging, many foreign banks are now rejecting U.S. account holders due to the imposition of FATCA. This makes the decision to expatriate more appealing for some, and unfortunately, the only resort for others. Not everyone expatriates to avoid criminal or civil tax penalties. Some expatriate as a form of income or estate tax planning and some as a form of political protest.
Klueger & Stein, LLP has assisted many clients expatriate from the U.S. (which requires careful advance tax planning) and obtain a new citizenship in another country. We have written previously about the economic citizenship programs in countries like Nevis, Dominica, Latvia and Malta. We use these programs for our U.S. clients who expatriate and for our foreign clients who want the safety and security of a backup passport. With several E.U. countries introducing economic citizenship programs (like Latvia or Malta), our clients in the U.S, China, Russia, Ukraine and other countries can now obtain an E.U. passport, allowing for visa-free travel to most countries.