Why Have So Many #Americansbroad Considered #Expatriation? It’s Probably Not What You Think… http://t.co/wByZ2Mulwf
— U.S. Citizen Abroad (@USCitizenAbroad) October 15, 2013
So, while the media sound bytes tell you that expatriation is all about tax, don’t believe it. Sure, that’s a part of it, but the reality is much more complex.
My own experience with expatriated clients backs this up.
- One who had lived in Switzerland for more than 40 years gave up her U.S. citizenship only after all of the banks she dealt with there closed her accounts. They didn’t want to deal with all the reporting requirements the USA requires if they accept U.S. account-holders. It’s easier just to fire their American customers.
- Another client received a letter from the bank that had issued a mortgage years earlier for her home in Germany. The letter threatened to cancel her mortgage unless she could prove she was no longer a U.S. citizen. Rather than face a huge balloon payment, she gave up her passport.
- A Canadian client contacted me after receiving a bill from the IRS for $20,000, despite being (he thought) 100% compliant with all U.S. tax and reporting obligations. He’d even hired a big-name U.S. accounting firm to prepare his tax returns each year, at a cost of more than $5,000 annually. He never owed any U.S. tax because taxes in Canada are higher than in the USA, but he still got screwed. It appears a Canadian educational savings plan account he’d set up for his daughter was the problem. Under Canadian law, gains in the account are tax-deferred—but not under U.S. law. That led to a big tax bill—and his decision to expatriate.
The fact is, more than 7 million Americans now live abroad. Many of them can no longer hold bank accounts, qualify for a mortgage, or set up a tax-deferred account for retirement or their children’s education.