From Dr. von Koppenfels:
[See pdf’s: Univ Kent study brief and US citizenship renunciation Kent study summary]
Dear all,
As promised, here (are) two documents – cut and pasted to go here, so I hope they don’t look too strange with the formatting – that summarize the initial findings of my research from the survey “The US and You”, to which some of you may have responded. Many respondents (thank you!!) took the time to write extensive comments, and I am still working my way through those (400 pages) of data. Producing a more in-depth analysis of that may take some months, but I’ll post that eventually as well.
For now, here the initial results. And thank you to all survey respondents!!
Best,
Amanda
11 February 2015
New Survey Shows US Citizenship Renunciation Intentions Not Linked to Income
BRUSSELS, Belgium (11 February 2015) – Figures released by the US Treasury Department show 3,514 US citizens renounced their citizenship (also includes long-term residents who gave up their residency) in 2014; this is the highest figure ever, up over 2,999 in 2014.
A recent University of Kent (at Brussels) study surveyed 1546 US citizens and former citizens (from 5 December 2014 to 20 January 2015) on this topic. Of the US citizen respondents, 31% have actively thought about renouncing US citizenship and 3% are in the process of doing so. The study shows that, in contrast to what is commonly thought, income is not a key factor in their doing so.
Of those who have renounced or relinquished US citizenship (142 of the total respondents), nearly half (43%) have annual pre-tax household incomes of under $100,000 (USD). There is, similarly, very little difference in renunciation intention between those with lower incomes and those with higher incomes: of US citizen respondents with annual household incomes under $100,000 (USD), 28% are actively thinking of renouncing; of US citizen respondents with incomes above $250,000 (USD), 33% are actively thinking of doing so.
The University of Kent study shows that many overseas Americans are feeling increasingly pressured by US financial reporting requirements and that maintaining US citizenship is costly – in terms of accountants’ fees. One respondent noted: “I can’t pay an accountant 2000€ in order to pay the USA $0.00 in the end.” Fear of “draconian” FBAR (Report of Foreign Bank and Financial Accounts) penalties is also widespread, as this pensioner noted: “Annual income under $4,000; potential FBAR penalties $30,000 per annum for 3 small accounts! I am old and dependent on savings; one paperwork lateness could leave me facing starvation.”
Numerous respondents also noted severe difficulties in retaining or opening investment accounts, bank accounts and, in some cases, securing mortgages, as local banks increasingly refuse US customers – which negatively affects their ability to plan for retirement. Some 39% have lived abroad for over 20 years, and over two-thirds (67%) say they are unlikely to return to the US.
All US citizens living outside of the US are required to comply with both taxation on global income and financial reporting requirements. Certain groups of US citizens and former US citizens feel particularly targeted, as a respondent in Canada explained: “Canada is home to many border babies, born in the US because that was the location of the closest hospital, and ‘accidentals’ like myself who left the US as young children with no say in where they were born.”
This University of Kent survey – the first academic study of its kind, and the largest look at the attitudes of Americans living abroad on this topic to date – shows that income is not the key motivating factor in prompting renunciations, but that increasing reporting requirements, fears of “draconian” penalties and increasing inability to hold a bank account are factors prompting renunciation.
A longer summary of initial findings is available.
———-
Executive Summary:
Survey of Citizenship Renunciation Intentions Among US Citizens AbroadThe US State Department estimates that 6.8 million Americans live outside of the US. The Treasury Department recently released its official numbers on 2014 fourth quarter US citizenship renunciations. In 2013, annual renunciations rose to their highest level ever, at 2,999, and in 2014 rose still higher, to 3,514.
A new research survey of 1546 US citizens and former citizens living outside of the United States shows that 31% of the US citizens are seriously thinking about renouncing their US citizenship, and that 3% are currently in the process of doing so.
The survey ran from 5 December 2014 to 20 January 2015, surveying 1404 US citizens and 142 former citizens, living in 69 countries. The survey was an opt-in snowball survey, distributed initially via overseas American organizations. The survey included closed-ended and open-ended questions, allowing for both quantitative and qualitative analysis.
Initial key findings of the study are:
Quantitative Analysis:
1) 31% have actively thought about renouncing US citizenship and 3% are in the process of doing so; 32% have never thought about renouncing US citizenship. Another 33% have given only a passing thought to the idea, however, they have no immediate or even long-term plans to do so. Many hold strong feelings of American identity and express pride in being US citizens.
2) More than one-third (39%) of all respondents had lived in their current country of residence for 20 years or more. The primary reason (33%) for moving to that country was to be with a spouse or partner, followed by employment (26%). 21% left the US as children. Over half (54%) are aged 50 or older, and 58% are female. 88% have at least a four-year college education. 45% have annual pre-tax household incomes of under $100,000 (USD) and an additional 18% between $100,000 and under $150,000.
3) Of those who have renounced or relinquished US citizenship, nearly half (43%) have annual pre-tax household incomes of under $100,000 (USD). Of those who have renounced or relinquished, more than half (56%) have lived at least 20 years in the United States, and three-quarters (75%) more than 20 years in their current country of residence.
4) Renunciation intentions are not linked to income: 43% of former citizens have annual household incomes under $100,000 (USD). Of US citizens with annual household incomes of more than $250,000, 33% have actively thought of renouncing and 4% are in the process of doing so. This compares to 28% of those US citizens with incomes under $100,000 (USD) having actively thought of doing so, and 3% currently in the process, and to 31% of all US citizen respondents who have actively thought of doing so and 3% who are in the process.
Qualitative Analysis:
5) US citizens who have renounced or relinquished their citizenship, or are thinking about doing so, mention several key factors. They note that financial reporting requirements are increasingly onerous and intrusive, and, second, that they are likely to remain overseas.
6) US citizens living overseas are affected by three sets of financial reporting requirements: first, they must file tax returns on global income – unlike nationals of any other OECD country living abroad; second, they must report all bank accounts with a combined total of $10,000 (USD) or more, or the so-called FBAR (Report of Foreign Bank and Financial Accounts) and, third, they are affected by FATCA (Foreign Account Tax Compliance Act) requirements, a law which came into force 1 July 2014. All three factors play a role in individuals’ thoughts on renunciation:
a. In open-ended responses, analysis shows that it is not payment of taxes which prompts renunciation, but rather primarily costs associated with complying with US filing requirements – particularly FBAR, which many respondents only learned about recently, and the recent FATCA law. These can be as much as $1000 to $5000 per year – as one respondent, with a household income of between $50,000 and under $100,000, put it, “I can’t pay an accountant 2000€ in order to pay the USA $0.00 in the end.” This person, who renounced citizenship, would have had to pay nearly 10% of annual income in such costs: “To maintain tax compliancy with my pension account I was going to have to pay my accountant at least £1500 per year and I only earn £18 to £20,000 per year.” Maintaining US citizenship is costly – in terms of accountants’ fees. There are, moreover, no pre-tax retirement savings options for overseas Americans – unlike their US-based counterparts.
b. FBARs are now e-filed via the Financial Crimes Enforcement Network, a phrase which riles many. The primary concern, however, over FBAR filing is that of many non-working spouses, as expressed by this woman, who has renounced her US citizenship: “Hated being treated like a criminal and filing FBARs on money earned solely by my UK only husband.” Others speak of stress created in their mixed-nationality marriages, especially those who are home-makers with income-earning non-US spouses, because of US filing requirements.
c. FATCA reporting requirements, also requiring reporting on joint accounts with non-US spouses, have further ramifications: numerous respondents also noted severe difficulties in retaining – or opening – investment accounts, bank accounts and, in some cases, securing mortgages, as banks increasingly refuse US customers. Numerous respondents reported great difficulties and stress in planning for retirement – with investment accounts increasingly closed to them in the countries they live in, as well as in the US (where many investment funds now require a US address).
7) Many respondents offered a “wait and see” response, noting that that if FATCA, in particular, is not changed, they feel that they will be “forced” to renounce US citizenship.
8) Two groups of US citizens and former US citizens feel particularly targeted by US financial reporting requirements, as well as by US citizenship policy, as explained well by this respondent in Canada: “Canada is home to many border babies, born in the US because that was the location of the closest hospital, and ‘Accidentals’ like myself that left the US as young children with no say in where they were born.”
These individuals – or their parents – believed that they no longer held US citizenship, having naturalized or held Canadian citizenship or not been aware of legal changes in US nationality law. Many realized only recently that the US Government still considers them US citizens, often after having been assured by US officials that they were not citizens, as this respondent said: “I was horrified to find out this year that the US is still claiming me as a citizen” – having relinquished US citizenship at the time of naturalizing as a Canadian. This person is not alone. Either not having been aware they were US citizens, or having been assured, many years ago, by Consulate officials that they were not, such individuals now face the cost of filing five years’ tax returns – even if no tax is owed – and potentially a $2350 renunciation fee, which for many is “prohibitively expensive”. They feel caught and targeted by US policy.
9) For many other respondents, a strong sense of anger and feeling of “being targeted” also emerged: “It is not a crime to live abroad and the US should not treat its expat citizens like criminals. I would never consider renouncing my US citizenship if the US treated me respectfully. As it is, I may end up renouncing, and that is a sad situation.” One person who renounced noted “What upsets me the most is the attitude by most US people that everyone outside the US is a tax cheat” and another noted “FATCA treats families like mine as suspected criminals until proven otherwise all because one family member is American who dared to marry abroad.”
10) Many expressed strong pride in being American, noting they would never renounce citizenship. Nonetheless, even some of those who have given no thought to renunciation still note, as this person did, “Folks upset about taxation without representation is what created the US.” A respondent with no intention of renouncing notes that “1. I’m an American. 2. I deeply resent being treated like a tax fraud or a drug lord.” This respondent, also with no intention of renouncing, said: “I find it tragic that many Americans living abroad are finding it necessary to give up their US citizenship based upon primarily taxation and banking problems. I think the IRS has to revise the code.”
11) Another person who has actively thought of renouncing, although does not intend to go through with it, said: “I do think that the mass media representation of this issue neglects to capture how difficult this decision is and how heartbreaking and frustrating it is. It’s like being in a cage.”
12) Many of those who did renounce or relinquish their citizenship expressed the pain of doing so, as this woman did: “It’s a bit like having a mastectomy because giving up my passport was traumatic for me.”
13) A very high degree of stress and even fear was expressed by a number of respondents, as expressed by this person “When I found about FBARs and the penalties involved I was unable to eat and sleep properly for weeks”. Many fear that inadvertent filing errors will wipe out retirement savings.
14) Numerous respondents mentioned their frustration with a lack of political representation of overseas Americans. They noted that they do vote in US federal elections, but also noted a lack of response concerning their concerns. Above all, respondents strongly felt the lack of representation of overseas Americans per se, as these two people did: “Double taxation without representation, without services, but with onerous ‘Orwellian’ compliance” or “I don’t feel that I have any representation within the US, so I might as well start forging links elsewhere.”
15) For many, American pride remains strong and a key factor in not renouncing, despite costs associated with remaining a US citizen (accountants’ fees, no pre-tax retirement savings options). On the other hand, frustration and resentment over US government financial reporting policies emerge strongly as well, even among those who feel they may return to the US at some point in the future.
Dr. Amanda Klekowski von Koppenfels is the Director of the MA in International Migration at the University of Kent in Brussels (www.kent.ac.uk/brussels). She is the author of Migrants or Expatriates? Americans in Europe (2014; Palgrave-Macmillan).
Honestly, this is becoming such a tiny concern for me now that it’s difficult to justify the time I spend keeping up with the issue. I will never hear a word from the IRS, is my wager. Might need to do something funky (like a fake CLN) for bank access if we move back to Germany for a bit, but as far as the US government is concerned, it’ll be crickets for the rest of my days.
“I’ve stopped filing twice. […] In both cases there was never any response from the IRS.”
Hmm, I wonder what makes the IRS decide to respond.
Several times the IRS accused me and my wife of filing frivolous returns (but refused to say what was frivolous about them). After 6 months or a year or various other durations, sometimes they said they had no return on file and asked me to file again. I asked how they could allege a return was frivolous but not have it on file. Of course they didn’t answer. In 2005 I got suspicious and gave documents to the FBI. The FBI doesn’t issue police reports but the response to my Freedom of Information Act request was that my documents were destroyed in 1990. If I had a time machine like that, I’d renounce US citizenship in 1984.
In 2011 the IRS got their act together. Instead of sending separate letters, one saying my 2006 return was frivolous and one saying I didn’t file a 2006 return, the IRS put both accusations in the same letter.
Of course now I know why they were doing this. So instead of having sleepless nights believing I had done something wrong but not being able to guess what and the IRS wasn’t telling me, now I get to have sleepless nights from courts cooperating with the US Department of Justice to protect embezzlers. Just how hard would it be to subpoena a witness from Ameritrade to testify that the Forms 1099 they issued were accurate, but courts don’t let me get that far.
IRS employees could have just stolen my withholding without accusing me of not filing. I wonder how they decide to issue such notices.
“I’ve happily lied to the odd financial institution on occasion but even if they found me out at some point and started reporting my accounts to the IRS I’d still continue to ignore the whole thing.”
Just make sure those financial institutions don’t have US branches.
“The US government still sends me a small SS cheque every month. If the IRS had some problem with me I’m sure that would have been stopped a long time ago.”
The US government can stop it if they want, but again I wonder how they decide. The US sent me a cheque for several thousand dollars for an unrelated reason, while we were in the middle of the IRS refusing to say why the IRS was demanding a year’s salary in penalties from me and refusing to say why the IRS didn’t pay refunds it owed me. I think the US could have seized that payment, but then maybe they wouldn’t be able to prevent courts from finding out what the IRS was doing.
“2002 was the year I exceeded FEIE and would have had to us the tax credit, but I was busy to try and understand it and neglected to file.”
I wish I’d known that solution for 1999 ^_^
When you use the tax credit, on Form 1116 Line 1 for the General category you have to exclude the amount of earned income that Form 2555 let you exclude from Form 1040. On one later line you calculate an exclusion from Canadian (or whatever) taxes that you paid on the amount of excluded earned income, but on two other lines you have to include the excluded income. The purpose is to prevent you from double-dipping two benefits on the same earned income. You get the exclusion or you get the foreign tax credit or you get the corresponding portion of the standard deduction, but you don’t get two of the benefits.
Well, that’s what IRS publications say, but lawyers for the IRS and US Department of Justice don’t read IRS publications. In court they called me frivolous for obeying those instructions. After some of my court rulings, I think you’re required to double dip now. But you have to have around 4 times the amount of income I had in order to benefit from double dipping.
BB – “Should the “WPCI” insist that the corporate repatriation tax applies to non-resident individuals with corporations outside the US, I suspect many will find out what happens when they stop filing.”
A co-ordinated refusal to file would force the USG to find out what happens when USCs outside America stop filing.
The power in this triad (USG, USCs, condors) rests always with the non-US-resident USCs. The USG can’t force corporation-owners to file and pay; the condors can’t force corporation-owners to file and pay. Only the corporation-owners have the power to determine the outcome.
Dump the maggots – including the lying Republican Party – get together with others facing the same decision, and agree to sit this filing year out. Let a little reality shine on the corrupted dreamworld of CBT.
Individual corporation-owners can then see for themselves that the USG doesn’t have the power to enforce their wild maniacal demands for money; and individual corporation-owners can then take their time to decide whether they want to renounce or remain citizens.
“A co-ordinated refusal to file would force the USG to find out what happens when USCs outside America stop filing.”
90% of USCs outside of America already don’t file. Only us exceptional idiots had to renounce because we tried to comply.
Lol ND – I wouldn’t put it like that…Who was to guess they were all such a pack of lying liars. Most of the world is still trying desperately to pretend they aren’t, even while the White House is being
rundismantled by the Stable Genius with a Very Big Button on his desk.@ND
Yes, the people homelanders call “quitters”.
@plaxy
I don’t really know what you mean by “get together” with others in the same boat.
Oops, that’s not “get together”, but “coordinated effort”.
BB – “co-ordinated refusal to file.”
One owner stops filing in protest at this bizarre tax – nothing happens. Nobody notices.
A dozen owners stop, releasing a press release pointing out the idiocy – it becomes a message.
Nononymous says
January 7, 2018 at 8:03 pm
Honestly, this is becoming such a tiny concern for me now that it’s difficult to justify the time I spend keeping up with the issue. I will never hear a word from the IRS, is my wager. Might need to do something funky (like a fake CLN) for bank access if we move back to Germany for a bit, but as far as the US government is concerned, it’ll be crickets for the rest of my days.
as someone who has been around here since the below visit counter was around 3,000,000 visits you hit the nail on the head Nononymous with your above comments.
i have learned so much from this website as to what to do when dealing with finacial institutions that happen to ask for documents to be signed or ask questions about my citizenship. i am one that has no problem lying to this institutions as it is none of their business what my citizenship is.
and
were i ever to get one of those dreadded brown envelopes with black lettering the contents would be added to the bottom of my bird cage to be taken out to the trash when required.
i remember well the first few months/year of finding out about FATCA and all the problems that came along with it. it changed me as a person for quite a while. i was angry, drinking way more than i should be and all in all a pretty miserable person to be around.
no i have resigned my self to never crossing the border to the south (no family no business reasons) and choose to spend my vacation dollars in mexico for the past 6 years.
are there places i wanted to visit in amerika sure but now the rest of the world is open to me and while a little corner of my heart still misses those places in amerika that i have enjoyed there are many more places in the world to discover now thanks to FATCA.
uncle sam come get me if you want to. you have my address from the last tax return i filed in 1989 when i left your country for good.
@plaxy
I’m not ruling anything out right now. A lot can happen between now and US tax filing time.
@All, they have created a situation where the ability to comply if you want to comply has become so damn hard that you simply throw up your arms and say….no mas.
In my home country I can login to my tax account put in a few details and presto my tax return is done and filed. And…..I am a complicated taxpayer because most people file nothing.
The law is too complicated.
The forms are too complicated.
The penalty warnings are too frightening on the instructions.
Lesson learned? Who flipping cares…….
There is a value to a US Passport and if its all you have as an expat I am really sorry for you but for all else if jumping through hoops that are too high is the price to keep it then they can just revoke it.
When I left the homeland in the first week I sat down with an officer at the local office of the tax authority. I was told that the tax treaty ensured I paid tax here and had no obligations with the USA. To be honest that made logical sense.
Few others boost my serenity quotient like maz, mettleman and George. Thanks. 🙂
— she who types with 1 finger … for now
There seems to be a rise in spirits all round, now the US political shenanigans have come to their natural end. 🙂
@Embee…..I have typed with one finger for decades and decades…….
@Plaxy….I think its a realization the emperor has no clothes. Plus through medium like this knowing there are others are in the same boat and its a large number meaning what are they going to do and who blooming cares. If they do go after the likes of Brockers instead of focusing on homelanders then they are going to have martyrs.
Taking out military and short term “American Citizens Abroad” my country has probably 100,000 deemed USC. All average folks…….so if they want to persecute there is going to be royal pushback.
@Plaxy…..think Harry Potter and the Riddikulus spell.
@Plaxy…I am now eligible to take certain pensions and I was doing some tax calculations. So I looked at 2018 US tax rates and my rates in the EU.
IF I make a teeny tiny withdrawal of a certain amount…..in theory because of exemption amounts….I could owe the USA a couple hundred bucks. But taking more than that unusual amount means I pay far more in the EU meaning there is no US tax and I would have a credit carry forward which I have no idea how to do.
IF I WANTED TO EVADE TAXES…….I would move to the USA and then take my EU Pension paying the USA far less than what I would pay in the EU.
The reality is that boutique tax planners need to figure out and promote how dual citizens US-EU can structure their affairs paying tax in the USA and nothing in the EU.
@ George
I’ve typed with all fingers for over 50 years — one is hard for me. My fingers know where the keys are but found out my head forgot.
George – “I think its a realization the emperor has no clothes. ”
Yes, something like that maybe. 🙂
“IF I WANTED TO EVADE TAXES…….I would move to the USA and then take my EU Pension paying the USA far less than what I would pay in the EU.”
Not I. The EU and EU Member States are far from perfect but the EU country I live in, and I believe most other EU countries, do make an effort to use taxes for the public good. It’s a deal I’m happy to sign up to.
The USG has long since lost all interest in the common good, it seems to me. The US tax code is a tax-cheat training manual.
@Plaxy, “The US tax code is a tax-cheat training manual.”
Indeed it is BUT the EU States do not understand or believe that.
And remember though we both have a love for our countries our respective EU Countries freely and openly tossed us under the bus.
Having tossed us freely under the bus like trash they need to realize that every action has a reaction.
When you start probing all these US treaties there is a lot of room that keen tax accountants could use to the detriment of our EU homeland.
We need to see slick American accountants selling US Corporations to US Citizens abiding in the EU who may not even speak english because they are accidentals!
@Plaxy……Because a Canadian is a Canadian unless they are Made in the USA……I would like to see slick cross border accountants set up Nevada Corporations for Ontario medical doctors so their earnings are no longer taxed in Canada but taxed lower in the USA.
I am sure with all these treaties there is a work around and besides Canada said it does not want its American Trash!
Plus with a Visa Debit card based at Citibank over the border in Wisconsin you no longer have a FBAR problem!!!
Frankly it gets to the point where our home government has forced our hands.
“…our respective EU Countries freely and openly tossed us under the bus.”
I don’t see it that way myself. I don’t feel at all bus-crushed. 🙂
I do think the EU and indeed the OECD ought to tackle the question of what defines tax-residency, rather than just letting each country make up its own idiosyncratic definition.
But I suspect the US will do something about FATCA long before that happens. It gets in the way of the tax-cheating game.
@BB: What a venomous and deliberately-misleading article. Though I guess I shouldn’t be too surprised considering who their employer is. Withersworldwide has a long and ignominious tradition of defending intrusive, offensive legislation — and demanding the passage of even more — for the benefit of themselves and their institutional clients who can extract $$$ from individuals who have to navigate the mess.
Another example from 2014: “Who’s afraid of FATCA” https://archive.is/OxON4
Eric – the Cheng-Nam piece seems to me to be just another slice of the CBT fantasy, in which all the fantasizers assume that the people they’re fantasizing about have no choice but to do as they say.
On some level, the writers understand that their scheme couldn’t work:
Which is no different from the status quo: non-US assets can’t be confiscated by the IRS.
As for their proposal that the US should withhold documentation of renunciation until the would-be renunciant pays over a huge percentage of all non-US-source non-US-taxable assets, plus a huge percentage of non-US-source non-US-taxable not yet received: completely unworkable. These writers are just moving chess pieces around on a board, clocking up the necessary “articles published” count for their careers.
They do seem to envisage holding Green Card holders hostage in the US until the exit tax shakedown is complete. Then, once the victims have paid up, letting them go on their way. What could possibly go wrong? 🙂
Where Green Card holders are concerned,
@Plaxy: “…an expatriating individual would be treated as a U.S. person for tax purposes until Form 8854 was filed.”
Michael Kirsch is one of the most fanatical CBT-defenders to be found, and even he wrote a paper arguing that this contravenes customary international law and violates the US constitution.