3,000 Americans ditch their passports

pmaitra

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3,000 Americans ditch their passports



Goodbye, Uncle Sam!

That's what 3,000 Americans chose to say last year, lining up at embassies around the world to renounce their citizenship. The numbers for 2013 represent a dramatic spike -- triple the average for the previous five years, according to a CNNMoney analysis of government data.

Some of the rush is coming from expats who are tired of dealing with complicated tax filings -- which are only getting worse as new regulations come into effect.

Unlike most countries, the U.S. taxes citizens on all income, regardless of where it is earned or where they reside. Reporting taxes can be so difficult that expats are often forced to seek expert help, which can cost thousands of dollars.

Related story: Americans turn in passports as new tax law hits

Brad Westerfield, a tax lawyer at Butler Snow, said that renunciations have increased following the implementation of a new disclosure law -- the Foreign Account Tax Compliance Act -- that targets overseas tax evasion.

The measure, approved by Congress in 2010, is aimed at recouping some of the hundreds of billions the government says it loses each year in unpaid taxes.

"They've become so complicated -- the increased filing obligations over the years," Westerfield said. "You see more people giving up their citizenship or relinquishing their green cards ... Individuals [are] wanting to simplify their financial affairs, and just pay tax and report to one jurisdiction."

Related story: U.S. expats cry foul over tax system

Westerfield said that the first wave of renunciations in 2010 coincided with a part of the law that requires individuals to report foreign assets worth as little as $50,000. That's in addition to a separate provision that forces Americans to disclose foreign bank holdings larger than $10,000.

Renunciations dipped in 2012, but now another part of the law is kicking in. The new provision requires financial institutions to report all foreign accounts held by Americans.

"People find that intrusive," Westerfield said. "Just because you live your life outside of the U.S., most of your assets are foreign assets. [Americans are] saying enough is enough."

The law has prompted some banks to kick out their American clients rather than comply. Penalties can be high if banks make a mistake reporting U.S.-held accounts, even if they are basic checking and savings accounts.

Related story: Banks lock out Americans over new tax law

Some Americans may be giving up their passports to protect their wealth. Doing so could raise legal questions -- it's illegal to renounce your U.S. status to avoid paying taxes, and giving up citizenship doesn't mean you're off the hook for back taxes.

"The U.S. used to be the 'Rolls Royce' of destinations -- the land of opportunity," said Hong Kong-based immigration lawyer Eugene Chow. No longer, it seems. "Both naturalized and native-born American citizens are choosing to say goodbye to Uncle Sam today." To top of page
Source: 3,000 Americans ditch their passports - Feb. 17, 2014
 

pmaitra

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Banks lock out Americans over new tax law


Jimmy Sexton, an American, was forced to close his checking account at Volksbank in Austria earlier this year.

Americans, take your money elsewhere!

That's what banks around the world have been telling their U.S. customers, as they try to avoid having to comply with a new tax law due to come into force next year.

Jimmy Sexton, an American, was forced to close his checking account at Volksbank in Austria earlier this year. And Genevieve Besser, an American living in Germany, was given two months notice last year to close her securities account at ING-Diba, the German arm of Dutch bank ING (INGVF).

The U.S. Foreign Account Tax Compliance Act, which requires businesses to report all assets held by Americans, aims to recoup the hundreds of billions the U.S. says it loses each year from tax evasion. But it's also leading global banks big and small to dump U.S. customers rather than wrestle with the complicated law.

"U.S. citizens living abroad are really having a hard time with their banks," said Gerard Laures, a partner in the financial services tax division at KPMG.
Proper compliance -- which means reporting everything from basic savings accounts, pension funds, investments, and more -- could easily cost institutions millions each year, he estimated. And penalties are severe; businesses face a 30% tax on U.S.-sourced income if they fail to comply.

"Many banks have taken the decision to tell U.S. customers to go away," Laures said.

Ross Badger, a tax adviser at Satis Asset Management, estimates that half of his clients have had difficulties with their banks, and expects the trend to continue.

Besser was told that new U.S. regulations would "mean a considerable increase in costs," according to a letter she received from the bank. Instead of charging American customers higher fees to offset the new costs, the bank simply decided to shut down the accounts. Sexton received a similar explanation.

Related story: Americans turn in passports as new tax law hits

A number of other banks have also kicked out Americans.

Deutsche Bank (DB) decided in mid-2011 to close the securities accounts of U.S. residents outside America because of the new law, and HypoVereinsbank, part of Italy's UniCredit, (UNCFF) followed suit.

HSBC is no longer offering wealth management services for Americans in some countries. Neither is the Bank of Singapore, the private banking operation of the Oversea-Chinese Banking Corp. And Raiffeisen bank in Switzerland has cut ties with Americans.

That's only a small sample of banks that are refusing to do business with Americans, who now face a "banking lockout problem," said Marylouise Serrato, executive director of American Citizens Abroad.

It's already a challenge to keep existing accounts open, and it's getting harder to open new ones. Americans are being refused financial services such as mortgages, insurance policies, and pension plans, she said.

"I mean, how do you function without a bank account or a charge card?" she said. "If you can't put your name in an account because a bank doesn't want an American, how do you even rent an apartment to live?"

Banking problems are adding to the tax headaches U.S. expats already face, many of whom say it's a burden to ensure their taxes are filed accurately each year. Growing numbers are even choosing to give up their U.S. citizenship as a way of escaping the paperwork.

After being told to leave ING-Diba, Besser said she was turned away by Barclays (BCS), Fidelity, Franklin Templeton, and a German savings bank, before she finally found a bank that would open an account.

Sexton, who is president of his own international tax firm, was also able to open a new account at another bank with a department specializing in expat accounts.

Financial institutions that are in a position to comply with the regulations could pick up some of the slack. "There is an awful lot of money around," Badger said.

"There's an assumption that if you have accounts outside the U.S. that you're a tax evader," Besser said. "It's not that easy to evade taxes. I mean, what taxes am I evading?" To top of page
Source: Banks lock out Americans over new tax law - Sep. 15, 2013
 

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