More Americans Giving Up Citizenship For Offshore Accounts

In July 2014, the Foreign Account Tax Compliance Act (FATCA) was officially implemented, which requires foreign banks to disclose the account information of U.S. taxpayers to the IRS for investigation.  The IRS collects this information on unreported offshore accounts for use in investigation for audit and criminal prosecution of non-compliant U.S. taxpayers.

As a result, increasing numbers of Americans are renouncing their U.S. citizenship for tax purposes, according to recent statistics released by the U.S. government. In 2013, a record 2,999 Americans officially relinquished citizenship, while the first six months of 2014 that number already has risen to 1,577. Many analysts attribute the increase in renunciations to U.S. taxpayers living abroad who are concerned about the U.S. government’s increasing focus on offshore tax evasion.

However, the process of renunciation is not an especially attractive alternative; departing citizens must be interviewed multiple times by consular officers, go through a bureaucratic process of approval by the State Department, and finally pay an often substantial exit tax.  However, there is an alternative to renunciation that is available for many U.S. taxpayers; the streamlined filing procedures are an IRS program intended for U.S. taxpayers who can certify to the IRS that their failure to report offshore accounts was ‘non-willful’.  The streamlined procedures carry with them a much smaller offshore penalty than the Offshore Voluntary Disclosure Program (‘OVDP’), which provides ‘amnesty’ for taxpayers concerned about criminal liability for ‘willful’ non-compliance.  The OVDP and streamlined procedures allow U.S. taxpayers to get right with the U.S. government, while still holding on to the many advantages of American citizenship or residency.   If you are a U.S. taxpayer concerned about unreported offshore accounts or assets, contact the experienced tax attorney at Daniel Rosefelt & Associates, LLC, Attorney & CPA to discuss your legal options.