In addition to tax filings, some U.S. citizens may be required to report foreign accounts to the U.S. Department of the Treasury, depending on the total value of their accounts. Reporting foreign accounts is a lesser-known requirement often overlooked by expats as they navigate life abroad, and failure to do so can result in serious financial penalties.
Greenback’s survey reported that many expats find it difficult to navigate the U.S. government’s tax and financial requirements, and nearly 80% don’t believe they should have to pay U.S. taxes while living overseas. As a result of these frustrations, about one in four have “seriously considered” renouncing their U.S. citizenship. For those considering citizenship renunciation, the burden of U.S. taxes and a host of other political and personal motivations were cited.
Giving up one’s U.S. citizenship can be a complicated process and it does come with a price tag. Any individual officially giving up their citizenship must pay a $2,350 fee to the State Department, and some with higher net worths may be required to pay an “exit fee” based on their worldwide assets. The State Department also warns against renouncing strictly for tax purposes, stating “persons who wish to renounce U.S. citizenship should be aware of the fact that renunciation of U.S. citizenship may have no effect on their U.S. tax or military service obligations.”