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While many filers dread tax season, Americans living abroad face an even greater annual burden—and are frustrated enough that some want to give up their U.S. citizenship.
Roughly 1 in 4 US expatriates is “seriously considering” or “planning” to relinquish their US citizenship, according to a survey From Greenback Expat Tax Services.
The burden of filing U.S. taxes is the top reason people want to give up U.S. citizenship, according to the survey, which had 3,200 American expats living in 121 countries.
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“You have people doing what seems like very normal things to them, like saving for retirement, or buying a home,” said David McKeegan, co-founder of Greenback Expat Tax Services. “But when you do it overseas, sometimes you can get yourself into a whole lot of trouble.”
Expats face stringent tax-filing requirements
American expats must pay annual US income tax on worldwide earnings, which include their salaries, business profits, investment income, and more, including filing and paying taxes in two countries.
While America has measures to prevent double taxation like foreign income exclusion And tax creditMany expatriates still oppose double filing requirements because time commitment and expense to prepare those returns. In addition, nearly 80% do not think they should pay US taxes while abroad, the survey found.
Violations of ‘intentional’ reporting face severe punishment
Additionally, some Americans must report foreign accounts annually to the US Treasury Department via foreign bank and financial accounts reports, or FBARor potentially face harsher penalties.
If your combined account value exceeds $10,000 at any time during the year, you must file an FBAR, regardless of whether or not those accounts generate income.
For example, if you have $5,000 in a savings account and $4,750 in an investment account, and the investment account goes up to $5,025 for even one day, you’ll need to report those balances.
Penalties for failure to file depend on whether it is a “intentional” or “unintentional” violation. However, willful breaches that charge more than $129,210, or 50% of your account balance, come with a missing form for each year.
“It’s a complete headache for people when they get into trouble,” McKeegan said.
US migrants feel unheard on tax issues
Although there was a sharp drop in Americans dumping their US citizenship in 2021 – 2,426 compared to a record-breaking 6,705 in 2020 – the number could drop to 2021 due to US embassy closures amid the COVID-19 pandemic.
As of 2020, there were approximately 9 million US citizens living overseas Estimate from the US State Department.
“What struck me about this most recent survey was that they are less likely to voice their concerns than people who live inside the US,” McKeegan said.
In fact, 86% of those surveyed think the US government is less likely to address their issues than citizens of the states, the survey found.