Americans are renouncing their citizenship at the highest levels on record, according to research by Bambridge Accountants New York.
During the first 3 months of 2020, the IRS reported that 2,909 Americans renounced their citizenship, far more than the total of the four quarters for 2019 (when 2,072 Americans renounced), and a 1,104% increase on the prior 3 months to December 2019 where only 261 cases were recorded.
Alistair Bambridge, partner at Bambridge Accountants New York, explains “The surge in U.S. expats renouncing from our experience is that the current pandemic has allowed individuals to get their affairs in order and deal with an issue they may have been putting off for a while.”
“For U.S. citizens living abroad, they are still required to file U.S. tax returns, potentially pay U.S. tax and report all their foreign bank accounts, investments and pensions held outside the U.S. For many Americans this intrusion is too much and they make the serious step of renouncing their citizenship as they do not plan to return to live in the U.S.”
“There has been a silver lining for U.S. expats that they have been able to claim the Economic Impact Payment of $1,200, but for some this is too little, too late.”
Americans must pay a $2,350 government fee to renounce their citizenship, and those based overseas must do so in person at the U.S. Embassy in their country.
However, as Bambridge tells Funds Society, “you do still need to pay an exit tax if your net worth is $2m or more when you renounce.” If you are at the $2m threshold or over, the IRS will calculate a deemed sale of all your assets and will charge you on the capital gains that would be realized.
“Speaking to our clients, a lot of them feel nervous and worried about U.S. taxes and the current situation has added to that anxiety. So I think for many, by renouncing it is a way to reduce that worry and take back some control in their life.” He concludes.
