Robert J. Fedor, Esq., L.L.C.

Is stepped up tax enforcement pushing some to leave America?

There is an ebb and flow to the tide of people that cross the borders of the United States every year. Immigrants from around the globe seek new lives on our shores. At the same time, a record number of Americans are renouncing citizenship or residency and fleeing for greener pastures.

The reasons for the vacating trends are surely many. Critics of such moves often suggest that tax evasion is a prime motive. Some might well point to the burdens of our complex and expensive tax system. But there are some experts who suggest it may not be just the taxes, but stepped up global enforcement of asset disclosure laws by the U.S.

Specifically onerous in the eyes of many are rules associated with foreign bank accounts. 

There are the Foreign Bank Account Reports, or FBARs, that Americans with a certain level of holdings offshore are required to file with their taxes every year. Penalties, both civil and criminal, can quickly erase an account's balance if care is not taken.

Also of concern is the Foreign Account Tax Compliance Act -- FATCA. The U.S. has begun to leverage this law in order to elicit the cooperation of foreign banks around the world. Countries that once were noted for protecting the privacy of account holders are now releasing names and numbers to U.S. officials.

Renouncing citizenship is one way some individuals have responded. The U.S. Treasury Department reports that nearly 2,400 people have pursued that strategy as we close in on the end of 2013. The trend is up by 33 percent over the previous high mark set in 2011. But there can be a tax associated with making such an exit, as well.

Compliance with all the rules and regulations, as they exist now and as they change, can be a significant challenge, carrying risks of penalty that can be devastating. People concerned about such matters would do well to consult an experienced tax attorney to minimize that risk.

Source: Forbes.com, "U.S. Citizens Renouncing Skyrocket---The Tina Turner Effect," Robert W. Wood, Nov. 15, 2013

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