Around 26% of some 3,200 American expats living in 121 countries around the world say they are either definitely "planning to renounce" their U.S. citizenships or are "seriously considering" doing so – with most citing the tax issues they, as U.S. expats, are obliged to deal with as the reason, according to summary of the findings of Greenback Expat Tax Services' latest annual survey.
This is a slightly larger percentage than the 23% of expats who, when surveyed in 2021 and 2020 by Greenback Tax, said renunciation was either a strong possibility or else a definite plan. This increase could reflect the fact that few American expats have been able to relinquish or renounce their citizenships for the better part of the last two years, owing to the closing of U.S. embassies and consulates around the world for much of this time, in response to the Covid-19 pandemic.
In 2019, "more than one in five" of the American expats Greenback questioned that year said they were "seriously considering renouncing."
As previously, those expats saying they were "definitely" or seriously considering" renouncing cited their continued frustrations over the way they are obliged to file U.S. tax returns from abroad, even when they pay taxes in the countries in which they currently live.
In a summary of its findings posted on its website, Greenback noted that the U.S. system of taxing on the basis of citizenship rather than residency, as "the majority of the world's [other] nations" (apart from the U.S.) use, has left the American expat community feeling "extremely excluded," with 86% of those surveyed saying they feel their concerns about such things as the way they're taxed "are less likely to be addressed by the U.S. government than [those of] U.S. citizens living in the U.S.A."
Asked what the No. 1 change they'd like to see made in the current U.S. expat tax regime, 57% chose "repeal citizenship-based taxation". This is 10% more respondents than gave that answer last year, when asked, Greenback pointed out.
Among the most eye-catching of the survey's findings was the percentage of respondents who admitted to being unfamiliar with two major reporting requirements that the U.S. has introduced relatively recently, which an American expat filing a basic income tax return could potentially overlook, if not informed by, for example, a professional expat tax preparer.
Six percent said they were "unfamiliar" with the need to file an Foreign Bank Account Report if, as a U.S. person, their total holdings in banks and/or financial institutions outside of the U.S. hit US$10,000 or more at any point during the tax year in question, while 20% said they didn't know what the Foreign Account Tax Compliance Act was, even though it has been around since 2010, and in force since 2014.
Tax experts have often warned that this lack of familiarity about such filing obligations can lead to serious problems, as the penalties for failing to file FBARs, for example, can be eye-wateringly high, even as the minimum amount needed to trigger a filing requirement hasn't barely changed in 50 years.
Other key findings of the Greenback
2022 U.S. Expat Trends Survey:
* While 6% of those surveyed said they are "planning to renounce" their U.S. citizenship, 20% said they were "seriously considering it" and 42% said they "wouldn't rule it out," almost a third – or 32% – said they "would never consider it"
* While 40% of the survey's respondents who said they were considering renouncing said the reason they were thinking this was because they found filing U.S. taxes "too great of a burden," 15% gave "the current political climate" as their reason and 10% cited their "disappoint[ment]" with the direction that the U.S. government appears to be heading. Eight percent gave the difficulty they have "working with foreign banks as an American citizen" as their reason for weighing up their options
* Almost half of the survey's respondents – or 46% – said they "disapproved" of how the U.S. government handled the Covid crisis
* Roughly five times as many of those U.S. expats surveyed said they "do not plan to return to the U.S. permanently" (49%) compared with those who said they planned to return to the U.S. permanently (10%). Forty-one percent said they were "unsure" whether they would stay abroad or not. Thirty-two percent -- or almost one-third of those surveyed – said the Covid-19 pandemic had made them "more likely to want to live abroad long-term".
Greenback was founded in 2009 by Carrie and David McKeegan, who are themselves American, and who run the company out of New York and Costa Rica. They say they founded the company after struggling to find a firm to help them do their U.S. taxes while they were living in the UK.
- AXFNJ Podcast: Dems Abroad’s Rebecca Lammers discusses the ‘suffocating’ U.S. expat tax situation with AXFNJ’s Richardson
- U.S. Supreme Court to begin hearing Alexandru Bittner FBAR case arguments tomorrow (Nov.2nd)
- Greenback Tax’s McKeegan: ‘7.1% increase in the FEIE in 2023 increases options for U.S. expats in the UK’
- Accidental Americans group launches appeal, after DC court dismisses renunciations case
- Canadian court rules against 'Gwen and Kazia' challenge of FATCA information-sharing law's constitutionality