Renouncing US Citizenship Just Became a Whole Lot More Expensive – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner

by Bruce Givner on September 30, 2014

Over the past two years, the number of US citizens who have chosen to renounce their US citizenship has gone up tremendously, from a total of 932 individuals in all of 2012 to 2,999 in 2013 and now 1,577 in the just the first quarter of 2014. As a result, on August 29, 2014 the Department of State (DOS) published an interim final rule in the Federal Register raising the processing fee for individuals renouncing their US citizenship from $450 to $2,350, a staggering 522.22% increase.

The cause for the increasing citizenship renunciations is largely attributable to much more aggressive global tax reporting obligations imposed by US laws such as the Foreign Account Tax Compliance Act (FATCA). The objective of FATCA is to identify US citizens evading their tax obligations by using financial accounts held outside of the US. The law requires foreign financial institutions and US withholding agents to implement new procedures for tax reporting and withholding, account identification, and documentation.

Those individuals seeking to renounce their US citizenship need to be aware of two things. First, due to the backlog of renunciation appointments, especially in US consular offices in Canada, it is now nearly impossible to schedule a renunciation appointment until at least the beginning of 2015. Second, and more significantly, any individual who renounces his/her US citizenship for the purposes of avoiding US taxation on or after September 30, 1996 will be considered inadmissible to the US. Resulting from 1996 amendments to the Immigration and Nationality Act, this provision is not aggressively enforced at the moment, but may be in the near future. For this reason, individuals considering renouncing their US citizenship must be careful to properly document their reasons for renunciation.

In some cases, it is possible for individuals to argue that they have already lost their citizenship by operation of law, thereby avoiding the potential grounds for inadmissibility. If an individual can successfully argue this position, DOS will issue him/her a Certificate of Loss of Nationality retroactive to the date of prior loss which would serve to reduce or eliminate any potential US tax obligations. Therefore, if you believe you may have lost your US citizenship but do not have a Certificate of Loss of Nationality, consult a qualified US immigration lawyer. Even if you are confident you lost citizenship due to a prior expatriating event, you should apply for the Certificate anyway in order to properly document this fact.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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