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While lots of filers fear tax season, Americans living abroad deal with even larger annual concerns– and those are annoying enough that some wish to ditch their U.S. citizenship.
Roughly 1 in 4 American expatriates is “seriously considering” or “planning” to renounce their U.S. citizenship, according to a study from Greenback Expat Tax Services.
The concern of submitting U.S. taxes is the leading factor expats wish to ditch U.S. citizenship, according to the study, which surveyed 3,200 American expats residing in 121 nations.
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“You have people doing what seems to them like very normal things, like saving for retirement, or buying a home,” stated David McKeegan, co-founder of Greenback Expat TaxServices “But when you do it overseas, sometimes you can get yourself into a whole lot of trouble.”
Expats deal with strenuous tax-filing requirements
American expats need to pay yearly U.S. earnings taxes on around the world profits, including their wages, organization revenues, financial investment earnings and more, which includes filing and paying taxes in 2 nations.
While the U.S. has steps to avoid double tax, such as the foreign earnings exemption and tax credit, lots of expats still oppose the double filing requirements due to the time dedication and expenditure of preparing those returns. What’s more, almost 80% do not feel they need to need to pay U.S. taxes while living abroad, the study discovers.
‘Willful’ reporting offenses included stiff charges
Additionally, some Americans need to report foreign accounts to the U.S. Department of the Treasury each year through the Report of Foreign Bank and Financial Accounts, or FBAR, or possibly deal with stiff charges.
You should submit the FBAR if your combined account worths go beyond $10,000 at any time throughout the year, despite whether those accounts produce earnings.
For example, if you have $5,000 in a cost savings account and $4,750 in a financial investment account and the financial investment account leaps to $5,025 for even a single day, you need to report those balances.
The charges for failure to submit depend upon whether it’s a “willful” or “nonwillful” infraction. However, willful offenses included a cost of the higher of $129,210 or 50% of the balance of your account, for each year with a missing kind.
“It’s a whole headache for people when they get into trouble,” McKeegan included.
American expats feel unheard on tax concerns
Although there was a sharp drop in Americans discarding their U.S. citizenship in 2021– 2,426 compared to a record-breaking 6,705 in 2020– the 2021 numbers might have been lower due to U.S. embassy closures amidst the Covid-19 pandemic.
There had to do with 9 million U.S. residents living abroad in 2020, according to quotes from the U.S. Department of State.
“What struck me about this most recent survey was the number of people who feel their concerns are less likely to be addressed than people who live inside the U.S.,” McKeegan stated.
Indeed, 86% of those surveyed feel the U.S. federal government is less most likely to resolve their concerns than stateside residents, the study discovered.
