Wednesday, January 25, 2012

US Citizens Abroad Giving Up their Citizenship over Tax Code

In its 2011 Annual Report to Congress, the National Taxpayer Advocate pointed out that more and more Americans working abroad are deciding to give up their citizenship rather than trying to figure out the IRS code.

On page 17 of the report, it states the following:

Many U.S. taxpayers abroad are confused by the complex legal and reporting requirements they face and are overwhelmed by the prospect of having to comply with them. Some are even renouncing their U.S. citizenship for that reason; about 4,000 people did so in fiscal years (FYs) 2005 to 2010. Renunciations increased more than tenfold from 146 in FY 2008 to 1,534 in FY 2010, with 1,024 renunciations in the first two quarters of FY 2011 alone. IRS Publication 4732, Federal Tax Information for U.S. Taxpayers Living Abroad, illustrates the complexity of the filing requirements. It refers to at least eight other relevant IRS publications, totaling 563 pages, and the additional documents referred to by these other publications include 4,727 pages of instructions, 667 pages of forms, and another 1,928 pages of form instructions, or 7,322 total pages. Finally, a recent IRS study of taxpayer needs and preferences showed that international taxpayers may have a “greater current need for IRS services than the general taxpayer population,” and another IRS study identified nine international locations that warranted serious consideration for expansion of tax attaché offices.

1,024 last year alone chose to give up their US citizenship due to the complexity of the tax code.

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