Most Americans, residing inside the United States, understand that filing an annual tax return and paying taxes is a necessity each year. But for Americans residing outside of the United States there are sometimes questions about who needs to file and pay. Particularly for those with dual citizenship and who are already paying taxes to the country within which they reside.
The 2010 Foreign Account Tax Compliance Act, or FATCA, was passed in an effort to make it more difficult for Americans — regardless of where in the world they live and regardless of dual citizenship — to avoid U.S. taxation. The premise behind this legislation is that all U.S. citizens, regardless of where they live should be subject to income tax.
When FATCA was put into practice, Americans living abroad were served notices by their local banks that required them to respond to questions about their citizenship. The answers to these questions were then forwarded to the IRS. A bank or citizen’s failure to comply could result in a penalty of up to $50,000.
For some Americans living abroad and already paying taxes in their country of residence this came as a suprise. While foreign tax credits are available to help reduce the U.S. tax bill, nonetheless they are now required to file and pay U.S. federal taxes.
Some responded to notices by simply renouncing their American citizenship. As reported by the Federal Register, since FATCA went into effect, the number of Americans seeking to renounce their citizenship has increased dramatically, from a high of approximately 600 people only a decade ago to 5,132 people expatriated in 2017.
In an attempt to stem the tide of attempted expatriation and also cover the increased cost of paperwork, the official expatriation fee was increased of 422 percent inside a single year, from $450 to $2,350, making it more difficult for some to afford this action.
Whether you’re American citizen living domestically or abroad, we understand that tax season can be stressful and we are here to help. Our software works to provide a simplified, streamlined tax-filing process that takes the confusion out of even the most complex filing situations