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Want to Make Next Spring a Lot Less Taxing Than This Spring? Renounce Your US Citizenship the Right Way in 2022.
Albert Einstein said the definition of insanity is “doing the same thing over and over and expecting different results.” This notion can easily be applied to the millions of US expats who are legally required to file US tax returns in addition to paying tax in their home country. It’s an annual expense that can add up to tens of thousands of dollars each year (including legal fees and potential US taxes owed).
At some point, every US expat going through this annual torture session inevitably asks themselves, “isn’t it time to break this vicious cycle?” – usually in between routine swearing sessions from gathering the information to do the annual return, answering endless questions as the return is prepared, signing the return, and then having to pay the accounting bill when it arrives.
Your annual US tax burden can become a distant memory if you start the process of renouncing your US citizenship the right way. The only person who’ll be upset by this decision is your US tax preparer, who will lose a lifelong revenue source, but trust me, they’ll get over it.
Many US expats dread tax season. It’s when your US tax accountant or lawyer informs you that last year’s US tax return is due by June 15th. And, if applicable, Form 3520-A (the Annual Information Return of Foreign Trust with A US Owner) is due even earlier on March 15th. Across the globe, US expats are also faced with impending deadlines for documents that apply to interests in TFSAs, Australian Superannuation funds, KiwiSavers, ISAs, corporations, partnerships, trust, mutual funds – and much, much more. If you miss the filing deadlines on any of these obligations, it can result in at least a $10,000 US penalty for non-timely filing. Not a great way to start the year.
A few years ago, the AARP conducted a survey of what Americans would rather do than file their taxes. Here is a sample of what they found:
- 53% would choose to binge-watch the same movie on endless repeat.
- 36% would rather visit the DMV (Department of Motor Vehicles).
- 22% would prefer to be stuck in bumper-to-bumper traffic.
- 20% would rather undergo a dental procedure.
This stress is only compounded when, as a US expat, you’re forced to file two sets of taxes. When you add up the accounting and legal costs, not to mention the stress and potentially sleepless nights worrying if you’ve completed the forms correctly, getting a tooth pulled doesn’t seem so bad. And, sorry to say, the situation is likely to get worse.
While President Biden’s massive Build Back Better bill was put on ice last December, who knows when the next legislative “brain trust” will introduce legislation with big US tax ramifications for expats? If history is any indication of the future, both sides of the aisle will likely continue to target US citizens living abroad. And why not – it’s an issue that does not cost them votes from their constituents. The US expat is an easy revenue source from any political perspective.
This, of course, will probably translate into significant tax increases for expats living around the globe. Regardless of a Democrat or Republican administration, both parties have been guilty of making life more difficult for US citizens living abroad since 2000. It’s a never-ending game of “ping pong” between the two parties, with both being guilty of treating US expats worse than the previous administration. Think of the US expat as the ping pong ball, getting smacked around from both sides (Bush, Obama, Trump, Biden, etc).
But it doesn’t have to be this way.
More US expats are renouncing their citizenship than ever before to stop the double taxation nightmare from dramatically impacting their wealth and health. In the last year, I’ve witnessed more and more US expats getting stung by the US tax bug. From the 3.8% Obamacare tax to Trump’s transition and GILTI tax on non-US corporations, to the taxable capital gains issue from the sale of one’s principal residence, dodging these tax bullets is stressful and next to impossible to emerge unscathed from. With real estate markets skyrocketing all over the world, many US expats are facing the reality of paying hundreds of thousands of dollars to the IRS on the sale of their home. And you thought realtor fees were expensive.
As I mentioned above, and often joke, the saddest person to see you renounce will be your US accountant. Over the years, you’ve probably paid for their kids’ braces, university tuition, and family vacations to Hawaii. Perhaps it’s time to cut them off and preserve more of your wealth for you and your family. If you decide to begin the renunciation process, and can get it done in 2022, you could be filing your final US tax return this time next year. But the renunciation needs to be done properly.
Make sure you have all the facts. A recent article in The Guardian regarding consulate wait times really irked me. Don’t be misled by recent articles suggesting consulates have ceased US citizenship renunciations due to the COVID-19 pandemic. Many consulates are still processing applications, and if you are willing to travel, our team could get your application processed and completed in a matter of months or even weeks. There are viable options available in every hemisphere on earth. Many clients will indulge in a “renunciation vacation” if there are locations open for an exit interview somewhere warm (usually combined with a few days spent on a beach). Getting a nice tan and ridding yourself of US tax filing obligations for life sounds like a successful holiday!
On the other side of the coin, the happiest person to see you renounce, aside from yourself and your family’s bank account, will be your investment advisor. Once the shackles come off, you’ll be able to broaden your investment portfolio with financial options in the jurisdiction you live in, just like any other non-US citizen, including non-US mutual funds, SUPER, TFSA, ISA, income splitting, non-US corporations, non-US trusts, non-US partnerships, and more. This also allows you to create a sound succession plan knowing the US estate tax will not negatively affect your family once you pass away.
As you begin preparing for yet another hectic tax season, wouldn’t it be great to envision your future when you no longer have to file US taxes? That day could come sooner than you think – and we can help.
Moodys Tax Law runs the largest renunciation group in the world and has helped thousands of US expats properly renounce. But it MUST be done the right way. The US has many pitfalls and landmines (exit tax, inheritance tax, disbarment from the US for life, loss of benefits, etc.) that one must successfully navigate to renounce properly. Our team specializes in making sure you renounce the proper way to avoid any obstacles.
If you would like more information on renouncing your US citizenship, we strongly recommend you attend one of our webinars on the topic. There live are sessions tailored to US expats living in all corners of the world – Canada, the Caribbean, Australia, New Zeeland, Asia, the UK, Europe, South and Central America, the Middle East, and more. Recordings of the sessions can be made available as well if one of the upcoming live webinars does not fit your schedule.
Our team of US lawyers represents between 600-900 US citizens renouncing their US citizenship every year on six continents – more than any other firm in the world. Our webinars are completely free, and we’ll walk you through everything you need to know to ensure you renounce your US citizenship the right way.
We know that you will have many questions about how these changes will affect you and your family. Our attendees are invited to submit questions ahead of time that we strive to answer during our session. Sign up today via the below link.
If you would like to get the process started on addressing your US issues immediately (with legal fees in mind) please schedule a one-hour call or video conference consultation with me by: