‘Accidental’ Americans’ launch lawsuit for refund on cost of renouncing U.S. citizenship – NBC News

2023/10/06 Leave a comment

Of note. Remember all the traffic complaining about FATCA and the cost of renunciation so no surprise that some of those who paid the higher fee are suing:

The price of being an American who lives abroad is often an accent that sticks out, jokes about culinary inferiority and sometimes even issues opening a bank account or buying a home.

But for some former citizens, the price to renounce that status has long been steep. Now many of them want refunds, filing a class-action lawsuit Wednesday to try to get their money back.

It marks a new stage in a yearslong battle by “accidental Americans” — U.S. citizens who neither live in the country nor have any real ties to it but must still pay taxes to Uncle Sam — to reduce the costs they face.

The $2,350 that Rachel Heller paid to renounce her citizenship years ago was almost equivalent to her monthly salary.

The State Department announced Monday it would be dropping the fee back down to $450, the amount it used to charge until 2014. Heller, a Netherlands resident and one of the lead plaintiffs in the lawsuit, wants a refund of the difference.

‘Like a divorce’

Heller is one of 30,000 former U.S. citizens, according to the Accidental American Association, which is organizing the lawsuit and calling for a change in the tax system.

Unlike most countries, the United States imposes a citizenship-based taxation system, irrespective of where a person lives or works.

“It was far more complicated for people living overseas. And the threatened fees if you did it wrong or left something off by mistake were so high that I got really paranoid about trying to do it myself,” Heller, 61, told NBC News in a telephone interview.

So in 2015, the former teacher turned travel writer decided she couldn’t keep spending the $1,100 every year on her accountant to file her U.S. taxes and declare her entire personal life to a country she had left in 1997.

She went to her nearest embassy in Amsterdam, near the city she had emigrated to, for a brief but final visit that left her in tears as she gave away her U.S. passport.

“It felt like a divorce, but it was by somebody you love but someone who’s not good for you,” said Heller, who grew up in Connecticut and moved to the town of Groningen, Netherlands.

“Accidental” Americans began coming to the attention of U.S. tax authorities some decades ago.

In 2010, Congress enacted the Foreign Account Tax Compliance Act, or FATCA, to crack down on tax evasion by Americans with financial assets abroad after a Swiss bank scandal showed U.S. taxpayers hid millions of dollars overseas. The law requires foreign banks to report on financial accounts held by U.S. citizens to the IRS.

As a result, many of these Americans learn they may owe taxes in the U.S. for services they’ve never received, after getting contacted by banks in countries where they live and are tax-compliant.

The State Department started imposing a fee for Americans to renounce their citizenship in 2010, and in 2014 increased it from $450 to $2,350 — one of the highest in the world — citing a “dramatic increase” in applications that required more resources.

The proposed reversal to $450 was in line with the cost of other services provided abroad, it said in a Federal Register notice Monday.

The State Department did not immediately comment on the lawsuit.

“Rather than resolving the causes of what leads individuals to renounce American nationality (FATCA law & Citizenship-Based Taxation), the State Department has preferred to put up barriers to limit the constant increase in renunciation requests,” said Fabien Lehagre, president of the Accidental Americans Association.

But it’s not just the taxes that have forced an increasing number of Americans to quit their citizenship, including Heller’s 25-year-old son, Robert.

A financial burden

“It was becoming clear that the banks were going to make things more and more difficult for us,” Heller said.

Some banks around the world would refuse services such as opening accounts, home loans would become tougher, and the paperwork the diaspora had to endure skyrocketed. Experts say that was because the cost of complying with FATCA ultimately fell on the banks, which became increasingly reluctant to serve Americans.

Any mistake while filing the required forms could come with fines amounting to thousands of dollars, meaning that having dedicated accountants just for American taxes was more and more necessary.

“For a lot of Americans, the hassle of being an American from a day-to-day financial being, it’s just not worth it. You’ve got interest penalties and even criminal penalties,” said David Lesperance, a managing partner at the Gibraltar-based law firm Lesperance & Associates.

“You’ve got full U.S. tax liability. Income, gift, estate, everything,” he said.

Amid these hurdles a record number of U.S. citizens have chosen to become expatriates.

IRS data showed that more than 1,300 people renounced their U.S. citizenship between January and June.

Lesperance said he has seen an unprecedented increase in the number of his clients wishing to give up their citizenship, and sometimes even the process fee is not the biggest hurdle.

The actual costs could balloon up to thousands, he said, as many struggle to even get an appointment with an embassy in the country they live in and are forced to travel to other countries.

Many who finally go through this process do so reluctantly.

Esther Jenke was completing her master’s degree in Nebraska when she met her German husband in 1994. Together they decided to move to Hamburg, Germany, the same year.

But it wasn’t until 2017 that she became fully aware of her tax obligations. She had already started thinking about retirement plans but her nationality got in the way.

“It was extremely difficult because the banks didn’t want me as an American client. Many of them refused to take me. So we put our investments in my husband’s name,” Jenke said.

The house they bought after saving up for years could be taxed too if they sold it, she said.

“I felt so angry that my own country was forcing me to give up my citizenship just to have a financially sound retirement,” Jenke said. She ultimately renounced her citizenship in 2018 at the Frankfurt Embassy.

“I feel much more free now. I can focus on my life in Germany without the U.S. hanging over my head,” she added.

Source: ‘Accidental’ Americans’ launch lawsuit for refund on cost of renouncing U.S. citizenship – NBC News

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Delays, costs mount for Canadians renouncing U.S. citizenship

2016/02/11 Leave a comment

The Canadian angle (my understanding this is not unique to Canada):

A crush of Canadians seeking to give up their U.S. citizenship is causing long delays and mounting frustration.

A record number of Americans willingly renounced their U.S. citizenship in 2015 as the burden of a sweeping U.S. tax crackdown spreads. U.S. Treasury Department figures released this week show that 4,279 individuals renounced last year, up from 2,999 in 2014 – a 43-per-cent jump.

Becoming un-American has become a protracted and costly journey, particularly in Canada, where it can take up to a year or more due to significant backlogs at the U.S. embassy and consulates.

“It’s very clear that there is no particular attempt to make it easier to get out – to provide more resources or expedite the process,” complained John Richardson, a Toronto citizenship lawyer, who has guided numerous Canadians through the complex process.

The U.S. publishes the names of people who renounce every quarter, but it does not disclose their citizenship or where they apply. Experts believe a significant chunk, if not the majority, are from Canada, home to hundreds of thousands of Americans.

From start to finish, renunciation can take a year or more, depending on where in Canada the application is made. Wait times at the U.S. consulate in Toronto are particularly long, according to lawyers and tax experts.

“Toronto may be the renunciation capital of the world,” Mr. Richardson said.

The United States has twice increased the processing fee – to $2,350 (U.S.) from $450 in 2014. Before 2010, it was free. The fee hike hasn’t stemmed the flow, which nonetheless remains small relative to the seven-million-plus Americans living in other countries and the larger number of people who become U.S. citizens.

Some Canadians are travelling to other cities – and even other countries – to get out faster and avoid having to file additional years of U.S. taxes and potentially steep future tax liabilities.

“I was concerned about taxes and what would happen to my estate,” said Jane (not her real name), a 67-year-old Toronto resident who flew to Nassau, Bahamas, in December to renounce rather than wait nearly a year in Canada.

“I couldn’t deal with the unknown,” she said, reluctant to disclose her identity while she awaits confirmation from the United States that her case is closed.

A U.S. embassy spokesman would not comment directly on the reasons for the long wait times, but he confirmed that it currently takes anywhere from 45 days to 10 months to arrange a mandatory meeting, depending on the location. He acknowledged that the process is not meant to be easy, even as the embassy works to “refine” it.

“Due to the serious implications the decision to renounce U.S. citizenship carries, the process is intended to be deliberative in order to permit individuals to reflect upon their decision before returning to execute the Oath of Renunciation,” the official said.

Adding urgency to the rush to leave is a sweeping U.S. law – the Foreign Account Tax Compliance Act – that is forcing financial institutions around the world to share much more information about their U.S. customers. Key disclosure rules take effect this year that will make avoiding filing U.S. taxes more difficult.

The United States appears to be dragging out the renunciation process, said Kevyn Nightingale, a tax partner at MNP LLP in Toronto, whose firm has done tax filings for nearly 200 clients giving up their U.S. citizenship. “There are a lot of consular services being provided to Americans abroad. Nothing takes this long,” he said.

U.S. officials may be embarrassed that their efforts to crack down on wealthy tax cheats has instead triggered an exodus of frightened middle-class Canadians, Mr. Nightingale suggested. “It does not look good to have a lot of Americans renouncing their citizenship because of stupid rules – rules that don’t generate significant revenue,” he argued.

Source: Delays, costs mount for Canadians renouncing U.S. citizenship – The Globe and Mail

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The Franco-American Flophouse: US Citizenship Renunciation Fees to be Raised 422%

2014/09/02 Leave a comment

Victoria Ferauge on the increase in fees for citizenship renunciation (looks like a tax grab to me):

Well, its a complicated labor-intensive procedure:

“The CoSM demonstrated that documenting a U.S. citizen’s renunciation of citizenship is extremely costly, requiring American consular officers overseas to spend substantial amounts of time to accept, process, and adjudicate cases. For example, consular officers must confirm that the potential renunciant fully understands the consequences of renunciation, including losing the right to reside in the United States without documentation as an alien. Other steps include verifying that the renunciant is a U.S. citizen, conducting a minimum of two intensive interviews with the potential renunciant, and reviewing at least three consular systems before administering the oath of renunciation. The final approval of the loss of nationality must be done by law within the Directorate of Overseas Citizens Services in Washington, D.C., after which the case is returned to the consular officer overseas for final delivery of the Certificate of Loss of Nationality to the renunciant.”

And demand for this service is strong yep, they say that.  450 USD, they say, was already below cost and they are just raising the fee in order to not lose more money on the service.

Now I’m just an old lady and I don’t pretend to be the brightest crayon in the box but if the goal here is to “break even” then they are looking at this all wrong.  Read the outline of the procedure again. Does that sound efficient to you?  Just the assumption that any US citizen showing up to renounce his US citizenship doesn’t really understand what he/she is doing and has to have it explained ad nauseum intensive interviews? and then be sent off to a corner like a little kid to reflect on it before being allowed to come back and do the deed, is just ridiculous.  Right there Id say just treating people like adults and assuming that they do know their own mind would save a lot of time, money and hassle all around.

And the narrative that will come out of this fee raise is not likely to focus on “cost recovery” at US consulates around the world but on what is going to be perceived as a punitive act on the part of the US government.  It looks like they are so embarrassed by the renunciation numbers and the lines to renounce at the US consulates that they are looking for ways to reduce or slow down the demand.  Think about that.  Has the state of US citizenship in the world really come to the point where the US government thinks that Americans have to be actively discouraged from renouncing?

The Franco-American Flophouse: US Citizenship Renunciation Fees to be Raised 422%.

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