US Citizens in Canada renounce US Citizenship

An interesting article in the Globe and Mail, Canada's leading national newspaper, talks about US Citizens there renouncing their citizenship in the wake of an announcement that the IRS will crack down on US Citizens who have not filed their taxes simply because they do not live and work in the US anymore.

Unlike many countries, the United States requires its citizens to file annual tax returns with its Internal Revenue Service regardless of where they live and work. Many of the roughly one million Canadian-American citizens long ago stopped filing, assuming they owed no tax. Many are worried now they’ll be hit with punishing penalties as a result of recent U.S. efforts to prevent its citizens from hiding assets in offshore tax havens.

I have been hearing on the local Los Angeles based persian language radio KIRN 670AM about an amnesty period given by IRS for people who have not reported their offshore accounts and income to come clean with the payment of a penalty fee. This would of course be a very relevant issue for many Iranian-American citizens who hold dual residence and businesses in the US and in their home country. But the article in the Globe and Mail suggests that the US expats there, have taken the radical measure of renouncing their citizenship en masse. Well, maybe "en masse" is an exaggeration. However, the numbers do show a growing trend. According to the Globe, last year, 1,534 Americans renounced their U.S. citizenship – more than twice as many as in 2009 and a sevenfold increase from 2008. In Canada, which is home to more U.S. expats than anywhere else in the world, there are typically fewer than 100 renunciations a year.

And the process is not easy or free either. Aside from a $450 fee, there are back taxes to be filed for at least 5 years, which could mean thousands of dollars depending on your income, and an additional exit tax if your income is within certain brackets. And let's not forget the emotional stress. “I’ve been through a divorce and this is quite similar to a divorce,” explains one of the US Citizens in Canada. “It’s a long, drawn-out process and there’s a lot of emotion that comes with doing what I’ve done. It’s not a fun thing to do, but it’s been forced upon me.”

The Globe article can be found here.