American citizens and green-card holders are increasingly renouncing their allegiance to the United States, as the government hunts for unpaid taxes on investment income earned overseas.
A total of 1,001 U.S. citizens and greencard holders cut the knot in the first quarter, according to an analysis of Treasury Department data by Andrew Mitchel, a lawyer in Centerbrook, Conn.,
The Wall Street Journal reports.
If that pace continues for the rest of the year, the 2014 total would smash the 2013 record (under Mitchel's calculations) of 2,999 renunciations.
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"The increase is due to current and future changes in tax law and enforcement," Freddi Weintraub, a New York attorney at the Fragomen firm who specializes in immigration law, tells The Journal.
The U.S. government has been after scofflaws on taxes for foreign investment income since 2009, picking up more $6 billion in taxes, interest and penalties from more than 43,000 taxpayers, The Journal states.
That includes more than 100 criminal indictments. Probably the most famous case involved Beanie Babies inventor Ty Warner, who pleaded guilty to tax evasion in 2013 over clandestine Swiss bank accounts.
Plenty of middle-class Americans also have been caught up in the government crackdown, according to The Journal. That's causing them to renounce their citizenship. While such a move doesn't free people from past taxes, it does from future taxes.
"We have reached the point where middle-class American citizens abroad are being forced to renounce — especially if they have assets and are moving toward retirement — because of taxes, paperwork and huge potential penalties," John Richardson, a Toronto lawyer with dual U.S. and Canadian citizenship, notes.
Donna-Lane Nelson, a writer who lives in Switzerland, gave up her citizenship in 2011. "Filing taxes from abroad had always been a real pain," she tells
CNNMoney.
"I was double-taxed on my full pension, but it didn't bother me so much to pay taxes, it was the annoying paperwork. I used to do my own taxes, but I started going to a professional when I learned about the new disclosure laws."
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