Relinquishing or Renouncing Your U.S. Citizenship: What You Need to Know

By Bryan Fitzpatrick

According to the U.S. Treasury Department a record number of U.S. citizens, 5,411 to be exact, renounced their U.S. citizenship in 2016. In contrast, in 2007 there were only 470 renunciations of U.S. citizenship. While there are many reasons for renouncing U.S. citizenship it appears that the implementation of the Foreign Account Tax Compliance Act (FATCA) may be behind the increase in renunciations.

According to the Internal Revenue Service the FATCA requires “that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding on withholdable payments.” Thus, as a result of this legislation, U.S. citizens living and working abroad can no longer ignore the fact that they are required to file tax and information returns annually in the U.S. even if they have no U.S. income.

However, the decision as to whether or not one should renounce their U.S. citizenship cannot be made lightly. Indeed, a former U.S. citizen can be barred from entering the country under the U.S. Immigration Act if it is determined that they renounced their U.S. citizenship to avoid paying U.S. taxes.

In the event that one does decide to renounce their U.S. citizenship that person must (1) renounce their U.S. citizenship in the presence of a diplomatic or consular officer; (2) do so outside the United States; and (3) do so using the exact form prescribed by the Secretary of State.

In order to make an informed choice one should speak with a U.S. immigration lawyer before deciding to relinquish or renounce their U.S. citizenship.