A record number of Americans have given up their citizenship in the third quarter of 2015, according to new government data.
The third quarter showed that 1,426 Americans gave up their passport – setting the pace to become the largest number overall in any given year in history.
So far, 3,221 people this year have handed in their passports – comfortably due to surpass the 2014 record of 3,415.
An increased number of Americans are saying goodbye to Uncle Sam – many of them expats tired of dealing with complicated tax paperwork.
Last year, 15 times more Americans renounced their citizenship than in 2008, this year could easily see that percentage rise to 17 times or as high as 20 times more.
Unlike most countries, the US taxes citizens on all income – no matter where it’s earned, or where they live.
For Americans living abroad, that means a mountain of paperwork so complex that expats are often forced to seek professional help, paying high fees to accountants and lawyers.
The headache is only getting worse. The Foreign Account Tax Compliance Act, or FACTA, requires individuals to report certain foreign assets, and for banks to disclose all foreign accounts held by Americans.
The new law comes on top of another rule that requires Americans to disclose foreign bank holdings above $10,000.
These regulations are part of a wider US government move to battle tax evasion, especially after major Swiss Banks admitted to helping Americans hide assets offshore.
But the campaign is making life difficult for the 7.6 million Americans living abroad.
Financial institutions rushed to understand FACTA, some overseas banks, both big and small, have kicked out their U.S. clients leaving some without even basic checking and savings accounts.
If a bank mistakenly fails to report any accounts held by Americans outside the U.S., they can face steep penalties.
Some Americans renouncing their citizenship are doing so on the pure basis that they are in fact very wealthy, so leaving behind their American passports could, and most likely will save them millions of dollars in taxes.
However, renouncing your US citizenship for the purpose of skirting tax obligations is in fact illegal.
Giving up your passport now doesn’t mean Uncle Sam can’t track you down later for back taxes.