There are many reasons why someone might want to renounce U.S. citizenship. One of them is taxation. 1040 Abroad is here to give you background on the reasons leading people to give up U.S. citizenship and explains how to do this.
According to reports from overseas American tax experts, 6.705 Americans have renounced their citizenship in 2020 alone. Compared with the 2.577 people who gave up their U.S. citizenship in 2019, this number has increased by 260%.
As the name suggests, renunciation of U.S.
citizenship is done when someone gives up their US citizenship, which means
that they will lose many benefits in the U.S., including voting rights, foreign
government protection, and the U.S. citizenship of their children.
The main benefit of U.S. citizenship remains the right to live and work in the U.S. as you wish. As a result people who renounce U.S. citizenship tend to have a life well established in their host country.
Why do Americans give up their U.S. citizenship?
Of course, there are many reasons why someone might want to give up US citizenship—including personal and political reasons. In instances in which their new country doesn’t allow dual citizenship, in which case, the decisions of giving up U.S. citizenship becomes a logical continuation.
However, more and more people choose to give up their US citizenship for tax purposes. U.S. citizens living abroad are subject to a series of laws that require them to declare all their global income to the U.S. Internal Revenue Service, and even pay taxes in the U.S. and the country (or countries) where they live. While there are mechanisms to
Another factor behind this trend is the Foreign Account Tax Compliance Act (FACTA), which has made it extremely challenging for US citizens to deposit assets in overseas accounts since 2010. This change in legislation is regarded as one of the main reasons for abandonment in recent years.
How to give up your U.S. citizenship
Renouncing U.S. citizenship is an important step. If you plan to renounce your U.S. citizenship, you would follow the steps below.
The renunciation will have certain formalities. At the core of it, it is also important that these are done voluntarily and completely waived intentionally. Then, the following year, you would file the final tax return. The required components are:
The individual must appear in person in front of a U.S. diplomat or consulate.
If abroad: The individual must appear in person at the US embassy or consulate.
The individual must sign the oath of waiver.
5 steps to relinquish U.S. citizenship
Five basic steps must be performed to successfully complete this process.
1. Meeting with U.S. Immigration Lawyers
Although every U.S. citizen has the right to renounce his citizenship, you must first speak with a U.S. immigration lawyer who will outline the impact that the decision may have on you and your family. Since renunciation of your citizenship in the United States is an irrevocable decision (for example, it cannot be revoked), it is worth doing a lot of research before proceeding.
2. Find out your new life situation
Once the abandonment process begins, you must ensure that you have a legal status (ie citizenship) in your new home country. If this makes you stateless, it is usually impossible to give up your citizenship. Although holding a passport in your new country is not mandatory, the process of giving up US citizenship can be very challenging if you cannot travel.
3. Processing the waiver form
The next step is to download and prepare the US abandonment form. Prior to the appointment, only one document needs to be prepared—namely, Form DS-4079, requesting determination of possible loss of U.S. citizenship—must be prepared. You can easily download it online.
4. Arrange and attend your abandonment appointment
The next part is arranging and attending appointments. The waiting time at the consulate can be very long, so it is wise to plan ahead. If the waiting time in your city is particularly long, you can check the consulates of other cities to see if the waiting time will be shorter. When you go to the appointment, don’t forget to bring some important documents and your DS-4079 form, including your birth certificate, U.S. passport, ID card, and new passport.
5. Complete your tax return
To complete your waiver, you need to complete your tax affairs in the United States. Your final tax return needs to be submitted on January 1 of the following year. You may also need to submit IRS Form 8854 (Declaration of Dispatching Information).
More information on renunciation of U.S. citizenship
The process of giving up US citizenship is very challenging because it takes a long time and involves many steps. However, the law to renounce US citizenship is very simple. If you want more information, you can read section 349(a)(5) of the Immigration and Nationality Act
US citizen living abroad? 1040 Abroad can help you prep your US taxes, offering upfront prices from their expat specialist services. If you’re thinking of renouncing your US citizenship, they can even help you get all your tax affairs in order before you make the leap. Get in touch to find out more.