Americans living abroad have their reasons for wanting to give up US citizenship, but due to the pandemic, many are effectively blocked from doing so.
Americans in Europe are struggling to renounce their US citizenship. In March 2020, the US State Department ordered embassies across the world to limit the services they offer to citizens abroad.
Embassies have slowly reopened in step with their host countries, but one service remains off the menu at the embassies in Europe: the process of renouncing American citizenship.
For nearly two years, Americans have been unable to begin the process of renouncing their US citizenship. But why, when the US allows dual citizenship with many countries, would anyone want to hand in their US citizenship in the first place?
Many renouncing are, like United Kingdom’s Prime Minister Boris Johnson, so-called “accidental Americans”: US citizens who have spent little to no time in the United States and only got their American passport through an accident of birth.
The reason Johnson eventually renounced his citizenship, and far and away from the most common reason for it is tax-related since all US citizens – even if they have never earned money in the US and have barely spent any time there – are expected to file an annual tax declaration with the IRS.
Recent legislation has made things even more complicated for US citizens abroad. The of 2010 has made it mandatory for foreign banks to report accounts held by US citizens to the IRS – or face penalties themselves.
European banks were expected to comply with FATCA (Foreign Account Tax Compliance Act) by 2020. As financial institutions have become stricter about reporting accounts to the IRS in the lead up to the 2020 deadline, some American citizens abroad have faced a higher tax burden.
For some, the shutdown of applications has had serious financial consequences.
Some “accidental” US citizens living in Europe have had bank accounts closed and mortgages denied as banks come into compliance with FATCA. If they could only renounce their unwanted US citizenship, they say, things could return to normal.
There is also a cost to renouncing citizenship (in addition to the $2,350 fee). The tax rules are complicated, but, in general, an exit tax is calculated for individuals.
Renouncing your US citizenship means forfeiting the right to vote, receive U.S. protection or assistance while abroad and other benefits. But for some Americans, that might feel like a small price to pay to avoid the financial burdens of living overseas.
A spokesperson for the State Department didn’t directly respond to questions as to why appointments to renounce citizenship remain off-menu when other services that require in-person appointments have been reintroduced.
A spokesperson for the State Department said: “US embassies and consulates are working to resume routine services on a location-by-location basis depending on a wide variety of factors, including public health data, host country and local mandates, and local conditions.”
We, the founders of Americans Overseas, were born in the Netherlands and obtained our American nationality through our (American) mother. When we heard about this for the first time around 2013, we were in total disbelief (it can’t be true!), anger (how can they do this?), fear (am I going to get fines or pick up other problems?), and panic (what should I do?).
It is (unfortunately) true that there is an additional American tax levy. But there’s no information from local government, and when approached, the consulate referred us to the IRS, and the IRS was impenetrable.
That’s why we started this initiative to help people from all over the world by providing proper information to avoid unnecessary panic, and offering help free of obligation and free of charge. If needed, we have a network of affordable professionals (accountants) who can help you with your tax obligations.
If you have more questions about how to renounce U.S. citizenship and US taxes you can contact us at Americans Overseas.
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