LOS ANGELES, Nov. 03, 2016 (GLOBE NEWSWIRE) -- Thinking of leaving the country and giving up your U.S. citizenship if you don’t like the election results? Dennis Brager, founder of the Brager Tax Law Group, reminds you to be aware of all the ramifications.
Individuals may give up their citizenship, known as expatriation, with the hope of avoiding taxes. Perhaps, they are dual citizens and lived in another country for many years, but the tax burden emerging from the Foreign Account Tax Compliance Act (FATCA) feels unfair. FATCA requires that foreign financial Institutions report on the foreign assets held by their U.S. account holders. Or perhaps all the paperwork is just too cumbersome. “Regardless of the reason for expatriations, U.S. citizens need to certify that they’ve met all their tax obligations for the last five years,” says Brager. “If they haven't filed a tax return any time in the last five years and they expatriate, they will become subject to an ‘exit tax.’” Similar rules are in place for long-term lawful permanent residents, i.e. green card holders.
If someone’s net worth is over $2 million, or over the five years before the year of expatriation their average Federal tax liability was greater than $161,000, or they fail or are unable to make proper certification of tax compliance over the last five years then they may owe an exit tax upon expatriation. The exit tax is based upon the difference between the basis of their worldwide assets (generally their original cost) and their fair market value on the date of expatriation. “For example, if 30 years ago you bought a piece of investment property in downtown Hong Kong for $100,000 and now it's worth $5,000,000, you're going to pay taxes on the difference,” explains Brager. “You can't walk away from your tax obligations by giving up your citizenship.”
“People assume that because they are living in another country, they’re not going to have to worry about past due U.S. taxes,” continues Brager. “However, the international community is looking at amending treaties to allow for international cooperation in the collection of taxes.”
Brager recommends careful tax planning for anyone thinking about expatriation or giving up their green card. “If you don't file the proper paperwork and handle it appropriately, then you can get stuck with a large tax bill, and your heirs may be hit with a large estate tax when you die, even if you have a small estate,” he concludes.
Based in Los Angeles with a worldwide client base, the Brager Tax Law Group is a tax litigation and controversy law firm, which represents clients with civil and criminal tax disputes with the IRS and other taxing authorities. All the firm’s tax lawyers are former trial attorneys with the IRS. Mr. Brager is also a California State Bar Certified Tax Specialist.