US citizens living in Britain have been warned that their bank accounts may be frozen due to compliance with a 2010 US law known as the Foreign Account Tax Compliance Act (FATCA). Imposed to help fight tax evasion, FATCA requires non-US banks to disclose the financial holdings of their US customers to the US Internal Revenue Service (IRS).
At the end of 2019, an extension period set up by the IRS in 2017 for banks to collect US taxpayer identification numbers will end, meaning that non-US banks who do not have these numbers from their US customers will be considered non-compliant with FATCA, and face significant financial penalties from the US.
What’s unusual about the US situation is that the US imposes tax on its citizens whether or not they are US residents, and deems most children born within its borders, or to US citizen parent(s) living abroad, to be US citizens for tax purposes. So, while FATCA does help catch tax evaders who have hidden money in offshore accounts, it also ends up capturing a lot of “accidental Americans” and other US individuals who did not realize they were noncompliant with US requirements.
For many US citizens living abroad, the idea of renouncing their US citizenship has never been more top-of-mind. To respond to this issue, Moodys has been hosting a number of highly attended, complimentary US citizenship renunciation seminars for expats across the globe. Attendees can learn more about how and why to renounce, the pros and cons of renunciation, and what the decision can mean for them their family.