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With the surge in the number of U.S. citizens choosing to say good-bye/adios/farewell to their US citizenship, the State Department has announced an increase in the application cost to renounce their American citizenship.

Effective September 12, 2014, the previously subsidized application fee to renounce American citizenship of $450 USD will increase to $2,350 USD; which is the estimated unsubsidized cost of providing the service. The new cost comes at a time when the sudden increase in demand has put increased pressure on already strained consular resources. The lengthy process which, depending on the city, consists of two exhaustive interviews (some cities in Canada require one interview only) to ensure that the applicant truly understands the consequence of their decision to renounce their US citizenship and that it will be a binding, irrevocable decision.

The application fee should not be confused with potential “exit tax” that may apply depending on your situation.

For the individuals who booked their appointments prior to September 12, 2014, but have interviews after this date, the new cost of $2,350 USD will apply.

Many Americans living abroad have become increasingly frustrated with the seemingly endless compliance filings required of them in addition to their US tax return. In many cases with US citizens living and working in Canada, there is no tax owing in the United States after foreign tax credits due to higher Canadian tax rates; however the costs of filing, not only US tax returns, but also other compliance forms can be a significant annual cost. Having standard accounts such as RRSP accounts, Tax Free Savings and RESP accounts can significantly increase the required reporting. Oh and don’t forget the FBAR’s (now Form 114). All of this combined with newly enacted FATCA laws which are causing numerous issues for US citizens abroad as banks are reluctant or unwilling to deal with them.

On the other side, there are also many Americans living outside of the US, who happily file US tax returns and other required compliance forms annually and see it solely as part of their life as a US citizen.

One thing for sure is that it is a major decision. It’s very personal and the reasons for considering renouncing US citizenship vary significantly from person to person. Don’t be too quick to judge- the people considering renouncing their US citizenship are your friends, your family and your colleagues. The vast majority of US citizens in Canada aren’t considering renouncing their US citizenship to avoid or reduce their US tax bill as in many cases they generally do not owe any US tax when all is said and done each year.

If you have questions about the renunciation process or if you’ve gone through the process and have any comments, I’d love to hear from you.

 

 

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Tony Theaker

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The information contained in this article is for general use only and should not be viewed as professional advice. Accounting and tax rules and regulations regularly change and individuals should contact a competent professional to obtain accounting and tax advice based on their specific situation.

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