I have likened the government's brutal penalties for trivial failures to report offshore bank accounts to "shooting jaywalkers." U.S. Citizens posted abroad for work or living abroad find penalties in the tens of thousands, or even hundreds of thousands of dollars, for failing to file the "FBAR" Form TD 90-22.1. The IRS is proposing these penalties even for taxpayers who attempted to come into compliance in the 2009 "amnesty" for FBAR penalties.
Now Andrew Mitchel reports that renunciation of U.S. citizenship is soaring:
The FBAR rules require U.S. citizens to file an FBAR report whenever they have a foreign bank account with a balance that rises over $10,000 in a year. Penalties can be up to half the account balance for each year the account is not reported. Americans who have move abroad after getting married, or who have taken overseas jobs, have found themselves in violation of a rule that many had never heard of. No wonder many Americans abroad have decided that it's just too risky and expensive to remain U.S. citizens.
The IRS is conducting another FBAR amnesty. We can only hope this one is better-run than the last one. Meanwhile, an organization called American Citizens Abroad is collecting FBAR horror stories in an attempt to change government policy towards minor FBAR violators.
Update, 3/10/2011: The TaxProf has more.
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