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Renouncing U.S. Citizenship Is Extremely Tricky Business

Becoming an American citizen is a nightmare. So is trying to leave


by Starre Julia Vartan

Breaking up with your country is, for me, like breaking up with a long-term boyfriend. First, there’s a creeping discontent, a sense that your plans and values have diverged. Then there’s a period of self-questioning, delaying, hoping things will improve. Sometimes, this can last years. Then, finally, you make the gut-level decision to end things, and you feel that tremendous swell of relief. You’re free.

That is unless you’re trying to break up with the United States of America. If you’re breaking up with America, it will cost you a small fortune, you’ll want to hire a lawyer, and you could get stuck in a bureaucratic purgatory for years. So it’s more like a divorce than a breakup, really.

US Citizen

]It’s a well-known fact by now that the United States has made it punishingly difficult to immigrate here. Less widely known is that it has also made it arduous to leave. More so than almost any country on earth. If you, as I do, want out of your U.S. citizenship, it’s a complicated, emotional, and expensive ordeal that can take years. So, while the partisans clash about refugees and undocumented people trying to enter the United States (even while illegal border crossings are actually at a 46-year low and otherwise immigration is stable), those of us who want out, permanently and officially, are trapped — and that’s especially true if you’re not rich.

I should start by saying I did not take my decision to renounce my citizenship at all lightly. I have lived here since I was four years old. I am a fourth-generation New Yorker on my father’s side. It’s not patriotic hyperbole to insist that I would not be who I am if I hadn’t grown up American. I thrived in New York state’s public schools through 12th grade, and then I also went to college and grad school in the Empire State. During high school, I worked at the West Point Officers’ Club, where I poured champagne for elderly colonels — and once served a canapé to George Bush Sr. I have gloried in more than a dozen of our national parks and lived in six of the lower 48 states, plus Hawaii. Ask me where home is, and I’ll picture the snug, green mountains curving so sweetly down to the Hudson River Valley.

But I’m also an Australian citizen — on my mother’s side. I was born in Sydney, my first few years lullabied by ocean waves crashing on the cliffs between Coogee Beach and Gordon’s Bay. My father is from New York City, which gave me my joint citizenship, and I came to the United States via London when my young, drug-addicted, and peripatetic Australian mother joined the New York party scene of the early 1980s. While her Instagram feed would have been epic, her parenting sucked. It mostly involved smacking toddler-me around and leaving me locked in an apartment by myself while she did way too much cocaine and hung out at Danceteria.

My mother eventually shifted an abused and frightened me to my father’s mother on the train platform of the Metro-North Hudson Line. In a great stroke of good fortune, my grandma raised me in a loving, nature-filled home in the Hudson Valley. She was easily able to gain custody of me — not just because I had so many bruises, but also because she was an American citizen, I was a citizen through my father, and my mother was not. I ditched my Aussie accent halfway through Montessori school and dedicated myself to being an American kid.

I briefly returned to Australia at age 10 with my grandma to live closer to my father, who had built a successful business there. Seven months into our new life in Sydney, my mother appeared at the door to reclaim custody — she had legal standing under Aussie law. Terrified, I ran and hid in the bathroom. My grandmother and I snuck out of the country illegally, leaving behind a puppy, friends, bike, and new school. When we landed in New York, I felt as if I had escaped back home. To my America. My sanctuary.

Then, as they do, things changed. Years passed, and I became a writer, a gig-economy worker. It’s a precarious existence. I spent three of the past seven years so underemployed that I circled close to poverty. Health care became a constant worry. I have, like many U.S. citizens, had health insurance off and on throughout my adult life, but mostly off. A few years ago, I got kicked in the face by a mule while out riding in the Oregon countryside. I pleaded poverty at the rural health clinic and was offered a butterfly bandage instead of stitches. But bargaining for medical care while drenched in my own blood changed me.

The longer I live here, the more threadbare the social safety net becomes. In my work as a reporter, I have talked to the homeless elderly in New York, the young street kids and families in tent villages in Oakland, Portland, and now Seattle — many of them are working people who still can’t afford a roof over their heads. Plenty need mental or physical health care they’ll never see. It wasn’t unthinkable that with just a couple bad breaks I could wind up joining their ranks. I’m afraid to grow any older here.

When I decided to leave the United States, I wept.

But I’m still here.

Because as much as I can’t afford to be here, I also can’t afford to not be here.

Here’s why. The Foreign Account Tax Compliance Act (FATCA) was passed in 2010 to make it harder for super-rich Americans — wherever they lived — to offshore their cash and skip out on taxes. Basically, it means that if you are an American, you pay taxes on your income, regardless of where it comes from and where you live. I was onboard with this new rule when I originally read about it because I’ve worked and paid taxes faithfully in the United States since I was 13. Fair’s fair, right?

Not quite. What FATCA really did was clobber tens of thousands of middle-class and lower-income people who happen to live outside the United States. Some were U.S. citizens living abroad, and others were dual citizens living in their other home countries. Some didn’t even know they were U.S. citizens since they’d lived elsewhere their entire lives.

When FATCA was implemented, citizens abroad were served intimidating notices by their local banks inquiring about citizenship and notified that their answers would be turned over to the IRS in order to follow up with them about taxes owed. A few were very wealthy people, like U.S./UK citizen and Brexit enthusiast Boris Johnson, who soon renounced his American citizenship. But others were just regular people who were living and paying taxes in the countries in which they lived. Foreign tax credits allowed them to get out of some U.S. taxes, but not all.

If the bank didn’t comply, it — along with its customer — could face penalties of up to $50,000 — for any mistakes made on their forms for the U.S. Treasury Department. “I’ve got people calling me saying, ‘This can’t be for real, right?’” after receiving demands for U.S. taxes after decades, or even lifetimes lived outside the country, says John Richardson, a Canadian immigration attorney and an expert in U.S. citizenship renunciation. The United States, he tells me, is the only country in the world besides Eritrea that taxes based upon citizenship.

This put me in a tough spot. Of course, I can just move to Australia, enjoy the benefits of citizenship, and start working there whenever I want. I can do it tomorrow. But if I do, I’ll be paying both Aussie taxes and U.S. taxes, including 100 percent of my Social Security taxes in the United States, because, as a freelance writer, I’m technically my own small business. Even if my tax liability is minimal—I really never know how much I’ll make in a year—I’ll need expert help, which is also expensive. It’s clearly in my interest to renounce, so I’m renouncing.

I’m far from alone. Numbers of expatriations have skyrocketed since FATCA went into effect in 2014, with 5,132 people expatriated in 2017, as reported by the Federal Register — compared with around 500 to 600 a year a decade ago. Perhaps to try to cope with the record-setting number of aspiring ex-citizens (and to fund the State Department’s efforts to process all the requests), the United States hiked the fee 422 percent, from $450 to $2,350, in 2015. And while “no other country generates an exit tax based on income,” Richardson says, the United States does — on top of the renunciation fee. This exit tax is on accumulated wealth worth more than $2 million.

That’s certainly not me. But it’s easily a lot of responsible middle-income people who have saved diligently — experts suggest $1.2 million for retirement if you make $75,000 a year — and maybe bought houses in markets that have shot up in value over the past 10 years. Shockingly, as soon as you retire abroad, the United States treats your retirement funds like earned income and taxes you at the highest rate — almost 40 percent. People have lost large chunks of their retirement accounts as a result of this, Richardson says. “It’s a separate and more punitive taxation.”

I remain in limbo. Not wealthy enough to stay or go. I found a lawyer, but I need to save up to pay him about $1,000, plus the renunciation fee of $2,350, which, realistically, given what I earn, will take time. Then I’ll have to hire a special tax accountant to ensure that all my taxes for the past five years are in good order. Then I’ll need to save more money for moving costs, a plane ticket, a new place to live. And then, and only then, if everything goes the way it needs to, I’ll be free. I’m lucky — I’m a relatively easy case, says Richardson — and yet it will be a few years before I can go.

This isn’t about dodging taxes — I’ve faithfully filed with the IRS every year and am happy to pay my Australian taxes when I go there (though I’ll get much more for them — including top-notch health care). It’s about freedom and safety. I want the freedom to live near my family and not be taxed twice just because I hold a U.S. passport, and I want to feel safe — that I can get medical care or social support if I need it. I don’t want to go, but I have to. The country that was once my refuge has begun to feel like a debtor’s prison.

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