Renouncing US citizenship: Understanding the why and the how

There are a number of reasons why someone might want to renounce their US citizenship. One of them is taxation. Expat Tax Online makes the case for renouncing US citizenship, and explains how it’s done. 

According to reports from tax specialists for Americans overseas, a total of 6.705 Americans renounced their citizenship in 2020 alone. This figure represents a huge 260 percent increase on the 2.577 people who renounced their US citizenship in 2019. 

As the name suggests, to renounce one’s US citizenship indicates that someone is ready and even tempted to give up their American nationality, meaning they lose a number of benefits in the US, including voting rights, government protection abroad, and American citizenship for their children. Why is this taking place, and how does one go about it? Let’s take a look. 

Why are Americans renouncing their US citizenship?

Of course, there are lots of reasons why somebody might want to renounce their US citizenship - both personal and political. Often, it’s simply a case of wanting to become a citizen of a different country. 

A growing number of people, however, are choosing to renounce their US citizenship for tax purposes. Money is at the core of this trend. US citizens living abroad are affected by a series of laws that require them to declare all of their worldwide income to the IRS, and even pay taxes in both the US and the country (or countries) they reside in. Surrendering their citizenship helps them evade taxes. 

Another factor behind the trend is the Foreign Account Tax Compliance Act (FACTA), which since 2010 has made it highly challenging for US citizens to stash away assets in overseas accounts. This change in legislation is seen as one of the major reasons why renunciations have spiked in recent years. 

How to renounce your US citizenship

It’s a major step, but if you are set on renouncing your US citizenship, here’s how to go about it. 

There is a particular set of specifications and requirements that individuals must adhere to in renouncing their citizenship. It is also crucial that these are carried out voluntarily and with complete intent to relinquish. The required components are:

• The individual must appear in person before a US diplomatic officer or a consular.
• If in a foreign country: The individual must appear in person at a US embassy or consulate.
• The individual must sign an oath of renunciation.

5 steps to renouncing your US citizenship

Five essential steps have to be carried out to complete this process successfully. 

1. Meet with a US immigration attorney 

While every US citizen has the right to renounce their nationality, you must first talk to a US immigration attorney, who will outline how the decision might impact you and your family. Since renouncing your citizenship in the US is an irrevocable decision (as in, it can’t be reversed), it’s worth doing a fair share of research before proceeding. 

2. Figure out your new living situation

Once the renunciation process is underway, you must ensure that you have a legal status (i.e. citizenship) in your new home country. It is generally not possible to renounce one’s citizenship if this would make you stateless. While it is not mandatory to have a passport in your new country, the process of renouncing your US citizenship can be pretty challenging if you can’t travel. 

3. Work on the renunciation forms

The next step is to download and prepare the US renunciation forms. Only one document - known as the Form DS-4079, Request for Determination of Possible Loss of United States Citizenship - has to be ready before the appointment takes place. You can easily download this online. 

4. Schedule and attend your renunciation appointment

The next part is scheduling and attending appointments. The waiting time in consular offices can be extremely high, so it is wise to start planning well in advance. If the waiting times are particularly long in your home city, you could look at consulates in other cities to see if the wait would be shorter. When you attend your appointment, don’t forget to bring some essential documents along with your DS-4079 form, including your birth certificate, US passport, identification and new passport.

5. Finalise your tax return

To complete your renunciation, you will need to conclude your tax affairs in the US. Your final tax return needs to be submitted on January 1 of the following year. You might also need to file the IRS Form 8854 (Expatriation Information Statement). 

More information on renouncing US nationality

The process for renouncing U.S. citizenship is quite challenging since it takes a long time and involves quite a few steps. However, the law for renunciation of US citizenship is pretty straightforward. If you would like to find out more, you can read through section 349(a)(5) of the Immigration and Nationality Act (INA). 

US citizen living abroad? Expat Tax Online can help you prep your US taxes, offering upfront prices from their expat specialist services. If you’re thinking of renouncing your US citizenship, they can even help you get all your tax affairs in order before you make the leap. Get in touch to find out more.