US Expats Want Repeal Of Citizen-Based Taxation
Every year, Greenback surveys US expats on key aspects of life abroad. In 2021, over 3,100 US citizens living overseas shared their opinions on US expat taxes, foreign financial reporting, the Coronavirus pandemic, remote work, and more. Here Greenback report the results.
Why do expats live abroad?
The majority of expats choose to live abroad for their career, significant other, or their love of travel and adventure. Greenback report:
- 27% Job relocation
- 28% Significant other
- 16% Adventure/love of travel
Many expats feel burdened by US tax obligations
Because the majority of the world’s nations use a system of residence-based taxation, most US expats are required to pay taxes in their host country. Despite this, most also have to pay taxes to the US government on the same income due to the US’s practice of citizenship-based taxation.
The US government has put several measures in place to help avoid double taxation, but all expats must still file an annual return—and many still have to pay a US tax bill.
- 69% don’t think they should have to pay US taxes while living abroad
- 10% were feeling worried about filing their US tax return this year
- 27% owed money to the US government last year, 52% did not owe, and 15% received a refund
The US also has rules in place that require Americans to report on foreign financial accounts. The rules were designed to safeguard against tax cheats hiding money in offshore accounts. However, these regulations disproportionately impact expats since they are more likely to have overseas accounts.
This year’s survey indicates that millions of American expats may be unfamiliar with the two main financial reporting requirements. This puts them at risk of non-compliance, which could result in steep penalties from the IRS.
- 5% were unfamiliar with Foreign Bank Account Reporting (FBAR)
- 24% were unfamiliar with the Foreign Account Tax Compliance Act (FATCA)
For those aware of the regulation, the Foreign Account Tax Compliance Act (FATCA) has created additional filing requirements and banking challenges for 37% of expats. In addition to requirements for individuals, FATCA requires foreign banks that work with Americans to report their accounts to the US government. Rather than face the burden of these requirements, many banks have decided not to work with US citizens.
- 28% of expats need to file additional forms for FATCA
- 6% have had trouble banking abroad due to this reporting requirement
- 3% had to file additional forms while also facing banking issues
For expats who are unaware of their tax and financial reporting requirements, the IRS offers a simplified path to compliance called the Streamlined Filing Procedures. Unfortunately, 43% of the expats surveyed had never heard of the IRS’s Streamlined Filing Procedures.
Top 5 tax changes expats would like to see
When asked about the number one tax change they would like to see, most expats indicated that they would like to repeal citizenship-based taxation or to simplify expats’ tax-filing obligations.
- 47% Repeal citizenship-based taxation
- 19% Simplify the tax-filing process
- 10% Increase the FEIE and other tax credits to lower expats’ tax burden
- 6% Repeal FATCA
- 5% Merge the FBAR and FATCA so only one needs be filed
Many expats have considered renouncing their US citizenship.
85% of expats feel they are not represented fairly in US government. As a consequence, many have considered renouncing their citizenship with 64% not ruling it out.
- 4% Planning to renounce
- 18% Seriously considering it
- 42% Wouldn’t rule it out
- 36% Would never consider it
Why do expats want to renounce?
Survey respondents cited taxes as the top reason for considering citizenship renunciation—followed by a variety of other personal and political factors.
- 42% find filing US taxes too great of a burden
- 12% have married a non-US citizen abroad
- 11% are concerned about the current political climate
- 10% are disappointed in the direction of the US government
- 8% don’t have strong ties to the US
- 7% have difficulty working with foreign banks as an American citizen
How were expats impacted by the COVID-19 pandemic?
The events of the Coronavirus (COVID-19) pandemic have made many US expats more likely to want to live abroad long-term.
- When asked to rate how impacted they were financially by the Coronavirus pandemic, expats gave an average score of 4.31 out of 10
- 60% disapproved of how the US government handled the crisis (37% completely disapproved and 23% lightly disapproved)
- 87% stayed abroad during the pandemic (64% had already planned to stay abroad and 23% stayed abroad due to the pandemic)
- 13% returned to the US during the pandemic (6.5% had already planned to return to the US and 6.5% returned due to the pandemic)
- 32% say they’re more likely to live abroad after the crisis
Do expats plan to return to the US permanently?
Most of those surveyed do not have plans to return to the US permanently. Some indicated they were unsure due to the uncertainty surrounding the Coronavirus pandemic, future employment opportunities, and personal ties in the US and abroad.
- 13% plan to return to the US permanently
- 44% do not plan to return to the US permanently
- 42% are unsure
Expats and remote work
When asked how the Coronavirus (COVID-19) pandemic has changed the way expats will work going forward, the majority indicated that they plan to work remotely at least part-time.
- 18% worked remotely prior to the pandemic and were therefore unaffected
- 10% plan to make remote work permanent post-pandemic
- 38% expect to split their time between remote and in-person work (hybrid model) going forward
- 11% plan to work remotely temporarily, then return to in-person work
- 23% do not/cannot work remotely
- Less than 1 year: 7%
- 1-2 years: 9%
- 3-4 years: 10%
- 5-6 years: 8%
- 7-9 years: 10%
- 10-14 years: 16%
- 15-19 years: 9%
- 20+ years: 30%
- 18 – 24: 1%
- 25 – 34: 16%
- 35 – 44: 24%
- 45 – 54: 21%
- 55 – 64: 18%
- 65+: 16%
- Prefer not to say: 3%
- Male: 50%
- Female: 48%
- Non-binary: 1%
- Prefer to self-describe: 1%
- Employed by a small organization (1-50): 12%
- Employed by a mid-sized organization (51-250): 10%
- Employed by a large organization (250+): 32%
- Entrepreneur/Small-business owner (you have 1+ employee): 5%Self-employed/Freelancer (0 employees working for you): 16%
- Stay-at-home parent and/or spouse: 2%
- Student: 1%
- Retiree: 15%
- I’m not currently employed: 4%
- Prefer not to say: 3%
- $0 – $49,999: 27%
- $50,000 – $99,999: 27%
- $100,000 – $149,999: 15%
- $150,000 – $199,999: 8%
- $200,000 – $249,999: 4%
- $250,000+: 6%
- Prefer not to say: 14%