Lawmakers Taking United States Down The Road To Financial Ruin – Federal Debt To Double In 15 Years Unless Congress Changes Course On Spending And Taxes

June 5, 2012

WASHINGTON, DC – The federal government is staring at a disastrous fiscal picture with debt approaching 200 percent of GDP within two decades if Congress doesn’t change course on spending and taxes, according to the latest analysis by the Congressional Budget Office released Tuesday.

The CBO said it’s the worst picture since a brief period during World War II when spending ballooned to fund the military campaign.

“In the past few years, the federal government has been recording the largest budget deficits since 1945, both in dollar terms and as a share of the economy. Consequently, the amount of federal debt held by the public has surged,” the CBO report said in a long-term budget outlook that paints a shockingly dark picture of government finances.

CBO analysts said the downturn and Congress’s response have been devastating for the government. Federal debt as a percentage of GDP — a standard measure of a government’s debt burden — stood at 40 percent at the end of 2008. But it will top 70 percent by the end of this year, and is only headed higher unless Congress changes course. The ratio could double by the middle of the next decade and will have topped 200 percent of GDP — twice the size of the projected U.S. economy — by 2037.

At that level, fiscal catastrophes are more likely, and the government’s ability to respond becomes far more constrained.

The increases in federal spending will come chiefly from higher interest payments and health care costs. Federal spending on health will nearly double from about 5.4 percent of GDP to 10.4 percent by 2037, according to Tuesday’s report.

Ironically, the nonpartisan budget agency said the deep deficits and debt are not inevitable. If Congress would step out of the way and allow the laws currently on the books — including ever-deeper spending cuts and potentially devastating tax increases — to go into effect, federal debt would begin to shrink almost immediately as a percentage of the economy, as measured by GDP.

But President Obama and lawmakers on Capitol Hill have been reluctant to let the law take its course. Instead, the GOP has fought to permanently extend lower tax rates due to expire, and Democrats have defended existing spending and in many instances called for new spending.

That’s left the country bumping along with deficits of $1 trillion or more each of the last three years. Yet with the economy still weak, lawmakers remain paralyzed as they try to figure out how to act over the long term without harming the economy now.

The budget agency said that may not be possible.

“On the one hand, cutting spending or increasing taxes slowly would lead to a greater accumulation of government debt and might raise doubts about whether longer-term deficit reduction would ultimately take effect,” the CBO report said. “On the other hand, abruptly implementing spending cuts or tax increases would give families, businesses, and state and local governments little time to plan and adjust, and would require more sacrifices sooner from current older workers and retirees for the benefit of younger workers and future generations.”

The report produced hand-wringing and finger-pointing on Capitol Hill.

“The president’s policies are not working,” said House Budget Committee Chairman Paul D. Ryan, Wisconsin Republican. “The sobering reality of our economic challenges require leadership and action. The president and his party’s leaders have failed on both counts.”

But House Minority Whip Steny H. Hoyer, Maryland Democrat, said the primary hurdle is the GOP’s demand that spending cuts fuel any debt solution.

“CBO’s report is a warning that we must get our fiscal house in order by achieving big and balanced deficit reduction that includes both spending and revenues,” he said. “Cutting domestic spending alone won’t work, and it will require both parties working together.”

The CBO’s analysis is a look at long-term budget and economic factors, and gives some interesting snapshots about how both the budget and the economy will change.

Among the agency’s assumptions is that the U.S. population will reach 389 million in 2037 and top 500 million in 2087, with the population skewing ever older.

And older workers tend to work fewer hours, meaning that by 2087 the average number of hours worked per employee in the workforce will be about 2 percent less than in 2022.

The report also projected that the growth in the labor force will slow, keeping economic growth to an average of 2.2 percent over the long-term. But the interest rate on debt will be higher, at an average of 2.7 percent — a reversal from recent years, when economic growth and interest rates were about the same.

The non-partisan scorekeeping agency also put an exact price on the deficit when it comes to savings, saying that for each dollar the deficit rises, national savings is reduced by between 32 cents and 72 cents, and domestic investment is reduced by between 10 cents and 50 cents.

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Pending Fiscal Crisis – Tax Increases And Spending Cuts On The Near Horizon – Congress To Decide How US Can Best Continue Spending Money It Doesn’t Have

May 23, 2012

WASHINGTON, DC – For Congress, the outlines of the pending fiscal crisis are clear: Don’t do a thing, and watch the economy slip into a double-dip recession early next year. Or cancel the looming tax increases and spending cuts, watch the deficit rise, and push the government ever closer to a European-style debt crisis.

That decision was put in stark terms Tuesday by the Congressional Budget Office, which in a new analysis said the economy will plunge into a recession early next year if Congress lets taxes rise and spending be cut, as called for under the law.

But if Congress changes the law to keep taxes low and spending high, it could add more than half a trillion dollars to the deficit in 2013, marking a fifth straight year of trillion-dollar deficits and risking the patience of the country’s creditors.

The CBO numbers come just as the debate is heating up on Capitol Hill over how to handle the looming “fiscal cliff,” which Congress created by continually pushing off tough decisions on both taxes and spending.

Senate Majority Leader Harry Reid, Nevada Democrat, signaled Tuesday that he will allow the automatic spending cuts called for in last year’s debt deal to go into effect — culling billions of dollars from defense and domestic spending — unless Republicans agree to allow taxes to increase on at least some taxpayers.

“If Republicans want to walk away from the bipartisan spending cuts agreed to last August, they will have to work with Democrats to replace them with a balanced deficit-reduction package that asks millionaires to pay their fair share,” Mr. Reid said.

Republicans remain adamant that the lower income- and investment-tax rates passed in 2001 and 2003 under President Bush, and extended in 2010 under President Obama, must be extended again.

“No economy can sustain such a hit without being hurled into recession,” said Sen Orrin G. Hatch, the ranking Republican on the Senate Finance Committee, which oversees tax policy.

One thing both sides say they agree on, however, is the need to act now.

Last week, House Speaker John A. Boehner kicked off the conversation, drawing a line in the sand in saying that he won’t allow another increase in the federal government’s debt ceiling unless it’s matched dollar-for-dollar with future spending cuts — just as the 2011 debt deal was.

Mr. Boehner also signaled he was open to ending some special tax breaks, as long as the money was used to bring down tax rates for everyone. He acknowledged there would be some who would pay more and some who would pay less.

But Democrats said much of the extra money the government would generate by closing those loopholes should go to funding the promises already made on spending, such as Social Security, Medicare and regular domestic spending.

The government was projected to see a large surplus at the end of the Clinton administration, but several economic downturns, two wars, several rounds of tax cuts and trillions of dollars in new domestic spending erased the surplus and have left the government deeply in debt: $15.715 trillion as of Monday.

And for the past three years, as political gridlock has become the rule in Washington, lawmakers have put off decisions on cutting spending or raising taxes, leaving everything to bite at the beginning of 2013.

The list of expiring laws reads like a taxpayer’s worst nightmare: The alternative minimum tax would bite ever deeper, last year’s 2-percentage-point payroll-tax cut would disappear, business-investing tax breaks would end, and almost all of the 2001 and 2003 tax cuts would expire. Meanwhile, some tax increases from Mr. Obama’s health care law are slated to begin biting in January.

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Congressional Budget Office Predicts “Recession” Beginning In Early 2013

May 22, 2012

WASHINGTON, DC – The nonpartisan Congressional Budget Office (CBO) said Tuesday that unless lawmakers act to prevent scheduled tax increases and spending cuts at the end of the year, a recession will likely result in early 2013.

Early next year income taxes are set to go up when the Bush-era tax rates expire. Automatic spending cuts totaling roughly $109 billion triggered by last August’s debt-ceiling deal are set to hit. Meanwhile, payments to physicians under Medicare will be slashed.

CBO projects that these and other elements of the so-called “fiscal cliff” will cause the economy to contract as demand dries up.

It projected in a Tuesday report that the gross domestic product (GDP) will contract by 1.3 percent in the first half of 2013 before growing 2.3 percent later in the year. Annualized, GDP would grow just 0.5 percent in 2013.

“Given the pattern of past recessions as identified by the National Bureau of Economic Research, such a contraction in output in the first half of 2013 would probably be judged to be a recession,” the report states.

A recession is technically defined as two economic quarters of negative economic growth.

This is the first time CBO has forecast a recession resulting from the fiscal cliff. In January it saw 1.1 percent GDP growth in 2013 if policies are not dealt with.

If Congress and the White House turn off all the automatic cuts and the tax increase, growth would rise to 4.4 percent, CBO predicted in the report released Tuesday.

The CBO projections appear to go further than other policymakers have gone in stating the economic risks of lawmakers failing to act.

Fed Chairman Ben Bernanke has warned of the risk to the economic recovery.

“It’s very important to say that, if no action were to be taken by the fiscal authorities, the size of the fiscal cliff is such that I think there’s absolutely no chance that the Fed could or would have any ability to offset, whatsoever, that effect on the economy,” Bernanke told reporters in April. “I am concerned that if all the tax increases and spending cuts that are associated with current law would take place, absent congressional actions … that’d be a significant risk to the recovery. “

Keeping the automatic cuts and tax increase in place would reduce the deficit by $607 billion in 2012 and 2013, CBO notes.

Unless future spending cuts are made, the national debt would grow at unsustainable rates and hurt long-term growth in that scenario, CBO warned.

Democrats and Republicans are in a standoff over fiscal issues and are unlikely to tackle the “fiscal cliff” until after the November elections. Lame-duck action could be limited to punting most issues into 2013 by extending current policies temporarily.

The White House said the CBO report shows that Congress should adopt President Obama’s overall budget plans.

“The President has put forth his plan to keep the recovery going now and reduce the deficit by more than $4 trillion over the next decade. Congress should act to avoid the scenario CBO lays out by putting forth balanced deficit reduction that meets the test of fairness and shared responsibility,” Office of Management and Budget spokesman Ken Baer said.

Last week, House Speaker John Boehner (R-Ohio) called on Congress and the White House to work out a long-term deficit deal and threatened not to raise the nation’s debt ceiling next year unless a greater amount of spending cuts is enacted.

In a Tuesday opinion piece in USA Today Boehner blamed President Obama for the failure to lock in a long-term fiscal solution last year.

“The president lost his courage, and the country lost its gold-plated triple-A credit rating for the first time,” Boehner wrote. “Since then, the president has been in campaign mode — playing small ball at a time when we need to address big challenges.”

House Budget Committee ranking member Rep. Chris Van Hollen (D-Md.) said the CBO warning means the Democratic path should be followed.

“It is clear that we need to act and we must do so in a balanced way,” he said.

“Given this report, Speaker Boehner’s threat to prevent the United States from paying its bills unless Republicans are able to impose additional economy-slowing austerity measures is especially reckless and irresponsible,” Van Hollen said.

House Majority Leader Eric Cantor (R-Va.) speaking on Fox News Tuesday said Congress should give certainty to the economy by canceling the scheduled tax increases now, but if it does not the public will have a clear choice in November.

“We are going to try every way we can to make sure taxes don’t go up on anybody,” Cantor said. “And so that is why we are saying this election, really, is much about the fact that if people do not want their taxes going up, they have got to vote to make sure that they don’t. And that is a vote for Mitt Romney.”

Earlier this month the House passed a bill replacing $78 billion of the $109 billion in automatic across-the-board spending cuts with a package of cuts to social programs over 10 years. Boehner has said the House will pass an extension of all the Bush-era tax rates before the election.

Those GOP actions are unlikely to be taken up in the Senate.

The White House and Senate Democrats want to end the tax breaks for the wealthy but extend them for the middle class. Democrats want the automatic spending cuts to be replaced by cuts less focused on social programs and revenue from ending tax breaks, including for oil and gas companies.

Senate Majority Leader Harry Reid (D-Nev.) said the CBO report means that the GOP should extend the middle class tax rates and come to the table ready to compromise with Democrats.

“We could avoid the so-called fiscal cliff tomorrow if Republicans would agree to extend the middle class tax cuts, which would provide certainty to millions of families and give us ample time to deal with the other challenges facing Congress at the end of the year,” he said. “If Republicans want to walk away from the bipartisan spending cuts agreed to last August, they will have to work with Democrats to replace them with a balanced deficit reduction package that asks millionaires to pay their fair share.”

Also on Tuesday, Reid wrote to Senate Republicans to say that action on debt issues appears to be “impossible” before the election so long as Republicans continue to reject any new tax revenue as part of a way to chart a new fiscal course.

“The American people want a balanced approach to fiscal policy that combines smart spending cuts with revenue measures that ask millionaires and big corporations to pay their fair share,” Reid wrote. “Yet a strict adherence to Tea Party ideology among Republicans in both the House and the Senate has so far put that balanced, common-sense solution out of reach.”

“It is imperative for both sides to rally around a long-term fiscal agreement that includes revenues,” Sen. Charles Schumer (D-N.Y.) said in a release. “A stopgap deal that just kicks the can down the road is not much better than pure deadlock.”

Deficit hawks have been hoping that lawmakers would put their differences aside and come up with a compromise along the lines of the Bowles-Simpson deficit commission, which sought to reform the tax code while trimming some entitlement benefits.

Reacting to the CBO report, the Center for a Responsible Federal Budget’s Maya MacGuineas said “you can only hope that as we march down a treacherous path between a fiscal cliff-recession and a mountain of debt, lawmakers are hard at work to come up with a workable solution, rather than taking the year off with the excuse that it is an election year.”

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Crazed Democrats Want “Ex-Patriot Act” To Punish Those Who Move Elsewhere And Renounce US Citizenship – Victims Of Law Won’t Ever Be Able To Reenter US Again

May 17, 2012

WASHINGTON, DC – Sen. Chuck Schumer, D-N.Y., has a status update for Facebook co-founder Eduardo Saverin: Stop attempting to dodge your taxes by renouncing your U.S. citizenship or never come to back to the U.S. again.

In September 2011, Saverin relinquished his U.S. citizenship before the company announced its planned initial public offering of stock, which will debut this week. The move was likely a financial one, as he owns an estimated 4 percent of Facebook and stands to make $4 billion when the company goes public. Saverin would reap the benefit of tax savings by becoming a permanent resident of Singapore, which levies no capital gains taxes.

At a news conference this morning, Sens. Schumer and Bob Casey, D-Pa., will unveil the “Ex-PATRIOT” – “Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy” – Act to respond directly to Saverin’s move, which they dub a “scheme” that would “help him duck up to $67 million in taxes.”

The senators will call Saverin’s move an “outrage” and will outline their plan to re-impose taxes on expatriates like Saverin even after they flee the United States and take up residence in a foreign country. Their proposal would also impose a mandatory 30 percent tax on the capital gains of anybody who renounces their U.S. citizenship.

The plan would bar individuals like Saverin from ever reentering the United States again.

“Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time,” Tom Goodman, Saverin’s spokesman, told Bloomberg News in an email.

Last year 1,700 people renounced their U.S. citizenship.

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Social Security Faces $8.6 Trillion Unfunded Liability – $73 Thousand Dollars Per US Household

April 24, 2012

WASHINGTON, DC – Social Security faces an unfunded liability of $8.6 trillion, according to the 2012 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds.

The unfunded liability is the amount that has been promised in benefits to people now alive that will not be funded by the tax revenue the system is expected to take in to pay for those benefits. (The Social Security trustees calculate the unfunded liability for a period of 75 years into the future, from 2012 to 2086)

The $8.6 trillion in unfunded benefits Social Security is expected to pay over the next 75 years equals $73,167.83 for each of the 117,538,000 households the Census Bureau said were in the United States in 2010.

However, the report also shows that when considering the unfunded obligations over an “infinite horizon”—the period extending into the indefinite future—the $8.6 trillion shortfall balloons to $20.5 trillion.

“Extending the horizon beyond 75 years increases the measured unfunded obligation,” the report said.

“Through the infinite horizon, the unfunded obligation, or shortfall, equals $20.5 trillion in present value, which represents 3.9 percent of future taxable payroll or 1.3 percent of future GDP,” reads the report.

The report adds that the 2012 estimate for unfunded obligations over the infinite horizon has increased from the $17.9 trillion in the 2011 report.

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US Active Duty Troops And Reservists Owe $390 Million In Back Taxes

April 17, 2012

WASHINGTON, DC – About 60,000 active-duty troops and reservists owe the IRS roughly $390 million in back taxes, in part because of confusion caused by frequent overseas deployments and address changes.

“Military tax returns are a little more complicated,” said Theresa Buchholz, a tax research analyst with H&R Block Tax Services in Kansas City, Mo.

Among the reasons servicemembers are susceptible to tax troubles:

•Confusion over eligibility rules for a tax break on income earned while serving in combat zones.

•Frequent moves that increase the odds tax documents are mailed to an old address.

•Risk of deployed troops missing deadlines for response to IRS queries.

Straightening out the problem can be a headache, said Navy Lt. Cmdr. Steven Millard, who blames his tax troubles a few years ago on a back-to-back deployment and family move.

“Took me two years to clear up a post deployment and get the money back I had to submit to stop the insanity of fines and interest,” Millard said.

The IRS is required to notify military financial service offices when a servicemember is found to be delinquent on taxes. The military investigates the claim and if it discovers that the servicemember is deployed or hospitalized because of a combat injury, it will seek a halt to IRS enforcement measures.

Michael Sullivan, an owner of Fresh Start tax services in Florida, said he routinely receives e-mails or calls via Internet service Skype from troops who have been hit with unexpected tax problems.

“A lot of times that notice does not catch up to where they are actually living, and the IRS is only obligated to send the notice to the most recent address” on file, Sullivan said. “If the IRS can’t contact you, you’re going to get an enforcement action.”

Tax documents mailed to the wrong address can lead servicemembers to mistakenly file incomplete returns — a red flag for IRS auditors.

If the IRS finds a problem with a return, some troops who have recently moved might miss the notification letter warning them about possible delinquency. Taxpayers who fail to respond to IRS delinquency notifications can miss an opportunity to straighten out the problem before a deadline expires.

One common issue is the combat tax exclusion. The military has designated numerous zones throughout the world for the benefit, but restrictions and conditions apply, and the amounts of income excluded can differ according to government formulas.

“It can be confusing because it’s hard to know what to include and what not to include” under that exclusion policy, Buchholz said.

As with all taxpayers, the IRS can seize a portion of a servicemember’s paychecks until the taxes are paid off.

Despite the tax pitfalls for troops who move about, the delinquency rate among servicemembers regarding federal taxes is less than the rate among civilians working for the federal government. About 2% of servicemembers are found to be delinquent, compared with nearly 3% for federal civilian employees.

The delinquency rate for military retirees is higher: Nearly 4% owe $1.5 billion in back taxes, according to IRS data.

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Record Number Of Amercans Renouncing US Citizenship – IRS Publishing List To Publicly Name And Shame Those Who Do

April 17, 2012

WASHINGTON, DC – A year ago, in Action Comics, Superman declared plans to renounce his U.S. citizenship.

“‘Truth, justice, and the American way’ — it’s not enough anymore,” the comic book superhero said, after both the Iranian and American governments criticized him for joining a peaceful anti-government protest in Tehran.

Last year, almost 1,800 people followed Superman’s lead, renouncing their U.S. citizenship or handing in their Green Cards. That’s a record number since the Internal Revenue Service began publishing a list of those who renounced in 1998. It’s also almost eight times more than the number of citizens who renounced in 2008, and more than the total for 2007, 2008 and 2009 combined.

But not everyone’s motivations are as lofty as Superman’s. Many say they parted ways with America for tax reasons.

The United States is one of the only countries to tax its citizens on income earned while they’re living abroad. And just as Americans stateside must file tax returns each April — this year, the deadline is Tuesday — an estimated 6.3 million U.S. citizens living abroad brace for what they describe as an even tougher process of reporting their income and foreign accounts to the IRS. For them, the deadline is June.

The National Taxpayer Advocate’s Office, part of the IRS, released a report in December that details the difficulties of filing taxes from overseas. It cites heavy paperwork, a lack of online filing options and a dearth of local and foreign-language resources.

For those wishing to legally escape the filing requirements, the only way is to formally renounce their U.S. citizenship. Last year, IRS records show that at least 1,788 people did, and that’s likely an underestimate. The IRS publishes in the Federal Register the names of those who give up their citizenship, and some who renounced say they haven’t seen their name on the list yet.

The State Department said records it keeps differ from those published by the IRS. They indicate that renunciations have remained steady, at about 1,100 each year, said an official.

The decision by the IRS to publish the names is referred to by lawyers as “name and shame.” That’s because those who renounce are seen as willing to give up their citizenship primarily for financial reasons.

There’s also an “exit tax” for the very rich who choose to leave. During the last 25 years, a number of millionaires and billionaires have renounced their citizenship. Among them: Ted Arison, the late founder of Carnival Cruises [CCL 31.70 0.26 (+0.83%) ], and Michael Dingman, a former Ford Motor [F 11.915 0.035 (+0.29%) ] director.

But those of more modest means renounce, too. They say leaving America is about more than money; it’s about privacy and red tape.

Liability, Not Priviledge

On April 7, 2011, Peter Dunn raised his right hand before a U.S. consular officer in Toronto and swore that he understood the consequences of giving up his U.S. citizenship. Dunn, a dual U.S.-Canadian citizen who has lived outside the United States since 1986, says he renounced because he felt American citizenship had become more of a liability than a privilege.

As an American, Dunn had to file tax returns and report all of his bank accounts – even joint accounts and his Canadian retirement fund. If he didn’t, he would be breaking U.S. law and could face penalties of up to $100,000 or 50 percent of his undeclared accounts, whichever is larger. Dunn says he was tired of tracking IRS policy changes, and he had no intention of returning to the United States. Renouncing his citizenship, as he puts it, was “a no-brainer.”

“If it was just me then it would be one thing,” says Dunn, a part-time investor who worried that having to share information with the IRS would deter future business partners – and upset his wife, who is Canadian. “Disclosing joint accounts I hold with my wife and anyone I ever want to do business with — that’s just too much. My wife’s account is none of their business.”

Dunn, who blogs about expatriation, takes issue with being characterized as a tax evader. He says the taxes he pays in Canada are higher than what he would pay in the United States, and he says he had always complied with the IRS before renouncing. But, Dunn says, the IRS approach to enforcing compliance is misguided. “It’s making life difficult for a lot of people,” he says. “It’s driving us away.”

Old, New Regulations

Dunn is referring to two filing requirements that affect Americans abroad: the Report of Foreign Bank and Financial Accounts — which has been around since 1970 but now carries penalties for noncompliance — and the Foreign Account Tax Compliance Act, passed in 2010 with the aim of reducing offshore tax evasion.

The first regulation requires all Americans, including those living abroad, with at least $10,000 in overseas bank accounts, to file a supplementary form disclosing all of their foreign accounts. That includes any accounts in which the U.S. citizen has a financial interest. That could include a joint account with a spouse or child, accounts for corporations in which the American owns more than 50 percent of the value of shares of stock, or any trust or estate that benefits the U.S. citizen.

The tax compliance act — the newer law — asks foreign financial institutions such as banks, hedge funds [cnbc explains] , and private equity funds to provide the IRS with information on U.S. clients.

The United States and five European Union countries recently announced their intent to allow institutions to report the information through their own governments, rather than directly to the IRS. Institutions that do not comply will be subject to a 30 percent withholding tax on certain U.S.-sourced payments and proceeds of property sales beginning in the 2013 tax year – for instance, dividends on investments in U.S. companies.

Some expatriates say they were unaware of the first regulation for years and even decades. In 2008, the IRS received only 218,840 such filings. American nationality law grants citizenship to almost everyone born in the United States or born abroad to American parents, regardless of how much time they’ve spent in the United States. Many may not even know the extent of their U.S. ties.

In 2004, the stakes for noncompliance rose. Failure to file meant potential fines and criminal charges. Americans abroad can be punished for noncompliance even if they owed no income tax – and IRS data show that most of them don’t owe money.

Income up to $95,100 isn’t taxed under a rule called the Foreign Earned Income Exclusion. In 2009, the income cap was $91,400, and 88 percent of all taxpayers claiming the foreign earned income exclusion owed nothing. Since 2008, the IRS has offered several voluntary-disclosure grace periods during which expatriates can file back taxes without facing criminal charges – but with the possibility of incurring penalties.

Marylouise Serrato, head of American Citizens Abroad, a nonprofit organization based in Geneva, says that many members feel scared about reporting requirements they did not know existed. Their disenchantment, she says, is pushing some to renounce.

“Americans abroad are terrified. We’ve had people pay tens of thousands of dollars in fines. We’ve had people . pay huge amounts of back taxes,” she says. “Up to this point, we never heard of anyone renouncing, or if they did, they didn’t talk about it,” says Serrato, who says her group does not advocate renunciation.

“Now,” she says, “we’re seeing a lot of people speak openly about it and come to us for information.”

Congress is taking note. “While I fully support measures that reduce fraud and address offshore havens, the U.S. should not have policies that place undue burdens on legitimate Americans abroad,” says Representative Carolyn Maloney, D-N.Y., and the chair of the Congressional Americans Abroad Caucus. Maloney says she has taken the matter to the Department of the Treasury, which oversees the IRS.

‘Too Expensive to Keep’

Lawyers report that banking is a big reason why people renounce. “I hear about banking problems again and again and again,” says Phil Hodgen, an attorney who has been helping Americans expatriate since 2008. The new reporting rules, he says, pose “a huge administrative burden. It’s made Americans too expensive to keep.”

Francisca N. Mordi, vice president and senior tax counsel at the American Bankers Association, says she has received a number of calls from Americans in Europe complaining about banks closing their accounts. “They’re going to drop Americans like hot potatoes,” Mordi says. “The foreign banks are upset enough about the regulations that they’re saying they just won’t keep American customers, and it’s giving (Americans living abroad) a lot of sleepless nights.”

Taxpayer complaints sometimes make their way to Nina Olson, the U.S. taxpayer advocate for the IRS, who addressed some of the international tax issues in a December report.

“The complexity of international tax law, combined with the administrative burden placed on these taxpayers, creates an environment where taxpayers who are trying their best to comply simply cannot,” the report reads. “For some, this means paying more U.S. tax than is legally required, while others may be subject to steep civil and criminal penalties. For some U.S taxpayers abroad, the tax requirements are so confusing and the compliance burden so great that they give up their U.S. citizenship.”

In the same report, the IRS responded to the criticism, stating that the penalties for failing to report foreign accounts issued in its guidelines are maximums, not set amounts. It said the agency will not fine filers if the lapse is due to a “reasonable cause.” The IRS also acknowledged the need for more public awareness, and it detailed its efforts to inform Americans overseas through fact sheets, a telephone help line and Twitter.

The IRS did not respond to requests for comment.

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