US Citizenship and Tax consequences

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Laura Saunders, Should You Renounce Your US Citizenship?  A Facebook billionaire has sparked interest in 'expatriating' to skirt big tax bills. Here's what you need to know. Wall Street Journal, May 19, 2012

Quote:

"last year, almost 1,800 people turned in their passports and green cards, a sixfold increase from 2008.

"The US is highly unusual in that it imposes taxes on 'world-wide' income, which includes international as well as domestic earnings, no matter where you live, above an exemption of about $100,000. That means any US citizen or resident with earnings abroad owes U.S. taxes on the income even if the money stays overseas. Most other countries don't tax earnings from abroad, although some tax them when they are repatriated.

"Also, unlike many countries, the US has a broad definition of who is a citizen--including, for example, people born on American soil. That produces a large number of 'accidental citizens' who don't consider themselves American but nonetheless owe US taxes.

"Steven Cantor, a lawyer at Cantor & Webb in Miami, says he recently had a Latin American client accused by the Internal Revenue Service of hiding offshore accounts, but who was a citizen only because he was born here after his mother sought medical attention during a difficult pregnancy. Mother and son immediately moved back home. 'he had no US passport or social security number and had traveled to the US on a tourist visa, but I had to struggle to convinve the IRS of his innocence,' Mr Cantor says. An IRS spokesman declined to comment on the case, but said the agency has since clarified the rules to provide reduced penalties for US citizens in such circumstances.

My comment: This is a helpful article, for those considering giving up US citizenship or green card. But most of us are not in that category (not that rich). So, there is no need to read the rest.