FATCA and Americans Living Overseas

Last updated on April 29, 2023

Foreign Account Tax Compliance Act (FATCA) was established to curb tax evasion by improving transparency by intensifying reporting requirements. After the IRS began to aggressively pursue tax evaders that evaded taxes using offshore tax havens, things changed for the millions of U.S. citizens that lived overseas. Complying with the U.S. tax laws became difficult.

To make matters worse, the IRS now requires foreign financial institutions (FFIs) to report their financial transactions with their customers that are U.S. citizens. This lead to difficulties both for FFIs and Americans living overseas.

Due to tax difficulties created by FATCA, many Americans living overseas have renounced their U.S. citizenship. Many were forced to renounce their U.S. citizenship because of personal reasons and not financial ones. Those who had been living overseas for years and have spouses of another nationality and children who were citizens of another country found it impossible to retain their U.S. citizenship.

Even though FATCA has limited tax evasion and prevented it to a certain extent, for the many Americans living overseas that had to give up their U.S. citizenship, it means a breaking off of decades old ties with the U.S.