Renunciation and Dual Status

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Renunciation & Dual Status "The US is one of the only countries to tax its citizens on income earned while living abroad" (Abrahamian, 2012). There are difficulties in filing taxes from overseas with heavy paperwork, lack of online filing options, and lots of local and foreign language resources for translation. The Report of Foreign Bank and Financial Accounts law 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. The Foreign Account Tax Compliance Act requires foreign financial institutions to provide IRS with information on US clients. The only escape from the requirements is to renounce US citizenship. But, this does not eliminate tax liability. Taxes would still be owed on worldwide income associated with a trade or business up to renunciation and expatriation taxes with amounts depending on the date of expatriation (Expatriation Tax). To renounce citizenship is also a process that requires fees and approval from the Department of Homeland Security. If it is deemed the individual is renouncing to avoid taxes, there could be additional consequences of being banned from reentering the US at a later time. If the individual is a US resident or a resident alien, the rules for tax liability are the same regardless of where the individual lives (US Citizen and Resident Aliens Abroad). If an individual is a US citizen or resident for part of the year
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