audit techniques

WSJ Asks the Question: Is the IRS Undercounting Americans Renouncing U.S. Citizenship?

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Is the IRS Undercounting Americans Renouncing U.S. Citizenship?, posted Sept. 16, 2015.

The names of U.S. citizens who have renounced is published quarterly pursuant to IRC Section Chart of Trends - US Citizenship Renunications Qtr 3 - 20156039G.  See, prior related posts:  1,426 Individuals Give Up Passport: Record Number of U.S. Citizens Renouncing: Quarter 3 for 2015, October 30, 2015.

No one knows for certain if the IRS (including the IRS per some of my conversations) is getting complete data from the Department of State regarding each name and individual.

The graph I have prepared shows the number of names reported quarterly as I track all reported names quarterly that related to clients and non-clients.  The latest cumulative amounts for 2015 (which does not include the 4th quarter) shows 3,221 thus far in the year.  If there is close to 1,400 as was the case for the last quarter, the total will be a record – by a bunch; i.e., close to 5,000 renunciations for the year.

Anecdotally, I have seen renunciations surge in our practice, largely as U.S. citizens residing around the world (typically in the “Accidental American” category) learn about the long arm of the U.S. tax law by way of their local financial institutions and reporting and documents requested as part of FATCA.  See, Why Most U.S. Citizens Residing Overseas Haven’t a Clue about the Labyrinth of U.S. Taxation and Bank and Financial Reporting of Worldwide Income and Assets, posted Nov. 2, 2015.

None of this answers the question of whether there is under-reporting of the names? Indeed, the question will likely not be answered without more information provided by the U.S. Department of State and the U.S. Treasury (i.e., the IRS officers responsible for issuing the names and report in the Federal Register).

The government is also likely to reject issuing information on these details to individuals and their advisers as part of a Freedom of Information Act (“FOIA”) request.  I have had similar requests rejected by the government under the so called “Exemption 7(E)” of FOIA.  See,