So-called accidental Americans tired of reporting assets to the Internal Revenue Service are preparing to renounce their US citizenship as the US Department of State gets ready to significantly cut the filing fee.

Passed in 2010 to crack down on tax evasion, the Foreign Account Tax Compliance Act, or FATCA, has posed a number of headaches for US citizens living outside the country. It requires foreign banks to report assets of US account holders to the IRS. And in some cases it has led lenders to refuse accounts and services to anyone with US citizenship to avoid fees for noncompliance.

Facing these financial issues, accidental Americans — citizens with little connection to the US other than having an American parent or happening to be born there — have complained for years that the $2,350 fee is a deterrent from renouncing citizenship. Now, in the face of a lawsuit, the State Department has proposed lowering the price to $450 this year.

Ditching Citizenship
That has many people ready to drop their US citizenship. Rob Gerresten, 67, was born to Dutch parents in the US and has lived in the Netherlands since he was one-and-a-half years old. The former IT manager has no other connection to America. But for the past seven years, he’s been fighting his local bank in Friesland as it’s attempted to shut down his account over his inability to provide a US social security number, something many accidental Americans struggle to do.

Under FATCA, foreign banks have to report a US tax identification number for every US client. So as an American without ID, Gerresten is a “red flag” and has been refused a mortgage and insurance policy.

“I can’t wait for the fee to drop,” he said. “The minute it does, I renounce [my citizenship] and I’m out of this mess.”

The US is one of just three countries in the world, along with Eritrea and North Korea, that taxes based on citizenship and not residency. A recent survey from Greenback, which provides tax services to Americans living abroad, found that nearly 33% of US expats plan to renounce their citizenship or are seriously considering it, with the “burden of filing US taxes” listed as a top complaint.

Still, renouncing citizenship is a drastic measure, and only a sliver of the millions of US citizens living abroad take the step. At least 3,260 people renounced their US citizenship last year and 3,840 did in 2022, according to data from the IRS’s Federal Register.

Refused Services
Ronald Ariës, 65, was born in the US when his father, an air force officer, was deployed there. He moved to the Netherlands when he was nine months old and hasn’t lived outside the Dutch nation since.

But when the US government passed FATCA, the accidental American was told by his bank that it would close his account. He took it to court in 2019 and won but was still asked to keep his assets at the bank under $50,000 so as not to raise any flags with US authorities. Ariës loaned money to his wife to stay under the threshold. He also spent €5,000 ($5,450) on legal fees and countless hours to defend his financial future in his home country.

Now, he’s waiting for the filing fee to drop to finally expatriate.

“I’m so sick of it,” he said. “I have nothing to do with the US, yet the country’s bullying me, making my life at home a headache.”

Beyond being refused a bank account, or having it closed, many Americans also report being denied services related to retirement funds, investing and loans. On top of that, it’s expensive to hire tax advisers for annual filings and some expats end up getting taxed in both the US and their home country because of loopholes in tax treaties.

Getting Out of It
Jean-Robert Ospital, 62, said he too is eager to see the filing fee reduced so he can expatriate. The French human resources instructor left California with his family when he was 10 and has only gone back a handful of times for vacation.

But after FATCA passed, he was told by his bank that he needed a US social security number to keep banking there, and he’s worried he’ll be taxed heavily when he sells his house in southern France.

“The US welcomed my family with open arms 60 years ago; now they’re going to tax me even though I’ve not lived there in 50 years,” he said, “It’s so disappointing.”

This article was provided by Bloomberg News.