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Posted by: Maricopa Lawyers on Aug 20, 2013

The U.S.’s crackdown on global tax evaders is prompting some Americans living in Asia to rethink their U.S. citizenship due to the increasing burden of paperwork required by the U.S. tax law.

The number of individuals renouncing their citizenship is relatively low, just over 1,000 people in the second quarter of 2013, out of more than 6 million Americans estimated to be living abroad but that number has been increasing in recent years.

The main reason people are cutting ties with the U.S., several lawyers say, is the Foreign Account Tax Compliance Act (FATCA) , which requires foreign institutions to disclose the overseas assets of U.S. citizens with green-cards or work visas to the U.S. government.

The main objective of FATCA is to identify people who may have been evading taxes through offshore investment projects.

A growing number of wealthy Americans in Asia- and others with green cards- are exploring whether to announce their citizens or give up their green cards to avoid extra tax obligations. Many are choosing to renounce their citizenship not for fiscal reasons but because of the system set in place.

The U.S. government estimates that approximately $100 billion is lost every year due to tax evasion, according to figures from Congress.

Jay Krause, head of the wealth-planning group in Asia for law firm Withers, says his lawyers in Hong Kong and Singapore are busy processing voluntary U.S. tax returns under the IRS’s offshore voluntary disclosure program, which is also designed to target tax evaders and people who have failed to file their taxes in years.

A total of 1,130 individuals have appeared on the Internal Revenue Service’s list of those who have renounced their citizenship in the second quarter, according to professionals who track the data. This is nearly twice the number of people who renounced their citizenship in the first quarter.

This number is no indication that there will be a large shift of individuals renouncing their citizenship this is simply a slowly growing trend.