For many Americans living overseas, especially those dealing with endless U.S. tax reporting, FATCA headaches, and foreign banking friction, that reduction will feel dramatic. But cheaper does not mean simple, and it definitely does not mean risk-free. Renouncing U.S. citizenship remains one of the most serious legal and tax decisions a person can make.

Does the New $450 Fee Apply to Me?

The practical takeaway is that the lower fee applies to renunciation services provided on or after April 13, 2026. Since renunciation must be completed in person at a U.S. embassy or consulate abroad, the key date is generally the date of the appointment at which the renunciation is actually carried out, not when you first emailed the embassy or started gathering documents. The final rule itself is effective April 13, 2026, and the process requires an in-person appearance before a consular or diplomatic officer.

What Exactly Is the $450 Paying For?

The fee covers the administrative processing of a request for a Certificate of Loss of Nationality, usually called a CLN. That certificate is the formal State Department document confirming that the loss of nationality has been approved. The Federal Register rule specifically describes the fee as the fee for administrative processing of a request for a CLN.

Is There a Minimum Age?

This is where many people get tripped up. There is no simple rule that a parent can just sign for a child and renounce the child’s citizenship. In fact, State Department guidance says the opposite: parents may not take the oath of renunciation or otherwise seek to relinquish the U.S. citizenship of their minor children. State Department also says that minors who seek to renounce must show that they are acting voluntarily and fully understand the consequences, that children under 16 are presumed not to have the required maturity, and that minors under 18 receive extra scrutiny.

So, for children, the question is not “is the fee cheaper now?” but rather “is renunciation even realistically available here?” In many cases, the practical answer is that families should proceed very cautiously and get individualized legal advice before even considering it.

What If I Already Paid $2,350?

The final rule does not create an automatic refund for people who already paid the higher fee. So if you paid $2,350 before the effective date, the conservative answer is: do not assume you are getting money back.

That said, there is an organization called the Association of Accidental Americans that has been involved in litigation challenging the old fee and seeking relief. News reports and the organization’s own materials indicate that refund-related litigation is still pending. That may be worth watching, but at this stage it is best viewed as a long shot rather than money in the bank.

Does the Lower Fee Change the Exit Tax?

No. The fee reduction does not change the expatriation tax rules. The CLN fee is a State Department consular fee. The exit tax is a separate tax concept under the Internal Revenue Code, and Form 8854 is still the key IRS filing for expatriates. IRS guidance says Form 8854 is used to certify compliance with U.S. tax obligations for the five years before expatriation and to satisfy expatriation reporting requirements.

So if you are asking, “Now that the fee is cheaper, can I ignore the tax side?” the answer is no. The cheaper fee may lower the cost of getting to the door, but it does not change what is waiting on the other side. For more on that issue, see your existing article on expatriation and exit tax.

What Might I Gain by Renouncing?

For some Americans abroad, the biggest benefit is not a one-time tax result but an ongoing reduction in administrative burden. U.S. citizens living overseas often remain stuck with annual U.S. tax and information reporting, even when they live permanently in another country and even when much of their financial life is local, not American. This can include Form 1040 filing, FBAR reporting, and complex international forms tied to foreign companies, foreign funds, and other cross-border assets. The Federal Register itself acknowledged anecdotal evidence of tax-related difficulties experienced by U.S. nationals abroad, including difficulties related in part to FATCA.

Renunciation may also make life easier with foreign banks and investment platforms. Many non-U.S. financial institutions are wary of U.S. citizens because of FATCA and related compliance burdens. That does not mean every problem disappears after renunciation, but it may make it easier to open or maintain non-U.S. banking relationships and to answer “no” to citizenship questions on financial onboarding forms truthfully. The State Department specifically noted public comments describing tax-related difficulties faced by U.S. nationals abroad.

In practical terms, people considering renunciation are often trying to escape not just one tax bill, but a lifetime of compliance exposure: self-employment tax, PFIC reporting and tax, NIIT, Form 5471 issues, GILTI issues, and capital gains mismatches between U.S. and local law. Whether renunciation solves more problems than it creates depends heavily on your facts.

What Might I Lose by Renouncing?

The most obvious loss is that you are no longer a U.S. citizen. That means no guaranteed right to enter the United States as a citizen and no unrestricted right to live and work there as a citizen. Former U.S. citizens traveling on another passport may need to rely on a visa or, if eligible, ESTA under the Visa Waiver Program. The official ESTA site currently shows an application fee of $40.27. ESTA is not a work authorization and is used for short visits under the Visa Waiver Program.

That loss matters more for some families than others. If you may want to relocate to the U.S. later, accept employment there, start a business there, or keep maximum flexibility for your children, renunciation may close doors that are expensive or impossible to reopen. Even for travel, former citizens should expect added questions in some cases, and future U.S. entry will no longer be on the same terms as before.

There can also be serious investment and estate-planning downsides. After renunciation, U.S.-source investments, U.S. real estate, withholding tax, and U.S. estate tax exposure may need to be analyzed differently. For some people, especially those with U.S. assets or expected U.S. inheritances, that downside can outweigh the compliance relief.

Is This a Good Deal for You?

The fee is clearly a better deal than it was a month ago. Going from $2,350 to $450 is a major reduction, and for some people it removes a real financial barrier. But the more important question is whether renunciation itself is a good deal for you. That answer depends on your age, your family’s future, your immigration plans, your net worth, your U.S. tax exposure, your compliance history, your banking situation abroad, and whether you are likely to regret losing U.S. citizenship later.

For adults who are permanently settled abroad, fully understand the tax consequences, do not plan to work in the United States, and are comfortable giving up U.S. citizenship, the lower fee may make renunciation more attractive than before. For children, the analysis is much more delicate, and in many cases the legal and practical obstacles are substantial.

Final Thoughts

The new $450 fee is real, and for many expats it is welcome news. But this is not a clearance sale on paperwork. Renunciation is still a permanent, high-stakes step with tax, immigration, financial, and family consequences. The price of the consular process is down. The importance of the decision is not.

Important disclaimer: This article is for educational purposes only. It is simplified, may omit important exceptions, and may contain errors. It is not tax advice, legal advice, financial advice, or immigration advice. Before acting, consult qualified professionals who can evaluate your specific facts, including the expatriation rules, Form 8854, exit tax, immigration consequences, estate tax exposure, and any issues affecting your children.

More Resources:

1. U.S. Embassy, Jerusalem - https://il.usembassy.gov/renouncing-u-s-citizenship/
2. Issues for children born abroad: US–Israeli Citizens — The Next Generation - Cole & Waxman Tax Services
3. The expatriation process and tax issues: Expatriating from the United States: What You Must Know Before You Cut Ties - Cole & Waxman Tax Services

The post Cost of Renouncing U.S. Citizenship Is “On Sale” — But Is It a Good Deal for You or Your Children? appeared first on Cole & Waxman Tax Services.

Our policy is to file extensions for all active clients. If you generally owe tax, or expect to owe tax this year then take care to make your payments now.  Call us if you need clarification.

• 12-February-2021 Tax filings accepted by the IRS
• 28-March-2021 Passover starts; office open for emergencies during chol ha'mo'ed
• 15-April-2021
  • Tax filing deadline for US residents 
  • 2021 1st quarter estimated payments due
  • Make final payments for 2020 (if necessary)
  • Make final contributions or take distributions from IRA's tax year 2020
  • Israel independence day (we're available for emergencies)
• 15-June-2021
  • Tax filing deadline for overseas residents (including Israel)
  • 2021 2nd quarter estimated payments due
• 15-September 2021 3rd quarter estimated payments due
• 20-September Sukkot starts; office open for emergencies during chol ha'mo'ed
• 15-October-2021
  • extended filing deadline for individuals (final for US residents)
  • *FBAR filing deadline
• 15-November-2021 (approximate) IRS closes eFile.  Paper filings only until approximately 01-February-2022.
• 15-December-2021 2nd extended filing deadline for individuals living overseas (including Israel)
• 15-January-2022 - 2021 4th quarter estimated payments due

* Technically speaking, the FBAR deadline is April 15, 2021. But if you miss that deadline, then it is automatically extended to October 15, 2021 so the latter date is the effective deadline for EVERYONE.

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The post How to File the FBAR yourself appeared first on Cole & Waxman Tax Services.

To paraphrase, the judge stated that there is no law or ordinance in the law books, or even by the Bank of Israel, that makes compliance with the IRS a legal requirement. Therefore, Bank Hapoalim is required to transfer the money, whether or not the account holder complies with the IRS requirements.

That being said, this is only a small victory for U.S. citizens in Israel, as they still have the personal requirement to report financial accounts to the United States government, and face significant penalties for failure to properly and timely disclose such accounts. While past blog entries have discussed the FBAR reporting in detail, please read below for an unofficial summary and explanation of the newest IRS form, which was initiated in 2011

Intro – what is FATCA?

If you have recently opened a bank account in Israel or in any country outside of the United States, you may have been asked some questions regarding your citizenship. You may have even heard of the infamous FATCA

FATCA is the acronym for The Foreign Account Tax Compliance Act. Under FATCA, certain US taxpayers are required to report financial assets that they own which are held outside the United States. This requirement should not be confused with the Report of Foreign Bank and Financial Accounts (known by also as the FBAR). The FBAR and the FATCA filings are separate requirements, and although they may sound similar in nature, it is important to be familiar with the instructions and regulations for each report. with the FBAR requirement, there are significant penalties for failing to comply with the FATCA requirements (discussed below)

Under FATCA, various foreign financial institutions, such as banks, investment companies, and certain insurance companies, will be required to report information about the accounts held by US citizens directly to the IRS. It is for this reason that your bank may ask you if you are a US citizen. They will need to give your account information to the IRS.

The individuals who are required to comply with the FATCA requirements include: U.S. citizens, one who is a resident alien of the United States for any part of the tax year, and a non-resident alien who makes an election to be treated as a resident alien in order to file a joint return. An individual with a green card and one who is treated as a residential alien for tax-reporting purposes under the substantial presence test are both considered residential aliens for FATCA purposes and have to comply with the reporting requirements. Contact your tax professional to determine whether you may have to comply with the FATCA requirements, even if you are not a U.S. citizen.

How do individuals comply with FATCA?

FATCA is filed by attaching a report, called Form 8938 to your tax return (usually a Form 1040). The form lists each foreign account that the taxpayer owns, as well as the maximum balance for that account for the year. These accounts include bank accounts, pensions, investments, and even some insurance accounts. See instructions or consult your tax professional for a full list of reportable assets. Since the maximum values for the account is usually denominated in a foreign currency, the maximum value is converted into a dollar value using the end-of-year exchange rates provided by the US Treasury.

Who has to file?

At this point, FATCA only applies to individuals, but at a later point, there may be some entities that will be required to file FATCA.

A taxpayer who is not required to file an income tax return for a specific year is not required to file Form 8938.

US Taxpayers who have foreign assets with a value below a specific threshold do not have to file a Form 8938:

• For US citizens residing in the United States, if the total value of the foreign assets is at or below $50,000 at the end of the tax year, there is no requirement to report them, unless the value exceeded $75,000 at any point during the year. If a taxpayer is filing a joint return with a spouse, the threshold doubles to $100,000 at the end of the year of $150,000 at any point during the year.
• For US citizens living outside of the US, there is no requirement to report ones foreign assets if the value is under $200,000. If a taxpayer is filing a joint return with a spouse, the threshold doubles to $400,000.

What happens if you already filed the 1040?

What do I do about last year? is a question that is often asked. The good news is that the FATCA requirement is only in effect since 2011. This means that you do not have to worry about tax filings for years prior to 2011. If you have already filed for the years 2011 or 2012, and neglected to file a Form 8938, you are required to file an amended return with the Form 8938 included. You will also need to include a cover letter of explanation to the amended tax filing.

Penalties for not filing

The penalties for failing to file the IRS From 8938 are substantial. If an individual who is required to file FATCA does not do so, the IRS will charge them $10,000! Even if a taxpayer does file the Form 8938, if he under-reports his foreign financial assets, he can be charged with the entire $10,000 penalty. Whats more, if the individual does not respond to the $10,000 fine, the IRS will assess an additional charge of $10,000 every 30 days. In addition to the fine, a taxpayer who fails to file the Form 8938 pay be subject to criminal penalties.

It certainly pays to speak you your accountant to clarify whether you have to file the FATCA form, and be certain to keep a close eye on the deadlines!

The post FATCA appeared first on Cole & Waxman Tax Services.

Thomas Jefferson explained the purpose of the government to “enable the people of a nation to live in safety and happiness. Government exists for the interest of the governed, not for the governors”. From first glance, it would seem that Thomas Jefferson would be a staunch opponent of current overseas compliance regulations. While in existence for years, the IRS’s recent focus on US citizens abroad to timely report all of their financial accounts appears to be solely for the “governors” interest while placing undue and unnecessary hardships on the “governed”.

Most taxpayers are quick to criticize the United States’ Big Brother approach and attack the IRS’s full disclosure requirements and compliance enforcements. “What right does the IRS have to know what’s in my bank?” and “Why does the IRS even care what accounts I have?” are two of the most common questions you hear in an expatriate US tax office. There is an interesting distinction between these two questions – the first is an exclamation of frustration, challenging the assertion that the US government has a right to an individual’s financial information, and is part of a much larger debate. The second question, however, is much simpler and more easily justified. Why should a US citizen living overseas whose annual salary is less than minimum wage be required to find their small bank balances and to gather up any irrelevant pension accounts for annual reporting to the IRS? Or in the words of many clients, “I’m so poor! What does the IRS really think I am hiding?” Or in accountancy terms, why aren’t these people deemed immaterial?

Congressional Research Service reports that U.S. citizens hiding money in foreign accounts cost the United States around $70 billion per year. Over a decade, tax losses total nearly $1 trillion! From this perspective, it is quite understandable that the IRS has increased enforcement of offshore disclosure requirements. In the words of Thomas Jefferson, the IRS has the responsibility to protect “the interest of the governed” by placing compliance regulations on those who are hiding money overseas and effective stealing hundreds of billions of dollars from innocent U.S. taxpayers.

However, this only addresses half the problem. While the FBAR requirements can be justified in theory, they still place an enormous burden on the average American taxpayer living overseas. Clearly there needs to be some sort of distinction between individuals living paycheck-to-paycheck and those fraudulently hiding millions of dollars in offshore accounts – both of whom are currently grouped together as illegally hiding money overseas.

Interestingly enough, one partial solution to this problem might come in the heavily criticized FATCA regulations. Currently, taxpayers are required to “double report” foreign financial accounts on both FBAR and FATCA; however it is very possible in the future that FBAR would be replaced entirely by FATCA. This change would drastically increase the filing threshold for those living overseas from the current $10,000 FBAR requirement to between $200,000 and $400,000. While many “innocent bystanders” will still be left with reporting requirements simply for having a financial account outside of the United States, the increased threshold would alleviate the pain to the lowest risk category of taxpayers, and be a step in the right direction towards protecting the safety of individuals from fraud while not impeding in their happiness of being able to live as a nation. Which according to Thomas Jefferson is the exact purpose of a government.

The post Why are we required to file FBAR appeared first on Cole & Waxman Tax Services.

Many people are now familiar with the IRS requirement to file an annual Report of Foreign Bank and Financial Accounts (aka “TDF 90-22.1” aka “Foreign Bank Account Report” aka “FBAR” aka “that annoying form with my account information that needs to be sent to the US government”). In the last few years, the FBAR has reached the same levels of infamy as the previously unmentioned “fiscal cliff” – both of which have grown from seldom mentioned concepts to a harsh reality that many U.S. citizens must now confront.

As people begin to comprehend their obligation to file an annual FBAR, they often have to address the nightmarish question of what to do with their outstanding FBARs. The instructions on TDF 90-22.1 explain:

A person who is required to file an FBAR and fails to properly file may be subject to a civil penalty not to exceed $10,000 per violation. If there is reasonable cause….no penalty will be imposed. A person who willfully fails to report…may be subject to a civil monetary penalty equal to the greater of $100,000 or 50 percent of the balance in the account at the time of the violation…willful violations may also be subject to criminal penalties.

These statutory FBAR penalties have captured the attention of the press and have caused many sleepless nights to U.S. citizens who are potentially liable for such burdensome penalties. Consequentially, it is important to review the Internal Revenue Manual (www.irs.gov/irm/part4/irm_04-026-016.html) that directs examiners in determining the appropriate FBAR penalty. This gives a more realistic outline of potential penalties for late filing the FBAR.

For most FBAR cases, the IRS has determined that if a person meets four threshold conditions then the person may be subject to less than the maximum FBAR penalty (for violations occurring prior to October 23, 2004). IRM 4.26.16.4.6.1 (09-01-2008).

1. The person has no history of past FBAR penalty assessments.
2. No money passing through any of the foreign accounts associated with the person was from an illegal source or used to further a criminal purpose.
3. The person cooperated during the examination.
4. The IRS did not sustain a civil fraud penalty against the person for an underpayment for the year in question due to the failure to report income related to any amount in a foreign account.

The Internal Revenue Manual continues to outline the penalty guidelines for the computation of non-willful FBAR violations. There are three penalty levels depending on the maximum value of the account during the period for which the FBAR should have been filed.

Level 1: If the aggregate balance of all accounts is less than $50,000, then the penalty for each violation is $500 (not to exceed a total of $5,000 in penalties).

Level 2: If the aggregate balance of all accounts is between $50,000 and $250,000, then the penalty for each violation is the lesser of $5,000 or 10% of the highest balance in each account during the year.

Level 3: If the aggregate balance of all accounts is more than $250,000, then the penalty for each violation is the statutory maximum of $10,000.

The post Understanding FBAR Penalties appeared first on Cole & Waxman Tax Services.

As a U.S. citizen, you may have to file an annual “Report of Foreign Bank and Financial Accounts” (FBAR) with the U.S. Treasury Department.  Existence of such an account or accounts must be reported on schedule B of IRS form 1040, as well as interest earned from such accounts. Keep a copy of your FBAR, quarterly bank reports, and yearly reports of all other financial holdings as detailed below.

The FBAR is not filed with the federal income tax return. The granting, by the IRS, of an extension to file federal income tax returns does not extend the due date for filing an FBAR. You may not request an extension for filing the FBAR.

• Who must file? ny U.S. person who has a financial interest or signature authority over one or more foreign bank account or securities account which had an aggregate value of $10,000 at any time during the year. This includes individuals, U.S. branches of foreign companies, and U.S. parents of foreign subsidiaries.

• When? By June 30th.  That means if you had the equivalent of $10,000 (in aggregate) in a foreign bank or securities account in the current year, you have to file the FBAR prior to June 30 of the following year.

A person who is required to file an FBAR and fails to properly file may be subject to a civil penalty not to exceed $10,000 per violation. If there is reasonable cause for the failure and the balance in the account is properly reported, no penalty will be imposed. A person who willfully fails to report an account or account identifying information may be subject to a civil monetary penalty equal to the greater of $100,000 or 50 percent of the balance of the account at the time of the violation. Willful violations may also be subject to criminal penalties.

In addition, beginning in tax year 2011, additional reporting requirements exist to comply with the Foreign Account Tax Compliance Act (FATCA). Failure to report foreign financial assets on Form 8938 will result in a penalty of $10,000 (and a penalty up to $50,000 for continued failure after IRS notification).  Further, underpayments of tax attributable to non-disclosed foreign financial assets will be subject to an additional substantial understatement penalty of 40 percent.

FBAR/FATCA Documentation

For your bank accounts, please send statements for all 12 months of banking activity for the year.  For other financial accounts, please send the yearly report for each account.  Please fax, email, or send photocopies of the statements and keep the original statements with your financial records.  Accounts that must be reported on your FBAR are listed below, but might include other financial accounts in your name.  Please see the frequently asked questions report, or contact your agent for clarification.  If there are any questions, then we recommend that you send us the report of the account.

• Bank accounts – checking, savings, other (postal account, savings account with insurance company, etc)
• Pension accounts – such as kupat gemel, keren pensia, etc
• Provident accounts – such as keren hishtalmut
• Life insurance

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