My wife and I are retired with pensions and modest investments. We were born in the US but have lived in Canada all of our adult lives. We have no US income, we have no US investments, and we pay no US income tax, yet last year our US tax return ran to 60 pages, not counting the FATCA reports. We pay an accountant $2000 to prepare our return because the rules change annually--indeed, sometimes twice a year--and we want somebody to run interference when the IRS comes back at us with erroneous demands from applying the wrong rules. Failing to file this return would leave us liable to an administrative fine (guilty until proven innocent) of up to one-third of our assets.
Each of us put $5000 into a Canadian tax-free savings plan--a variant on a US IRA. After two years the IRS suddenly decided that for each year we had had these, each of us needed to file a trust return. Each of the four returns cost us $1000 in accounting fees.
We used to keep our investments in indexed mutual funds and exchange-traded funds, but suddenly the IRS decided that to keep them there, each of us would need to file a trust return annually for each fund. We were obliged to sell them all and buy individual shares and bonds instead.
To give up our US citizenship we would need to pay capital gains tax on most of our assets as though we were selling them all, including the value of a defined-benefit pension plan.
