5 citizens who left the U.S. to avoid paying tax

  • AUSTIN, TX- JANUARY 11: John Evans dressed as Uncle Sam joins Tea Party groups convened at a rally at the Texas state capitol during the first day of the 82nd Legislative session on January 11, 2011 in Austin, Texas. The demonstrators picketed demanding true conservative values from elected officials. (Photo by Ben Sklar/Getty Images)

    Renouncing U.S. citizenship

    With news this week that Denise Rich, ex-wife of a renowned tax-dodger, is renouncing her U.S. citizenship and thereby avoiding taxes, we decided to take a look at other successful citizens who became ex-pats in order to avoid filing a 1040. Apparently it's getting more common as the IRS cracks down on undeclared and untaxed foreign holdings.

    Tax attorney Jim Duggan says it's not too difficult for an American to renounce U.S. citizenship. All it takes is an appearance at a U.S. embassy or consulate, some paperwork, and an exit tax, one of the drawbacks, according to Duggan.

    Though expatriation remains relatively uncommon, Duggan says the yearly count of Americans who have renounced their citizenship has significantly increased.

    "In previous years, the average number of renunciations was in the hundreds, not thousands," Duggan says. "Approximately 1,800 U.S. citizens renounced their citizenship in 2011, and it is anticipated that this number will exceed 2,000 this year."

    The U.S. is the only country save Eritrea that imposes tax on its citizens abroad. That rule no longer applies to these former Americans.