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Last week, a major news bomb was dropped on the Korean community in the U.S.
The dreaded Foreign Account Tax Compliance Act (FATCA) deal has finally been agreed upon between Korea and the U.S., a severe headache for Koreans in the U.S. who have money in Korea.
Under the agreement, the U.S. Internal Revenue Service (IRS) will receive information on bank and other financial accounts held by U.S. citizens, green card holders and residents in Korea. Starting in July, Korea's National Tax Service (NTS) will automatically send information to the IRS on accounts with a balance higher than $50,000.
The IRS plans to use this information to track down offshore tax evasion. If money owed hasn't been reported via the annual tax filing, violators may have to pay up to 50 percent of their foreign account balance.
So if someone, for instance, left about 30 million won ($280,000) in his Korean savings account, he may end up having to cough up as much as 15 million won for not reporting this money to the IRS.
Not everyone has this kind of money, but those who do are seriously contemplating: Is U.S. citizenship worth retaining?
''I have money in Korea that has nothing to do with the U.S. This is money that I made before moving here and now the IRS wants to tax that?'' says Cha Hae-nam, 62, who lives in Connecticut. ''That has to be the most ridiculous thing I've heard.''
Cha, who has about 80 million won in cash, stocks and funds combined, says he is ready to give up his green card any time and move back to Korea if it's going to cost that much to live in the U.S.
Elderly Koreans seem more outraged by the news and inclined to leave America for good.
''Being old, it's already tough enough to live in the U.S. Hospitals, customer service and just everyday living in general is so much easier in Korea,'' says Park Bong-joo, 58, who owns two small businesses in New York. ''This new law is definitely adding to the reason for me to go back to my home country.''
Law offices in New York, California and other areas with high Korean population density say inquiries regarding the new tax law and renouncing of U.S. citizenship have increased by at least 30 percent in the past three months.
''After a lot of rumors and anxiety about this new tax law, people are finally realizing that the IRS is getting serious,'' said John Kim, a tax attorney in Los Angeles. ''At this point, I can't say whether the IRS will aggressively go after these accounts and penalize the violators as it says it would. It's too early to tell, but Koreans here are definitely becoming more cautious.''
Kim added that many Korean business owners in the U.S. take advantage of savings banks in Korea since they have a much higher interest rate than banks in the U.S.
''For some people, the amount is more than hundreds of millions of won,'' he said. ''These are the people who are really contemplating giving up U.S. citizenship.''
Apparently, Koreans aren't the only ones mulling renouncing U.S. citizenship.
According to the U.S. Treasury Department, a record 2,999 Americans gave up their citizenship or long-term residency in the U.S. last year. The number went up three times compared to 2012, and many say the tighter tax law is to blame.
Since the FATCA became enacted by the U.S. congress in 2010, the U.S. so far has a similar agreement with 22 other countries.
''We can't say this is the one and only reason, but it's certainly a valid cause for people who simply aren't attracted to the U.S. anymore,'' say Rick Kim, a tax attorney in New Jersey. ''But people must remember that it takes more than just signing a piece of paper to renounce their U.S. citizenship.''
Experts say the process is lengthy, which includes numerous paperwork and interviews. High income earners even have an ''exit tax'' imposed on them, to officially say goodbye to America.
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