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Americans dropping their citizenship to pay more as State Department hikes its processing fee by nearly five-fold

Are you a frustrated American living abroad and want to ditch your U.S. citizenship? Be prepared to dig deeper into your pockets.

With U.S. expatriates giving up their citizenship in record numbers, the State Department announced last week that it’s raising the administrative processing fee for formal renunciation of U.S. citizenship from $450 to $2,350 – nearly a five-fold jump - beginning September 12, 2014.

The department’s Bureau of Consular Affairs said the hike was needed because ‘documenting a U.S. citizen’s renunciation requires U.S. consular officers to spend substantial amounts of time to accept, process, and adjudicate cases.’

‘A renunciation is a serious decision, and we need to be certain that the person renouncing fully understands the consequences. This process sometimes takes multiple appointments to complete,’ consular affairs said on the State Department’s website. ‘The fee of $450 was initially set below cost, representing less than a quarter of the Department’s processing costs. The new few now reflects the service’s full cost.’

The higher fee comes at a time when more and more Americans abroad are choosing to renounce their citizenship rather than deal with U.S. tax laws. Toronto’s Globe And Mail reported Tuesday that 1,577 Americans worldwide renounced their citizenship or surrendered their green cards in the first half of this year.

Last year, a record 3,000 Americans renounced their citizenship, the newspaper reported. In 2009, only 742 Americans gave up their citizenship, according to the State Department. About 7.6 million Americans live abroad.

Several American expatriate advocacy groups blame the surge on the Foreign Account Tax Compliance Act, a 2010 law which took effect in July. FATCA requires international financial institutions to provide the Internal Revenue Service with information on U.S. customers with more than $50,000 in their accounts.

The law was intended to snare U.S. tax evaders stashing money overseas. But the expatriate groups say the law has made it difficult for Americans living abroad to get loans, mortgages, or even some basic financial services because foreign banks won’t take them on as customers because they don’t want the hassle of dealing with the IRS.