Ask your questions about Renunciation and Relinquishment of United States Citizenship and Certificates of Loss of Nationality.
Please note that the guidelines for this discussion are published here.
Ask your questions about Renunciation and Relinquishment of United States Citizenship and Certificates of Loss of Nationality.
Please note that the guidelines for this discussion are published here.
*@Zev I share your situation. I was born to Canadian parents and returned to Canada at 3 weeks old. I am hoping to relinquish with the arguement that I worked for an organization under the umbrella of the federal government. I feel that we are in a terrible situation and I strongly feel that we should not have to file US taxes or potentially pay penalties. I have been writing to my MP, Flaherty and Harper. I suggest that you consider doing the same. I would like the government to negotiate with the US to give people such as ourselves an easy way to “dump” our questionable US citizenship.
@Dianne: Did you sign an Oath to Canada and to the Queen in your job? If so, try to get a certified copy from your personnel file.
I agree Canadian government should be doing far more for its own. I’m certain they would be taking a far stronger stand for Canadians born in China or India to Canadian parents and then raised in Canada.
*I’m in the same boat at Zev and Dianne. I was 3 days old when my parent came home (both born and raised Canadian)… I got a social security # when I was born but I have never used it. I have traveled to the US for vacations and training (for canadian companies) but never to earn a dime. Is it possible to renounce without filing a tax return or FBAR?
*@Blaze. I did sign an oath of fidelity and secrecy in my job and I do already have a copy. I am hoping to relinquish, however, the point that I have been making to the politicians is that I feel that there should be an easy way for people like myself to get rid of our questionable US citizenship. There need to be negotiations on the part of our politicians with the US.
We should not have to meet the criteria of working for a foreign government or military in order to expatriate. In fact, it should be easy for someone born to Canadian parents and returning to Canada as a baby to be ONLY Canadian. Am I missing something or is it absolutely crazy that we should now as adults be required to get an SSN and file taxes in order to renounce US citizenship. In my opinion it is not acceptable to have to live with the uncertainty that we will be found and punished because of our US birth place.
Does anybody know of any accidental Americans who have been successful relinquishing?
I have never worked for the Canadian government unless working in a poling station during elections counts.
Having entered the US at least 50 times over the years with a Canadian passport, I could readily argue that the US customs agents have effectively confirmed my previous notion that I was Canadian exclusively. US law states that American citizens must enter the states using a US passport. Has anyone tried this argument?
I have considered doing nothing but worry about my inability to travel in the future. As Fatca goes into effect, big brother will be watching us all…
*I was not able to relinquish and ended up renouncing. I would suggest making a written statement, and putting in any and all reasons for relinquishing and make it clear that your actions were voluntary with the intent to relinquish. My view is that the list of relinquishing acts, are not instructions for how to relinquish. Those acts and a few others were put in place to take US citizenship from you. Various court decisions have changed all that, some actions have been removed, and the word voluntary has been inserted. You have natural and inherent right to expatriate under the older 1868 act. If I were doing it again I would quote that act in my statement and say the fact that I moved out of the US as a child and never returned is proof of my intent to expatriate. The newer INA did not replace the expatriation act of 1868, both in my opinion are valid laws.
*Zev. You don’t have to do anything. As they say in Brooklyn, Fugeddaboudid
@Candy: I believe you must be compliant with IRS to renounce. Perhaps True North could answer whether there was a requirement to be compliant to renounce.
@Dianne: No, you are not “missing something” and you are not “crazy” to believe this should not be happening and that the Canadian government should be doing more to protect the rights of its citizens.
It’s the IRS and US who are “crazy” in their outrageous demands. Unfortunately, we are caught up in it.
Also “crazy” in my mind is the fact Canadian government will not make two simple statements: Canadian banks must adhere to Canadian laws and Canadian laws will not be changed to accommodate a foreign government. However, to the government’s credit, they have also given no indication they will change current Canadian privacy, banking or human rights laws to satisfy the Americans.
My personal advice to you and Candy is the same as it was to Zev. Do Nothing. (I’m beginning to sound just like Joe Smith!). Read the reasons I gave in my advice to Zev. As I said, others will give you different advice. Read, read and read all the information posted here and make whatever decision will give you the most peace of mind.
Remember, your greatest protection from IRS is Canadian citizenship. CRA will not collect for IRS on Canadian citizens. Under current Canadian laws, Canadian banks cannot ask about your place of birth and cannot provide any information to IRS without your consent. Despite the threats and posturing of US, Canadian banks also cannot close your account if you refuse to give consent. If they do close your account, they are subject to a fine of up to $200,000. Plus, they are required to reopen an account for you unless you have committed a crime against the bank.
If you have a reason to go to the US, you may be told you should get a US passport. My advice is Don’t Do It. That will claim US citizenship and get you caught up in Calgary411’s nightmare.
I was told once I should enter as a US citizen. On another occasion, I was told to get a US passport. I have not followed that advice. I have had no problems crossing since then. However, after my elderly mother’s death, I will never again cross the US border. We have had more reports here of people having no problems crossing than we have had of problems. I am not aware of anyone denied entry (or worse) for traveling on a Canadian passport with a US place of birth.
Most importantly: Stay Calm. Don’t Panic. Don’t do anything impulsive.
*@TrueNorth –
What expatriating act did they reject?
*@Blaze @Candy Strictly speaking you have to be current with your US tax returns for the last five years to be exempt from the exit tax (to be an ‘uncovered expatriate’), except that people paying the exit tax are exempt below something like $640,000 in total assets. So it’s possible to file only Form 8854, be a covered expatriate with less than $640,000 in total assets and exit the US tax system that way.
This could be called the Out in a Blaze of Glory approach. The only real disadvantage is that you may be targeted by future vindictive legislation which assumes that covered expatriates renounced to avoid taxation, which may affect your ability to travel to the U.S. (Of course, if you’re not planning to go to the U.S., it’s an open question why you’d bother with the whole renunciation/IRS paperwork monster in the first place.)
The State Department has no interest in your tax status, other than pointing out that you should pay attention to it.
@Broken Man: I also believe folks who are duals at birth, like Candy, Dianne and Zev are exempt from the Exit Tax altogether. Is that correct?
I personally relinquished with the clear and firm words from US Consulate in 1973 that it was “permanent and irrevocable.” I’m not going anywhere near a Consulate to get proof of that 40 years later.
Don’t Wake The Sleeping Bear!
*@Blaze –
Not necessarily.
See here: http://www.irs.gov/pub/irs-pdf/i8854.pdf
‘Taxation Under Section 877,’ pages 1-2.
They may be exempt from tax as covered expatriates, but that’s a separate issue.
Even though
You became at birth a U.S. citizen
and a citizen of another country and
you continue to be a citizen of, and are
taxed as a resident of, that other
country.
if you
fail to certify on Form 8854
that you have complied with all of your
federal tax obligations for the 5 tax
years preceding the date of your
expatriation.
then you are a covered expatriate subject to tax on a deemed sale of your assets that exceed US$636,000.
It really needs a diagram.
Part of the appeal of relinquishing as opposed to renouncing is that if the expatriation date is far enough in the past, you’re spared all this nonsense.
“A little simplification would be the first step toward rational living, I think.” (Eleanor Roosevelt) If only Eleanor could teach IRS a few lessons!
*@Blaze – There is that, yes.
There are three categories:
1) Uncovered expatriates, not subject to the exit tax. They must file five years of returns (but can back-file five years of returns).
2) Covered expatriates with assets below US$636,000, who pay no tax. The appeal of this category is that you don’t have to file the five years of returns, but it may lead to other problems (audit risk, future laws barring you from the US)
3) Covered expatriates with assets above US$636,000, who pay a tax on the deemed sale of their assets.
@Broken Man: So, back to Candy’s question. Does she have to file five years of returns to renounce or just Form 8584. What happens if she renounces without doing so?
@Dianne: Hopefully, this should prove that it is not you who is “crazy.” It’s US and IRS who are “crazy.” Actually, I think they are crazy on steroids. Unfortunately, they are making us all “crazy” along with them.
Simplify your life. Don’t Wake The Sleeping (And Crazy!) Bear.
*There is no requirement to be tax compliant before renouncing. The State department and the IRS are two different departments. I have renounced and I have never filed taxes. I am still deciding what I will do. The way I see it is June 2013 will be the deadline for me as that is when form 8854 will be due. This is not to say that the IRS sees it the same way, I’m sure the view of the IRS is you need to be 100% compliant and up to date period.
*@Blaze –
It depends whether her assets add up to US$636,000, see above. If she doesn’t want to file five years of returns, and who can blame her, then she is a covered expatriate, who may or may not owe any actual taxes.
There are a couple of disadvantages to being a covered expatriate, which may or may not matter. I wouldn’t be surprised (I defer to Mr Mopsick on this) if a covered expatriate filing an 8854 and no returns faced some kind of audit or other unwelcome attention; perhaps not. It was explained to me that one of the advantages of filing a number of nil returns was that it made it clear to the IRS that you’re not a promising revenue source.
Future laws reviving the Reed Amendment may categorize covered expatriates as renouncing to avoid taxes, and bar them from the US subject to some sort of appeal process. Does any of this matter? Hard to tell from here.
Does any of this matter? Is it worth wrestling the paperwork monster, poking the sleeping bear? It depends on what you want or expect your future relationship with the United States to be. If you’re a Canadian citizen, and (in a worst-case scenario) you’re happy to never cross the border, then I wouldn’t worry about any of it, particularly if you have a Canadian birthplace. I went through the renunciation process and all the tax paperwork because while 1) I have no interest in filing complicated tax returns to a foreign country for the rest of my lfe, and making my executors deal with the IRS after I die 2) I want to be able to cross the border in a normal way.
*@Broken Man – The way I understand it, you are a covered expatriate if your net worth is $2 million or over. That’s what it says in the PDF/link you posted above. Also, that’s what Phil Hodgen has said:
http://hodgen.com/why-people-expatriate/#more-394
You might or might not have to pay income tax because you expatriated. The IRS looks at you as either an “expatriate” (and you do paperwork only) or a “covered expatriate” (you do paperwork plus pay some tax).
A covered expatriate is someone who is rich by IRS standards. You had an average Federal income tax liability of more than $151,000 (for expatriations in 2012) for the prior five years? Or your net worth is $2,000,000 or more? Either way, you are rich. You are a covered expatriate.
A covered expatriate is also someone who–regardless of net worth or prior Federal income tax liability–cannot say under penalty of perjury that the prior five years of Federal tax obligations are fully satisfied. Finally, a covered expatriate is someone who is late filing the exit year income tax return on time.
If you’re a covered expatriate, here’s how you calculate your exit tax. Pretend all of your IRAs, HSAs, and similar tax-deferred accounts distributed everything to you on the day before your appointment at the Embassy. It’s all taxable income. There is no early distribution penalty.
Some pensions are treated as your entire pension benefit is distributed to you as a lump sum. You pay U.S. income tax on this make-pretend distribution although you might be decades away from retirement. If you are a beneficiary of a trust, generally you will be taxed as taxable distributions are made.
As for everything else, pretend that you sold it the day before your appointment at the Embassy. In investment jargon, your assets are marked-to-market. Calculate the capital gain, deduct the exemption amount ($651,000 in 2012), and pay tax on the rest at the normal tax rates. If it is long term capital gain, pay tax at 15%. If it is short term capital gain, pay at those rates. If it is depreciation recapture, ordinary income, whatever–apply the relevant tax treatment to it.
SadCdn again – Those people with a net worth under $2 million should not be considered a covered expatriate or have to pay tax. At least that’s how I understand the above.
*@Broken Man – I voted in Canadian elections, after the 1967 supreme court decision, but before the law was repealed in 1978.
@Blaze, not filing taxes, but filing the 8854 is something I have considered, it would make me a covered expat, and I’m not sure I would be off the hook for taxes anyway. It will probably be all or nothing.
*SadCdn again – Those people with a net worth under $2 million should not be considered a covered expatriate or have to pay tax. At least that’s how I understand the above.
If they’ve also filed five years of returns, except that not all covered expatriates have to pay tax.
@Zev, Candy and Dianne: I don’t know if you can make any sense of all of the above. I’ve been here for months and I’m even more confused than ever (and also very glad I relinquished US citizenship 40 years ago!).
Let me put it in the simple language of Petros: “Keep your ass and your assets out of the US.” Any Canadian who does that should be safe.
*HELP! Even though we have annually filed, and paid additional US taxes over that owed in Canada for the past fifteen years since we immigrated, we are just now finding out about FATCA & FBAR. In 2003 our family became Canadian citizens. We have not done business nor owned anything in the US since we immigrated in 96. We are shocked, overwhelmed and angered at these discriminatory reporting requirements that are being required of American citizens abroad and NOT of citizens nor residents living in the US. From the beginning of living in Canada we have tried to comply with the US tax laws, even though we felt them unfair. Throughout the years we have hired an US accountant to file our US tax return for our personal tax along with our small business that we own and operate only in Canada. The additional accounting fees along with the extra tax that is owed to the US government is costly and burdensome. IS THERE A WAY TO GET OUT OF THIS additional cost in time and money to the US? We do NO BUSINESS nor OWN ANYTHING in the US. Where do we start?
Relinquishment, or denouncing US citizenship or other possibility, which would be best for our situation or are any options affordable? Time is a limited commody for us where we run our own business by ourselves.Continuing paying as we are is costly too.
One area that may be of concern to us is that some of our capital assets have appreciated 500% over the past fifteen years. Would we have to come up with gain tax if we were to get out of our US citizenship? Or would we owe further tax? Are there other fees or taxes that would have to be paid? How can we find the answers to these questions?
Has anyone had similar experiences that can help us learn what to consider and possible pitfalls to avoid. Experienced advise would help us to sort through the mass of info to focus on what is important for us to consider, and would be greatly appreciate. Swimming Against the Current
*You’re in a good position if you’ve been filing. File several years of FBARs with a covering letter saying you’d never heard of the things before and renounce. You could be out of the system by the end of the year.
http://renunciationguide.com/ is a good place to start. There is an exit tax, but you have to be fairly wealthy to be subject to it.
@North Fish: It sounds like you would not be able to relinquish because you have maintained your US citizenship even after becoming Canadian. So, that leaves renouncing. As Broken Man says, that shouldn’t be a problem for you because you have been filing returns.
His suggestion to file FBARs now with a note as to why you didn’t previously do so is a good one. Do NOT do this through OVDP (Overseas Voluntary Disclosure Program).
Your best protection from IRS is your Canadian citizenship. Canada Revenue Agency will not collect any taxes for IRS on a Canadian citizen if the tax liability occurred when the person was a US citizen, even if the person was also a US citizen. In addition, CRA will not collect any FBAR penalty for IRS on any Canadian citizen or resident.
Check out some of the information elsewhere on this site as to whether you would be subject to an Exit Tax.
Under current Canadian laws, Canadian banks cannot ask about your place of birth or other citizenship. Under privacy laws, they cannot release information about your finances to IRS without your consent. They cannot close your account for failure to provide consent. Canadian government has given no indication to date that they will change those laws to accommodate a foreign government.
Do you have a need to travel to US? If not, follow Petros advice: “Keep your ass and your assets out of US.”
Most importantly, Stay Calm.
@North Fish: Here is Information on the Exit Tax.
Further information on other issues is in the Renunciation Guide.