In early February, Late Loyalist told his 2011 OVDI story, a harrowing tale: his 5% voluntary disclosure fine was $1589.00, with zero taxes owing to the United States, but his lawyer fees exceeded 20k. He now reports that he has renounced his United States citizenship.
Hi All:
Wednesday March 7th at 3:45 pm Calgary time I renounced my US citizenship. What a relief! I can’t tell you how good that first step feels.
I was ushered into the Consulate at 2:45, paid my $450 fee and waited. There was a 76 year older man ahead of me who couldn’t decide what to do. I waited 45 minutes for him to decide. Each time he hesitated the Consul tried even harder to convince him it didn’t ‘cost anything’ to keep his US citizenship. In the end the old guy signed and left relieved. You could see the visible relief on his face.
While I waited I had the chance to review the oath of renunciation and the statement of understanding before going through the process.
I got a similar five minute lecture, same as the old guy. Keeping US citizenship doesn’t cost anything.
I had written my ‘renunciation’ letter in the context that it sounded like I wanted to relinquish if I could. The answer was No. The reason was that when I took the oath and became a Canadian, ‘did I do this with the ‘intent’ to relinquish my US citizenship’? Since I couldn’t show or prove intent the Consul didn’t think this applied to me. I said, “I’ll renounce, where do I sign”? I wasn’t rude about it but I did push to get through the process. I raised my right hand and the Consul read the ‘oath of renunciation’ to me. I said ‘I do’, signed the two documents and was out in 10 minutes. No second meeting required. I was told that it could be 6 months to a year before I get the CLN. Until then I’m supposed to live like I’m an American.
It was all done in 10 minutes! As I walked back to my work place I felt that all the crap that had been heaped on me since August of 2011 had lifted. As I said to the Consul, “now, I’m just like 35 million other people, and that can’t be bad”.
The staff was polite and efficient and the whole process went real well. I hope that any of you who choose to take the step of renouncing your US citizenship have the same experience I did.
@M: “Just like people now regret doing OVDI, they will regret renouncing.”
I don’t see it that way. If you don’t live in the US and have no intention of doing so in future, US citizenship is no more use to you than a (ruptured) appendix. Getting rid of it is pure upside.
@all, The US is like a Tumour, if you don’t remove it, it will just continue to grow and destroy you..
You want to save money? Do nothing.
A citizenship (and residency) is an asset, no matter the country. What you are a citizen of is your business, and only your business, that you need not tell anyone, just like your money and assets.
Giving up an asset because of a potential liability should be studied and measured very carefully.
I am seeing (pop culture) romantic analogies and medical analogies. I am not seeing legal or financial analysis.
The only area where I could see somebody regretting renouncing is if it severely disrupts an inheritance from a US-based family member. Otherwise, I think that most of the people on this board have little to no use for a US passport and yield no benefits from it (only problems), so it won’t be missed. We are actually in the informed minority – Recent surveys from, I think it was the Globe & Mail, showed that the vast majority, the stampeding herd, are collectively doing absolutely nothing about FATCA and their FBAR reporting requirements. THAT is the approach that will get people in trouble and they will regret not renouncing or sorting out their finances now, not the other way around!
Just saw your newest post, M. Doing nothing won’t save anyone anything in the long term – All that will do is make the IRS penalties steeper and steeper. Bad advice.
@M: US citizenship has never been as asset for me. I gave it up long ago and never tried to reclaim it–but it is now trying to reclaim me.
Rather than being an asset, US citizenship is a financial, emotional, personal and medical drain.
I like sadden’s analogy. Better to get rid of the tumor before it spreads and kills them.
You want a financial comparison? This “asset” (as you call) it has the potential to drain us financially, like a Ponzi scheme or bankrupt us completely like the stock market crash of 1929.
You want a legal comparison? The United Nations condemned Eritrea for citizenship based taxation and financial intimidation through citizenship based taxation.
@ Dan and all. This is a common theme I read frequently: The IRS will do something bad unless I do something. This is a fight or flight response to a perceived threat.
It really depends on your exposure. If you make money that is reported to the IRS by your employer, then yes you have exposure, because the IRS has that information, can garnish your wages, etc.
If you live abroad and the IRS has no information about you, nor do you have assets in the US, you have zero exposure, therefore nothing to fear.
And if Canada has said that it will not cooperate with the IRS on such matters, you have double protection: zero exposure, and 100% protection from the Canadian govt.
To renounce is a possible third layer of protection, but please keep in mind that the IRS and US Congress can make their own rules as to what constitutes taxation. They can always pass a law penalizing those who renounced with twice the fines, for example.
The best defense is to confront and choose to ignore the US Congress laws that are unfair, not to run away. Because they can always make up new laws to try to catch you.
M’s advice works in some situations better than others. A pure accidental who has never tried to assert any claim to be American and never wants to live there can probably just ignore this whole situation. It helps if they derive USC status from a USC parent – a US birthplace may be an awkward thing going forward.
In what situation *is* US citizenship an asset, if you’re legally and functionally a citizen of another country? Really only because it gives you the right to work there, which you might want to exercise at some point in your life. This is no small thing. But the situation you *can’t* be in is accepting a job in the States, moving there, and making it clear to the IRS that you’re a delinquent taxpayer who hasn’t filed returns and FBARs. Then you’re potentially really screwed, regardless of whether there were real taxes actually owed.
So as a practical matter, *if* you want to preserve the right to work in the US at some potential, hypothetical future time, you have to go through the complicated, life-sucking hassle of filing returns *now*. Maybe that seems worthwhile – it depends on the person, and their career situation.
This is why M’s assertion:
“A citizenship (and residency) is an asset, no matter the country. What you are a citizen of is your business, and only your business, that you need not tell anyone, just like your money and assets.”
really doesn’t work. US citizenship *might* be an asset, but at the cost of your time, money and privacy. *Or* you can protect your time, money and privacy, but your US citizenship will not be an asset if you make that choice.
@Halifax and all. I think most of you overestimate what the IRS is and what it can do, based upon some regulations written by its best lawyers, that you read.
They are a completely incompetent bureaucracy, staffed by the lowest paid US workers.
If you accept a job in the US, taxes are automatically deducted from your paycheck, more than you owe. Then some people file to get a refund. Many never file, at all.
To think that you would have to file 10 years of returns is absurd. They will only accept the past 3 years, firstly, second, you can just file the current year. No need for past years.
@ Blaze. I am not sure that complying with US laws in order to renounce, so you don’t have to comply with US laws anymore is the best strategy. It would be easier to not comply with US laws from the beginning.
This is like asking a stalker for permission to not see him anymore, and then having a five year relationship with him in order to meet his condition.
Have to strongly agree with M. There is NOTHING the IRS can do once you decide to lay low and not visit the USA. End of story.
But if you lie low and don’t enter the USA, then your US citizenship isn’t an asset.
Who said that US citizenship was an asset?
Oh see your point. I do not agree with M that US citizenship is an asset. It is for many of us a clear liability.
@M
I don’t understand the ‘pop culture / romantic’ and ‘medical’ analogies you refer to. Do you think the emotional and medical issues encountered by so many are not serious? That’s a bit demeaning, don’t you think? Are you, yourself, and your family, ‘US persons’ having to rethink your citizenship?
For most of us, to leave the US citizenship millstone behind so we never have to again think of the US is the right decision. We respect the decisions others have to make for themselves, if it was based on their good research, circumstances and even, perhaps, their age and how close to retirement they are. We here are not a stampeding herd rushing to renounce (or, better still, relinquish). The many of us deciding such have come to our conclusions after very careful consideration. I would also say that most of us NO LONGER HAVE TRUST in the government of the country of our birth.
Perhaps someone with greater wealth and exit tax possibilities has more valid reason to keep their citizenship. And, there are other reasons, like family and job opportunities. Although, with the way the US changes their “laws” (without, by the way, taking the responsibility of informing those who believed they lived under a different law – just throwing penalties around for, in most cases, no taxes owed), many of us do not wish to gamble for no reason other than to “have” that US citizenship — we cannot see any value vs the risk.
I don’t want to live the remaining years of my retirement continuing to ‘check in’ with the home land and I don’t want this mess left to the executors of my small but hard-earned estate who would have to continue the insanity of administration for my developmentally-delayed son (zero taxes owed — much better benefits here in Canada where his family is). I may have been born in the US, but Canada is absolutely where I want to be — why would I have stayed otherwise?
We see the good portion of vindictive crazies for US legislators and senators of the US and read what a lot of those most ‘patriotic’ home landers think of those who left to live in ‘foreign lands’. We are labelled traitors and tax evaders. No thanks — I have better things to do with my spare time and other worries needing more of my attention and retirement savings.
@M
How can you possibly believe that anyone who 40 or 50 years ago, “relinquished” their U.S. citizenship in order to become a citizen of their country of residence and has spent those 40 or 50 years contributing to their country of residence, with very little contact with the U.S., would now consider U.S.citizenship an asset.
Sorry but I left my country of birth as an 18 year old college student; I have had my children in Canada, married to a “Canadian” husband. I have buried a daughter in Canada and a husband in Canada. Today I survive on CPP that my late husband earned in Canada and investments that his life insurance and the sale of our home allowed me to purchase. So in other words, all my assets are Canadian, not American. And according to your reasoning, I should now be not too hasty applying for a CLN that I should have had 40 years ago. I should start filing U.S. tax returns and FBARs to my country of residence listing those same assets. GET REAL!!!!
M –
There is validity in some of your argument. I used to buy it a lot more.
The separate trajectories of FBAR and relinquishment / renunciation procedures over the past decade foreshadow worse conditions on the horizon. Take the panic of the close of 2011 OVDI as presage. And look at 2012 VD3 with that stepped-up penalty.
Consider as counterexample the many persons who have spent their working lives in Canada and would never qualify for post-65 medical coverage in the US. Isn’t $450 for a one-time renunciation a much better deal than to see multiples of that amount go to an accountant every year forevermore to file useless paperwork of ever-increasing complexity for no benefit whatsoever? And potential detriment?
Not to mention putting closure to a set of aggravating uncertainties. Pass the SWAN test – ditch that poor investment in an extra citizenship and Sleep Well At Night.
I agree that the US is exposing its own festering incompetence as much as anything else. So why suffer ongoing effort and cost to preserve a dysfunctional connection to such incompetence?
Canada for the most part is a country that is 4000 miles long and 100 miles wide. That southern border looms large. To say just don’t cross may not be such a simple solution.
@all
Interesting thread. Let’s focus on M’s:
“You want to save money? Do nothing.
A citizenship (and residency) is an asset, no matter the country. What you are a citizen of is your business, and only your business, that you need not tell anyone, just like your money and assets.
Giving up an asset because of a potential liability should be studied and measured very carefully.
I am seeing (pop culture) romantic analogies and medical analogies. I am not seeing legal or financial analysis.”
____________________________________
Renunciation is a personal decision. The issue is not whether U.S. citizenship is an “asset”. Let’s imagine that it is. The value of that “asset” must be measured against the costs. This should be “measured very carefully” with “legal or financial analysis”.
Okay, let’s do that.
Financial Aspects of The Cost of Retaining U.S. citizenship
Everybody has a different situation. But, remember that if you renounce you will have to have five years of tax compliance. That may or may not come at a cost (depending on whether you have been filing US tax returns). I have the impression (but have no actual knowledge) that some are to date with their filings and others not. Furthermore, some of you are worried about filing U.S. taxes when you may not be U.S. citizens.
For those up-to-date on the filings, and have no impediment to renouncing, then the issue becomes the possibility of the exit tax. It is important to consider the exit tax may or may not end up being a cost. It may end up being a prepayment of the estate tax (we don’t know which way the estate tax is going).
Those who are subject to the exit tax (who don’t see it as a prepayment of the estate tax) may have a financial reason to NOT renounce.
But, those who are NOT subject to the exit tax (remember we are talking finanical analysis) have a very sound financial (if this were the only consideration, but of course nobody would renounce for purely tax reasons) to renounce. Why? Through inflation it won’t take long for you be a “convered expatriate”. Owning a house in Vancouver would do the trick. Remember again that the U.S. has an estate tax to deal with eventually. Now, I don’t know how the U.S./Canada tax treaty affects that.
Those are “some” of the possible financial considerations and one part of the cost.
Non-Financial Aspects of the Cost of Retaining U.S. Citizenship
Simple you are treated like a criminal and with the advent of FATCA you are required to live under supervision. You can’t live a normal and productive live. Plus you have to continue to think and worry about this.
Sure U.S. citizenship can be viewed as an “asset” (in limited circumstances). The question is whether the costs outweigh the value of this asset in any signigicant way. This is for you to decide.
Finally, unless I am missing something, there is no way to renounce without being in tax (and probabaly FBAR) compliance.
The very existence of discussion about renouncing U.S. citizenship assumes that people want to be in compliance. Many of you seem to be worried that you are not in compliance because you became Canadian in the 70s or early 80s and have not been filing tax returns. This has been the subject of numerous discussions. I suggest:
If you have committed an expatriating Act (becoming a Cdn citizen for example or being a justice of the peace) prior to 1986, a clear reading of s. 349 gives you ample grounds to argue that you are not a U.S. citizen. If you are in this situtation your time would be much better spent working on the “state of your U.S. citizenship” (no pun intended) instead of filing tax returns. If you are not a U.S. citizen, then you should not be filing U.S. tax returns.. Furthermore, unless you can find something in s. 349 of the INA that says that loss of citizenship is conditional on the issuance of a CLN then …
So, there is a logical and financial analysis to this issue.
As Phil Hodgen says: “U.S. citizenship is a problem to be solved”. That may be a way to view the solution.
Finally:
@Fullturtle
I thought I read a suggestion that you thought the costs of this would prevent retirement or something. Two things:
– your first stop should be a good citizeship/immigation lawyer;
– second I have the impression (just an impression) that your situation is fairly simple. If so, remember the December 2011 FS for Canadian dual citizens (they actually spelled it “duel”) This should give you clear, inexpensive guidance for how to put this behind you quickly. You might want to hire a professional to write the “reasonable cause” letter.
@Outreagec
I thought I read that your mother was a Justice of the Peace. It seems to me that this is a fact (see s. 349) which would strengthen the claim that she is not Cdn. It would be a great tradgedy for her to go file taxes, etc. without really exploring this.
I offer this as non-emtional logical analysis. But, it is of course not legal (or any other kind of advice).
I think many of you are receiving bad advice.
Just tell your financial adviser that you no longer want to file US returns.
If you already don’t file, then don’t start. No need to bother with consulates and idiotic forms.
You are not seeing that the DoS/IRS has set up a game for you to play and you are falling for it. And lawyers and accountants are happy to take your money to “help you” play the game.
If you are integrated in Canadian society you don’t owe the US anything, not even a goodbye letter.
Dear M,
I admire you that you play the rule of your own -:) I wish I learned it earlier..
@M
The problem is that with FATCA your financial institution could withhold 30% of your yield on investments or deny you an account in Canada if they discover that you are a US person. So a CLN is necessary to deal with the Canadian financial institution so you will be treated as a Canadian.
@ij and renounce
A bunch of words are not laws, unless it has, at least, jurisdiction and enforcement.
@greyowl
So be it. Wait and see if anyone will dare to take your money. Make them make the first move.
Then take appropriate action. There will be many wealthy and powerful people who will act before their money is taken. By the time they get to your money it will have been resolved. Either FATCA will be refused (99.9% likelihood), or people will move their money where it is safe, and you can just follow their lead.
I cannot see Canada allowing its residents money to be taken from them and given to a foreign country. The most they might do is provide your name to the IRS.
PS Too Much Coffee
don’t wait too long. I am pretty certain Mrs. A. will not be there that much longer.
@M
“Just tell your financial advisor that you no longer want to file income tax returns” – perhaps you don’t understand the ramifications of FATCA. If it goes through in the form the IRS wants it to go through, then the financial advisors will have an obligation to report on any client who they believe to be American or close the account. I really don’t think telling them “you no longer wish to file” will cut it.
Hi Too Much Coffee! Nice to see you here.
I renounced 7 weeks ago in Toronto. Mrs. A confirmed for me that you make the appts online. I can send you what is needed so you can go to the first appt totally prepared. I didn’t realize you were far away. I can give you a phone number to call so you can speak to someone who will know how to help you.
BTW, for clarification, the Oct 22 meeting was the first of two meetings for the 22 people who wanted to renounce. It was not a “ceremony.” Mrs. A told me they had not done this before but were trying to adapt to the situation (so many more than usual applying all at once). It was not possible to get an appt in November as the spots were taken up by those who had their first meeting in Oct. Two of our buds from the old Expat Forum were in that group. I know that they completed their 2nd appts. Do not know about the rest.
They have changed their approach several times since then, as to whether appts had to be booked directly, the 2nd appt only booked after the first one completed and so on. As far as I know, you definitely book the first one online as “request notarial and other services not listed” You will not pay the $450 until your CLN comes back.
You can write me at nobledreamer 16 at gmail dot com.
@tiger
I understand the ramifications of FATCA. Some people in Congress got drunk and they get mean when drunk.
Do you think banks will jeopardize their business to comply with drunk Congressmen? and that Canada will relinquish her sovereignty to drunk Congressmen?
I don’t think so.
Either it will be rejected, or gaping loopholes will be opened. My guess is that Canada will exempt Canadian residents, if they don’t reject it outright.
Even if your financial institution reports your name, there is nothing the IRS can do, if you are a Canadian citizen living in Canada.