As reports flood in from stalwart Brockers — CLNs arrive for Peg11 and recalcitrantexpat, Don Pomodoro gets a second appointment and renounces — and advanced backstories trickle in from lurkers and indirect reporters, it is still the case that almost all are still somewhere in the middle. Few share the absolute closure of schubert1975.
In broad terms, these are the stages of U.S. personhood for extraterritorials:
• Realizing that U.S. personhood is problematic
• Assessing the options and current conditions
• Deciding to act now or to sit tight
• If acting, engaging in some combination of attempting to become compliant /
maintaining or enhancing compliance / seeking exit
• Monitoring an ever-changing situation to gauge position in the middle
• Pondering the subroutines and timelines of exit: consulates, appointments,
relinquishment/renunciation, receipt of CLN
• Seeking to log out of the system without encountering a fatal error: 1040+1040NR
and 8854 and FBAR, unless confident with backdated CLN
• Dealing with detritus and fallout (eg, ITIN vs SSN, Social Security)
Plaudits to Michael J. Miller for his recent provision of informed clarifications on Form 8854, even if certain margins of uncertainty cannot be dispelled.
The front edge of a pioneer wave seems now to be heading into the later items on the list — the aftermath of CLN.
A recent question on the relationship and timing of ITIN superseding defunct SSN has fallen off the plate, but deserves a good answer. For example, at what point after renunciation does SSN “go dead,” and at what point can ITIN be sought? Back to that crazy limbo of having renounced but not having a CLN in hand.
Phil Hodgen talks about logging out of the system properly, and the broad outlines are clear. Read the form and instructions for the multimultipurpose 1040NR, and see that the application to expatriation is as clear as mud — compounded by relationship to that other real return which is for one whole year, not two partial years. Even an ordinary dual-filing accountant is unlikely to penetrate that gobbledygook with assurance.
The other middle that applies to everybody, no matter what they’re doing or not doing, is — as schubert1975 perceptively pointed out earlier today — the utter uncertainty about what comes after the November U.S. election, and how the changes that follow may affect those swimming midstream in the river they can see now, those who are not even sure how far they will manage to have swum through the opacity by that point.
Emblematic of that inability to assess circumstances is Don Pomodoro’s feeling moved to ruminate, on the very day of his renunciation, that conditions just might change, to render that renunciation unnecessary.
The United States is a headless chicken that has become the marvel of the barnyard.
Problem is, even if you renounce/relinquish and take the steps to eliminate US person exposure completely (or so you think), you will never be entirely free of it, especially if you have “indicia” of US person status. For example, if you were born in the United States, this will always be on your foreign passport and you will have to endlessly justify your non-US person status to foreign financial institutions that take you as a client, as long as the FATCA regime exists. For non-US persons with indicia of being US persons, there will always be a residual risk that the FFI you deal with may take unilateral steps for any reason with regards to your indicia. For them it’s risk assessment as well and for example who says they will not want to put you in a US person category anyway (admittedly the chance of this happening is small if you have sufficiently proven to them you renounced/relinquished). As a further example, many FFIs in Switzerland still seem to think that US persons who renounced STILL have filing requirements for the next 10 years. Therefore, they are somehow at risk if you have not properly filed your income taxes, so for them you are still kind of a US person.
All this we can thank Uncle Sam’s deeply complex and byzantine tax and regulatory policies.
@Wellington
To add to your point, I know first-hand that there are UK financial institutions that will turn you away if you have ever been a US person for tax purposes at any point in the past. Not just the past 10 years, but forever. That goes far beyond the strictest FATCA interpretation, and it’s a measure of just how much non-US banks want to deal with it. It’s also a depressing indication that even a CLN may not be enough to inoculate against FATCA.
I am still fighting the IRS over my 1040 from the year I expatriated, 2010. They decided to disallow my Foreign Earned Tax Deduction for the part of the year that I was still a US citizen. They claimed that this was because I had failed to attach a copy of the bi-lateral tax treaty between Switzerland and the US. So I got a letter demanding 5 figures of back taxes and penalties. Shortly thereafter I got another letter from the another department in the IRS (dealing with alternative minimum tax) claiming I owed a different amount of money.
After a year with numerous snailmail letters and phone calls we received a letter from the first department saying that they were accepting our taxform in a “letter of no change”. (BTW: did y’all know that the IRS will not forward your phone call, provide direct numbers, or provide email addresses?). Shortly after receiving this letter of no change, we received another belligerent letter from the AMT people threatening liens if we didn’t pay up. For about the 10th time we made copies of past correspondence from department 1 and mailed them to department 2. That was about a month ago and we are still waiting to see what happens. More than once when I finally spoke to an agent in Philedelphia or New York (I made numerous phone calls to both offices) I would ask if it was even possible that 2 departments within the IRS could both have claims open for the same person in the same year. I never received a satisfactory answer from any one of the IRS agents. Aside from being about the most sinister department of the federal government, they are probably the most inept.
@Watcher
That is outright DISCRIMINATION / PERSECUTION. Which UK banks are doing this? It sounds like a good opportunity for lawsuits.
@Rick Blaine
It’s TD, in its UK guise of TD Direct Investing (formerly TD Waterhouse). So far only investment and trading accounts. I don’t know of a case where an ordinary bank or savings account has been refused on the same grounds. Yet.
I have to say as a long-time expat living in the UK, I’m very worried about our banking accounts and other financial accounts (insurance and the like). Although I think the FATCA joint agreements are farcical, since I doubt the UK will ever get back anything from the U.S. that is relevant, I’m hoping that by having a joint agreement in place I will be able to at least carry on with my life without too much harassment from the UK financial industry. When I read this story about the U.S. expat living in Switzerland, it really made me realize how difficult things could become for our family.
http://genevalunch.com/blog/2012/06/21/swiss-banks-step-up-efforts-to-identify-quarantine-or-avoid-us-citizens/
@Expat in the UK: Interesting article about the Swiss woman. My children both opened bank accounts using their Swiss passes years ago and until now their banks are unaware that they are US Persons. Perhaps through FATCA declarations the news will get back to these banks. At some point our children will hit the FATCA fan, so we are busy helping them get ready to renounce.
One of the comments linked to a Guardian article about Boris Johnson dropping his US citizenship;. What a big-government commie rag the Guardian is, just look at what the author wrote:
“Alas, you made the mistake of renouncing your American citizenship in
the Daily Telegraph last year. After an unfortunate mishap you
encountered on a vacation with your family to Mexico, via Houston,
American immigration officials instructed that to pass through the US
you needed your American passport, long since expired. “Right. That’s
it. Entre nous c’est termini,” you wrote, and with those words, my heart
sank. To my utter dismay, you declared that, “after 42 happy years I am
getting a divorce from America.”
Why Boris, why? Why renounce your birthright over such a silly misunderstanding?
Irrespective of the law and your own feelings about American citizenship, I would like to make the personal (yet legally unsanctioned) appeal welcoming you back as a US citizen. We need your leadership, your eloquence and your offensive, inappropriate, off-the-cuff remarks now more than ever.”
I am sure this author would be the first to accuse Saverin of renouncing for tax purposes, and in typical hypocritical liberal fashion we can see the implicit dual standard of one set of rules for lefties and another set for everyone else. (BTW, please don’t anyone try to claim that
@ConfederateH
Being ignorant of the political beliefs of the writer of the comment, it would seem to me that the comment simply betrays a profound lack of understanding of the hassles that Americans abroad face, hassles that are exclusively caused by their own government. This is a common symptom of homelanders who can’t or don’t want to understand what expat life is like under the US’ tax regimes.
@Rick Blaine
Where does it say that on the TD website? I see notices that accounts aren’t open for US nationals, but haven’t seen anything quite as extreme as what you mention. This would seem to be overkill on the extreme if they are actually doing this!
@Wellington
Thank you for your comments, Wellington. I do agree that ConfederateH and I probably would not agree on a wide range of political issues, however, I get the impression that he and I would most definitely agree that FATCA is an invasion of our privacy and our rights to greater or lesser degrees. I think he and I would both agree (I hope) that taxation without representation is fundamentally wrong.
@ConfederateH – No matter what Boris Johnson is or isn’t, he is certainly a clever politician. He has been in the papers and in elective offices for as long as I lived in the U.K. He has an uncanny knack for saying the right thing at the right time (even if it is controversial) and I certainly don’t blame him at all for divesting himself of his U.S. citizenship.
@Don Pomodoro
As far as I can tell it’s an unwritten TD policy, visible only when someone complains about it publicly, so we can’t really tell how prevalent it would be. Example here. This anecdote by the way is not connected in any way to the “first-hand” experience I referred to earlier. Just some other person who hit the same barrier.
I can see how this policy could be attractive to FFIs. Why bother to differentiate between multiple different classes of US and ex-US persons when you can simply and easily lump them all into one toxic barrel?
Interesting. I wonder how they would treat an “accidental” who was born overseas, since renounced and now has no further connection to the US. That would truly tell how cautious they are being.
This sort of discrimination needs to be brought before the ECJ – I don’t think it would stand a chance if challenged:
http://www.nytimes.com/2011/10/07/opinion/07iht-edsokol07.html?_r=2
Edit: I just realised that I technically (or potentially) match their supposed “exception towards opening an account”, since I only ever had a part time job as a student in the US and would have a CLN to show in a few months. I might just try to see if they would potentially open an account just to probe this policy – I used to be resident in the UK as well…
@Don Pomodoro
We can only guess. I suspect the answer would be refusal. TD appear to view any substantial US contact as poison to be avoided, but extrapolating that from two cases is quite a stretch. However, in neither of the cases I’m aware of did TD ask directly about anything beyond being a “US national”. Or even go looking for such. In both, they got their clues from other circumstantial evidence innocently volunteered by the potential customer who was unaware of their (presumed) unwritten policy. A former US citizen who knows to permanently keep quiet about past US connections might be fine. DADT, in other words.
@all
Whenever you talk to somebody who left an abusive/relationship marriage you will find two things:
1. They struggled with the decision to leave;
2. Once gone they wish they had left sooner.
Renunciation is for all of us an important decision. But, not all important decisions are difficult (painful maybe, but not difficult). U.S. citizens abroad are being subjected to a kind of abuse that reminds me very much of what happened in a couple of European countries in the last century.
Phil Hodgen had it right:
Get out while the going is “semi good”.
@DonPomodoro; re the link you posted above – http://www.nytimes.com/2011/10/07/opinion/07iht-edsokol07.html?_r=2 “ ‘For Tax Purposes, We Are All Americans’ By RONALD SOKOL, Published: October 6, 2011 “Yet in one aspect the United States has expanded the power far beyond
limits fixed by other nations, and the question of whether it has
violated international law in doing so should be raised. ”
– the potential for a European court challenge – That would be something to see.
In the Middle, but not US persons:
The many many others who are stuck ‘in the middle’ are our non-US partners, spouses and families – they are severely affected, but have no obligation to the US – and cannot renounce – unless they ‘renounce’ their relationships with us. As recent stories from Switzerland show, even non-US spouses are now being denied banking services because of a relationship with a deemed US ‘person’, even if banking and assets are separate. And advised that perhaps divorce – *financial and **actual might solve the problem. Our US burden and captivity is also theirs. Any financial loss falls on an entire family or marriage, or business, it cannot be discussed as if it is confined or ‘quarantined’ to just the one US individual.
*”The one group that appears to be missing from the discussions is bank clients who share accounts with US citizens, from spouses to business partners. Fatca obliges FFIs to report any US clients, and accounts to which they have access, personal and private, will, with their permission, be available for reporting to the IRS. The framework does not yet address the issue of how those sharing accounts with Americans, who do not believe the US tax division should have access to their accounts, will have to deal with Fatca. The situation currently is that banks in Switzerland are advising US clients who share accounts with
non-Americans to renounce access to them.” from http://genevalunch.com/blog/2012/06/22/swiss-us-tax-compliance-framework-doesnt-address-problem-of-non-us-spouses-partners/
**”Had he been sole owner they would breach the contract because he is considered a dual national (which he is not!) because of his marriage to me. He was even told the only solution would be to divorce!” from http://genevalunch.com/blog/2012/06/21/swiss-banks-step-up-efforts-to-identify-quarantine-or-avoid-us-citizens/ by Ellen Wallace on 21 June 2012 at 16:26
The US is bludgeoning whole non-US families caught in the middle, as well as individuals deemed US ‘persons’.
@usxcanada
A good synopsis of the algorithm we all have to go through when deciding whether to renounce. Currently, I’m in the “act now” category, having entered ovdi2011 and awaiting word from the IRS. Based on others reports it may take a long time to get clear of the FBAR mess.
While I fully understand why folks renounce, I have concerns about the consequences.
I have a lot of family in Amerika, and want to ensure I can visit in the future. Others have advised that, if I renounce, I would be treated like any other Canadian at the border. While I wouldn’t be a covered expat, given the childish behaviour of Senator’s Shumer and Casey, I’m not so sure that is correct!
*It doesn’t end with taxes. Try asking a U.S. Consulate abroad for consular services; you have low-level consular officers making life and death decisions apparently without any input or guidance from Washington; that is unless YOU (the citizen) can find and call the appropriate people in the U.S. State Department to help.
I actually had a U.S.Consular officer (supervisor) tell me that Germany was not capable of mistreating a U.S. citizen because it is an ally of the U.S.A.
Our government is working increasingly against it’s own citizens.
@Badger
I knew that the situation in Switzerland was worse than in most other countries, but I truly had no idea 🙁
Our rights to be treated as citizens of the countries that we live in are being trampled upon more and more here in Europe it seems. I don’t see how this can continue on this trajectory; something has to give and I hope that that something takes the form of a high profile court case that I mentioned before. All that we want is to be treated as exclusively EU or EEA citizens whilst resident in our respective countries and an end to this blatant discrimination!