In a post last week, I pointed to a San Buenaventura/Santa Barbara immigration lawyer who goes around on Yahoo! Answers scaring would-be renunciants with tall tales about how they’ll be banned from the United States. But he’s hardly the only immigration lawyer giving bad advice to emigrants, merely the most malicious one. These “answers” sites are full of answerers whose worldview is professionally skewed by their daily diet of people who want in to the United States; they are not qualified to give any advice to people who have got out, regardless of their good intentions — in particular due to the potential tax aspects of the situation. Some are merely not well-informed of those tax consequences; others — especially migration consultants in China — deliberately seek to downplay the tax consequences in order to move as many clients as possible through the door.
In the latest iteration of this recurring problem, a Canadian man asks over on JustAnswer.com whether he should get a U.S. passport or renounce U.S. citizenship:
I have been a landed immigrant since March, 1970 and a Canadian Citizen since 1978, having come here from the US. I did NOT renounce my US Citizenship but would like to know what the ramifications are to me as a Canadian citizen, if I choose to do so now,as I am now being pressured to get a US passport. I travel to the states once per year for pleasure and have had no difficulty using my Canadian passport for the past 15 years. I have no desire whatsoever to move back. I have never earned money in the states since coming to Canada and have no criminal record. Are there any negative aspects to renouncing?
He signs off with his real name, which I have omitted here because I do not want this post to be a Google hit for his name without his consent.
This gentleman is in quite a similar situation as the hundreds of commenters and thousands of lurkers who have come to the Isaac Brock Society looking for peer advice since 2011. The normal answer we give to these kind of questions: do not apply for a U.S. passport. You can easily argue to the U.S. State Department that you relinquished your U.S. citizenship in 1978 by naturalising as a Canadian. Your exclusive use of a Canadian passport since then to enter the U.S. would be a strong argument in support of your relinquishment, especially since you have not earned any U.S.-source income (meaning you have not used your Social Security Number since you moved to Canada — if indeed you ever had one). The only difficulty would be if you did something else after 1978 indicating a positive intent to retain U.S. citizenship, like applying for a U.S. passport or registering to vote in a U.S. election.
There are no U.S. tax consequences for someone who relinquished in 1978. Getting a U.S. passport today when you have no intention of working in the U.S. and you are nearing retirement — with much of your savings likely in a Canadian RRSP and/or TFSA — would be a bad idea bringing U.S. tax & paperwork misery to your golden years. As a Canadian you will continue to enjoy visa-free travel to the United States, and in the unlikely event you really wanted to move to the U.S. in the future you could probably even get a U.S. work visa after you have your Certificate of Loss of Nationality of the United States in hand.
Unfortunately for our questioner, he got the following response from a not-particularly-clued-in Miami immigration lawyer, for which he is apparently being charged CA$39:
Why wouldn’t you want a U.S. Passport? Who is pressuring you to get one?
As all the friends of Isaac Brock (even those of us in Asia and Europe and South America) may guess, and some have even experienced personally, the questioner is probably being pressured to get a U.S. passport by U.S. Customs and Border Patrol agents. When he crosses the border, they threaten to disrupt his holiday and refuse him admission to the U.S. with their bureaucratic, one-size-fits-all approach to enforcing the law that “U.S. citizens must use a U.S. passport to enter the U.S.” — because they cannot understand the concept of people who were born in the U.S. emigrating from the country and changing their nationality. And of course, the reason you would not want a U.S. passport is because it is far more advantageous not to be a U.S. citizen when residing permanently outside of the United States.
Update: the Canadian gentleman added more details to his question confirming exactly what we all guessed — he’s worried about harassment by U.S. border guards — and in response the Miami immigration lawyer updated his answer with the following howler:
By just spending a little more than what you have already spent on this question, you could get a U.S. Passport and have done with it. You use the U.S. Passport to enter the U.S. and the Canadian passport to enter Canada. That’s it. Neither country has any issues with a person having both. It’s just a benefit to having both.
And I don’t even think there are any major issues because there are treaties between the U.S. and Canada so that you aren’t taxed twice.
CA$39 for one paragraph of horrible advice and one paragraph of blatantly incorrect speculation without any legal citations whatsoever.
I would be happy to write using my real name but have no idea how to contact him/her.
I’ve sent this gentleman a message in LinkedInby trying to ‘connect’ to him. Hopefully he won’t report me as a spammer as I like using LinkedIn. I couldn’t put a web address but asked him to google Isaac Brock Society.
This is just my opinion but:
US persons outside the US should avoid using MOST US based lawyers and accountants (there are exceptions). There are two reasons for this:
1. They are unable to understand the totality of your circumstances (i.e. what is the life of a taxpayer who resides in Canada or Europe?);
2. Deep down, like most “Homelanders”, they think there must be some nefarious reason for not living in the U.S.
And a possible 3rd reason: in the case of lawyers/accountants their careers are largely dependent on staying in the good graces of the IRS, leaving the question:
Are they really representing your interests?
There are plenty of good tax/compliance lawyers outside the US and in your country of residence).
I invite U.S. based professionals to comment on this.
In general I agree with your statement…..There are plenty of good tax/compliance lawyers outside the US and in your country of residence)…… but I wish it was always that simple đ
My CPA firm (from country of residence) was not part of the solution, they were part of the problem and 3X the price .
@Mike
How was your CPA firm part of the problem?
It is very difficult to choose the right kind of professionals. It’s seem to me that the starting point is to realize that (for most people) the problem is a compliance problem that includes a tax problem.
http://renounceuscitizenship.wordpress.com/2012/01/05/the-taxpayer-the-irs-and-the-professionals-where-to-go-from-here/
These thoughts were also expressed in part of another post as follows:
“How To Select The Right Lawyer
I wrote an earlier post that discussed how to select the right tax preparer to do your U.S. tax returns on a going forward basis. Most people feel that the IRS cannot be trusted. But, can we trust the cross border professionals? The purpose of this post is to share some thoughts on how to get the âprofessional helpâ required to clean up past compliance issues. This should be considered in terms of:
A. How to decide who to retain for professional help
B. How much will it cost?
Re A: How to decide who to retain for professional help
First â You have a compliance problem. This is different from a tax problem. The tax problem may have caused the compliance problem, but now your problem is to bring yourself into compliance. Hence, you need a professional who is experienced with U.S. tax compliance issues. You do NOT go to your local tax preparation firm. You do go to a lawyer experienced in compliance issues. Remember that only a lawyer will give you the benefit of âlawyer clientâ privilege.
Second â Your specific facts must be understood. The most important principle is to find somebody who will really take the time to understand your situation. There are infinite permutations of facts â some helpful and some not so helpful. Your route to compliance must be based on an analysis and understanding of your specific situation. Any adviser who recommends a specific course of action (for example OVDI or compliance going forward) without a lengthy discussion of your history should NOT be retained. Your decision must be the result of an analysis of you. Your lawyer will need to write âreasonable causeâ letters. The effectiveness of the letter is a function of an understanding of your facts.
Third â You need to be able to speak freely, honestly and openly. Because the decision is the result of an analysis of your specific factual situation, you should consult with a lawyer. You need to be able to share all relevant facts with the professional. Consultations with lawyers are subject to âlawyer client privilegeâ. Consultations with accountants are not. Lawyers cost more, but thatâs life.
Fourth â the lawyer who advises you on what to do, doesnât have to be the same as one who helps you actually come into compliance. Seeking professional advice in the compliance area is similar to obtaining the services of a financial planner. There are âfee based plannersâ and planners who survive off commissions from the sale of products. There are planners who charge for their advice on an hourly basis. There is an analogy here. The reality is that it is in the financial interest of the lawyer for you to be in OVDI (or something elaborate). For this reason, you might consider:
Using one lawyer to help you decide how to come into compliance;
And use a different lawyer to bring yourself into compliance.
To put it another way, you might consider simply paying for a âcompliance consultationâ where it is clear that you will NOT be retaining that lawyer to bring you into compliance. This could be the best money you will spend. Then, move onto the decision of what lawyer to use to bring you into compliance. In other words, the decision to undergo surgery is different from the decision of who will be the surgeon.”
In other words, you the tax issues are part of a larger problem and should be dealt with in that context.
Personally, if I went to a lawyer it would be a citizenship lawyer, to establish that I am not an American.
@USCitizenAbroad …How was your CPA firm part of the problem?…. If you have to send back the returns 3 times because you found material errors (not even in my favour đ ) If you cannot trust the work or word of anyone involved anymore because you are a “loss maker“ for the CPA firm with regards to time (had a fixed price agreed). I had 7 CPA`s from within the firm involved in my returns and nobody took charge or was leading – the left hand did not know what the right hand was doing. It was pretty bad and took 3 month to complete unfortunately I did find 2 more errors after I signed đ but of course they now would not pick up the phone or answer e-mails anymore. Which meant I had to look for another CPA now who was correcting/amending those returns according to my notes….. and it is still going on
@USCitizenAbroad …. regarding your post …. I did this research last year and I could write a book about those issues you are mentioning but unfortunately it always depends where you live and generalization is not advised because in some places the choices are very,very limited.
There is a huge gap between theory and practice. A CPA firm (who of course consults with their own in-house tax lawyer or Caplin & Drysdale who seems to consult with dozens of firms here in europe) might recommend VD – a tax lawyer OVDI etc…. All of them should be part of the solution BUT sorry I think more and more that they are part of the problem and increase my stress level instead of calming me down. Nobody can be trusted – too much greed out there.
Mike
That’s why you should separate the issue of:
1. What do I need/want to do from
2. What professionals do I use to do it.
If a lawyer/accountant is trying to get you to retain them (OVDP is a fee annuity for a lawyer) they will/may try to get you into OVDP. That’s why you go to a lawyer and say:
I am NOT going to retain you to do any compliance work. I am going to retain you to help me make the decision on how to come into compliance. You will pay a fee for that discussion/advice and will have a much better chance of fair identification of the issues and possible solutions. That in IMHO is the most rational way to go.
Also, the first consultant is almost sure to have better judgment than you do on what lawyers/accountants to use from that point on. Your experience with your CPA shows that you chose the wrong firm (obviously). But, how could you have known better? You couldn’t. But, somebody else might have better judgment in that area.
Anyway, I think you get my point.
Hi.
Just wanted to let @Eric know that I’ve now been in contact with this gentleman and have given him some basic information about US citizenship, taxation, etc. I’ve also sent him the details of this website.
Yes, if the person in question took a foreign nationality at a time when the taking of such foreign nationality would cause him to relinquish his US citizenship by action of the law at that time, then he shouldn’t have to do anything. He is not a US citizen. He shouldn’t have to renounce, and he shouldn’t have to get a US passport, either.
@US in the UK: thanks for that!
….he doesn’t want to do anything that can be construed as having a retention of US citizenship, such as filing with the IRS, applying for a passport, etc.
It might be advisable to follow NorthernShrike’s advice and get a citizenship lawyer if the US attempts to claim him as one of his own after his act of relinquishment.
Fresh in the news today:
http://economiccollapsenews.com/2013/03/12/top-wealthiest-10-pay-majority-of-federal-income-taxes-in-u-s/
@SwissPinoy
Ultimately however, this just plays into the hands of those homelander politicians that keep bleeting out that the rich are nothing but disloyal tax dodgers.
It also ignores the issue of those that are not rich but also want out, and while they’re talking 1% here, and 47% there, they’re all collectively choosing not to deal with the fact they’re actually talking about real people. Meanwhile, I am beyond sick and tired of hearing these fucking people refer to me as a percentage in order to fuel their own agendas, as though my role is to be a pawn or a useful idiot.
…..I am NOT going to retain you to do any compliance work. I am going to retain you to help me make the decision on how to come into compliance… Of course that is a given, I certainly would recommend to stick with a CPA to do the compliance work and do not waste your money on a lawyer like @not that Lisa unfortunately had to find out. Secondly how to come into compliance can mean 3-4 things which we do not have to repeat here again but I question the motives of the other party involved. Btw. for this discovery process you do not need to hire a tax lawyer anymore anyway it is all here on the blog by now . I repeat what I said before : it is very likely that a tax lawyer will increase your stress level and not calm you down ! There are exceptions I am sure . Regarding my choice of CPA firm I honestly doubt it that somebody else might have better judgment in that area – I did my due diligence and it was just bad luck plain and simple. The system is broken and I would not be surprised if in the not so distant future that we will see proof of that on TV.
Looking for an opinion on this piece. It probably has been posted on IBS somewhere, and I missed it, and if so, I apologize for the duplication… I will put over at the questions on Relinquishment as I don’t see it there.
Expats Live in Fear of Malevolent Time Machine
By: Michael J. Miller and Ellen S. Brody
Starting with the ending…
CONCLUSION
More than a few expats find themselves in the same position as John Doe from the example above.
Theyâre understandably terrified that the IRS will pull the lever on a time machine, altering the past so
that their relinquishment of U.S. citizenship never happened, with grossly inequitable and devastating
consequences. The authors can only hope that the IRS will relieve their suffering by issuing favorable
written guidance as soon as possible.
@Just me
It was posted here:
http://isaacbrocksociety.ca/2013/03/05/michael-miller-paper-on-the-exit-tax-applies-propsectively/
Opinion: Nice short concise analysis of the Expatriation rules over the years. Main point is that although 877A is badly written, Mr. Miller takes the position that it applies prospectively (meaning that it affects those who expatriate after 2008 when it came into force). As I recall he bases his argument on the presumption that Congress would intend new legislation to apply on a “going forward basis”.
@mjh49783, yep, there’s no hope for America. The whole nation is basing its policy on “another millionaire left”. Here’s another one fresh in the press today:
What millionaires moving to save on taxes says about them, and us
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/12/what-millionaires-moving-to-save-on-taxes-says-about-them-and-us/
I just wish that I had the millions to go along with the stereotypes!
I think I got good advice (won’t know for sure for another few years) but horrid execution from the reputable, UK based CPA firm that I worked with. They certainly had tons of experience with situations such as mine (thousands of cases according to them). Sadly, they were absolutely awful when it came to getting the work done. Some junior bod spent more than 100 hours collating the information I provided even though I had provided summary spreadsheets with all the information they needed broken down into interest income, dividend income, employment income etc and calendarised for US purposes. They completely overlooked the PFIC situation even though I had produced a separate binder for them and supported this with spreadsheets on the value of investments over time which they had requested. We went through up to 5 rounds of revisions before the returns were correct. I spotted mistakes in the tax rates used by their software. They took nearly a year to complete the work and were outrageously expensive though they ultimately reduced their bill by about 2/3 because I hammered them relentlessly on their price and delivery. I had three different “account managers” none of whom met a single delivery date all of which were dates they proposed and committed to. I considered writing a letter requesting they be banned from their respective professional organisations. If they wouldn’t pick up the phone when I was a client, I’m certain they wouldn’t now either.
For a more recent year, I used a US based, sole proprietor firm who did the work for less than 1/3 the “sticker” price of the UK firm and took just 5 days to complete the work though it was outside “peak” filing season.
Seeking emigration advice from an immigration lawyer is like seeking marriage advice from a divorce lawyer!
@Schweiz-Amerikaner
Good one!
@USCitizenAbroad
Thanks for the link. I had to think it was somewhere. I should have search harder in the archives. đ
I don’t know if this is the right place to post this or if it matters for or about anything, but a columnist at Bloomberg, Clive Crook, writes that he is seeking to renounce US citizenship:
http://www.bloomberg.com/news/2013-03-13/liberals-should-embrace-the-ownership-society.html
Poor guy. With a name like that, the USG clearly has all the evidence they need to convict him of… well, there surely must be something he can be penalized for…