Renouncing Your U.S. Citizenship: Is Divorcing Uncle Sam Right For You?
By Alexander Marino JD, LLM (US Tax)
The billionaire co-founder of Facebook, the only American member of Monty Python, a Civil Rights Leader with a PhD from Harvard, the founder of Carnival Cruise Lines and owner of the Miami Heat NBA franchise, and arguably the best chess mind to ever live have more in common than you might think. So what do Eduardo Saverin, Terry Gilliam, W.E.B. Du Bois, Ted Arison, Bobby Fischer and thousands of U.S. citizens living in Canada have in common? The answer is all five have renounced their U.S. citizenship.
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I think we are all underestimating the tangible, measurable and invaluable travel benefits attached to US citizenship. As a US citizen, you have the inalienable right to stand in a (generally) shorter line at customs and immigration upon arrival to the US (tangible). Over the course of a lifetime, you could save minutes, possibly even hours (measurable). Furthermore, the border official normally says “Welcome home” which can provide you with a warm and fuzzy feeling that you really can’t put a price on (invaluable).
If only that was actually true.
@Edelweiss
When my wife and I visited Chile in 2009 I had to stand in line for approx. 30 minutes to pay the entrance fee charged to all U.S. citizens (currently US $160, I believe it was US $130 then). The fee is probably just thought to be a little jab at citizens of a country who has a history of bullying them. Can’t blame them, really. I’d be curious to know which other countries extract such fees from U.S. citizens. In any case, to be fair you’d need to subtract that time from the time saved in visiting the US on a US passport. 😉
Incidentally, my German wife didn’t have to pay any extra fee.
@AlexMarino
You refer to ‘thousands’ of US citizens in Canada renouncing their (US) citizenships. Where are you getting your statistics from?
@ USCitizenAbroad
Yes I am a member of Democrats Abroad AND I would also be a member of Republicans Abroad if they had a chapter in Calgary, however they do not. When I realized my own political ideology does not fit squarely with either party I stopped identifying myself as either Democrat or Republican.
With that said, Democrats Abroad in Calgary is a great group that engages in lively political and economic debate. I would encourage anyone (whether a Democrat, Republican, US citizen, or Canadian citizen) who is interested in US politics and economics to check them out. As one member deftly described the group: “we’re a drinking group with a political problem.”
http://www.accountingtoday.com/news/IRS-Update-Challenging-Times-To-Be-Sure-66095-1.html?ET=webcpa:e6841:241779a:&st=email
And, still we have to file the punitive myriad of paperwork to prove that we owe $0.00 to the US. The IRS has to process all of this paper for no $$ benefit to the US. Could there be a better way?
UScitizen, I think the “contrived problem” is simply stating the fact that most crisis issues involving the US these days are only problems b/c the US prefers to make mountains when it could instead level molehills. They inflate issues by making them more complicated than they have to be. The “issue” with non-compliance stems, largely, from the fact that most expats simply didn’t know what the USG required of them and when they discovered it, realized that compliance was nearly impossible b/c the process is by design complicated.
The US never keeps it simple. Probably b/c Congress has no idea how to work together to a common end and the nature of politics and money down there is so riddled with corruption that the average person can’t possibly navigate it.
The IRS could have simply offered to allow people to be compliant going forward. Congress could have just allowed expats to file as non-residents. They could get rid of FBAR. Simple solutions. But instead they dig in (even though they know that they’ve caused the issues in the first place) and refuse to admit that as is, their form nation mentality simply isn’t working.
Animal, totally agree that US citizenship is no more advantageous than citizenship in any other of the 180 or so nations where people live relatively free (sad reality is that there really is no such thing as true freedom. it’s just a gilded cage thing.) Just a note for you, as I know you have children. I was looking at the Hamilton consulate site and noted that the minimum age for kids to be allowed to renounce is 14, which is two years earlier than I previously thought. My daughter is chomping at the bit to renounce and the plan was for her to do so at 16 but she can apparently do so earlier now. Thought this info might interest you.
@notamused
Apparently that blue passport will also save US citizens the $5.50 entry fee the US has imposed on air and sea travellers from Canada. It made NDP MP Pat Martin’s “blood boil” and what Harper called a “cash grab”. This seems like histrionics when you compare it to FATCA’s potential raid on Canada’s treasury!
http://www.thestar.com/news/canada/2011/10/24/us_wont_budge_on_entry_fee_for_canadian_travellers.html
Argh, I think my comment may have been interpreted literally. It was intended to be sarcastic. You’ll spend far more time on 8938s, FBARs etc. than you could ever possibly save standing in a shorter line.
I was going to mention the right to pay travel fees with Turkey ($20) as an example that I didn’t have to pay with my Swiss passport.
@Edelweiss
Argh, I think my comment may have been interpreted literally. It was intended to be sarcastic.
Your sarcasm was loud and clear on my end. 😉
@edelweiss,
I think we all got it — your sarcasm is indeed relevant!
Please let me clarify what I meant by “contrived problem.” In my opinion, forcing thousands of individuals into compliance and making them pay hefty fines when they owe no tax is a problem that is invented/created by the government. If no taxes are owed, and there is no drain on the public coffers, is there really a problem? In my opinion the answer is “no.” In that sense, the problem is “contrived.”
I certainly didn’t mean to minimize the effect that OVDI/OVDP/Streamlined has had on the lives of those involved and I apologize if anyone has taken offense.
@notamused, you are right to question the accuracy of the paragraph about the Name and Shame list. Those of us who have been tracking that list know that the criteria applied for inclusion of names in the list have been inconsistent. Treasury seems to have changed the criteria for the past quarter’s list to keep the list much shorter than it would otherwise have been. It no longer seems to provide any useful information regarding numbers of renunciations and relinquishments.
That’s why I have tried to get a more accurate list of numbers of CLNs issued — numbers directly from the State Department rather than indirectly via the Treasury Department. Just over a month ago I submitted a “dataset suggestion” for such a report to Data.Gov:
https://explore.data.gov/nominate/2412
So far there has been no official response. It might help of some more people will add comments at that site supporting the suggestion.
… the things society is really interested in — the “real” news the media gives us. What’s wrong with this picture?
http://www.calgaryherald.com/life/Steinfeld+this+yoga+teacher+doesn+wear+Lululemon+anymore/8120970/story.html
@Calgary
Lululemon’s owner, Chip Wilson used to be my neighbour. Interesting person. Used to peeve me off that I didn’t fit his sample size. Howz that for trite?
@Alex, I believed that’s what you meant by a contrived problem: that the U.S. government is artificially creating complexity for genuine Expats and ctizens living in other countries who have inherited U.S. persons or green cards that haven’t been formally canceled.
Our lives are being made very stressful. Even though I have recently renounced, I’m still in limbo. I have to wait to see if I’m even going to be approved with as CLN; I still have to file for 2012 and, if approved, 2013; and because my returns are very complicated, I will still have to wait out all my open statutes of limitations for both the tax returns and F-bar. I could thus be waiting till the end if this decade before I am truly free!!!
People seem to think they’re off the hook by expatriating, but it’s not like turning off a switch; it’s more like pouring out a kettle. It takes time even though it’s true that my side of it will be for finished sometime next year when hopefully my final return with 8854 is filed.
I am cautiously optimistic but no longer take anything in my life for granted. I strongly agreed with Calgary’s earlier post of how all we really yearn for is for things to be resolved so we can recapture the joy in our lives; I have already suffered so much already from all the uncertainty.
I can’t empathize enough how much empathy I feel for everyone here!! I.b.S. is my main sourced of support rright now.
In many ways, I almost feel that this has almost been as bad as a cancer diagnosis with all the fear and hoops to get through. Having peoples’ sympathy but ultimately having to go through it alone with only others in the same boat truly understanding. And like cancer, it also makes me appear to be tainted somehow, as though some will not fully trust my innocence. That I somehow brought this all on myself.
My renunciation was like the actual surgery; but it will still be several years beyond the completion of my ‘treatment, I.e. the final return and f-bar, that I will finally know whether I’m in ‘remission. 😛
@Alex Marino
The problem is that even when there is a small amount of tax due (say for example $100 per year), most lawyers – maybe not your firm – still tell you that you have to shed $40K + in fees to enter OVDI and become compliant, because that’s what the IRS says. That’s just non sense.
Yep. It’s always about the taxes! Always! It’s never about the draconian, punitive, bullshit tax policies, let alone be anything political!
@bubblebustin,
Right up there with so much other important news. The media (compared to better journalism of years way past) appears to be gagged on the issues that this site addresses, while it screams over and over about tax evaders and traitors, molding the minds of what society should “think”. Or, at least, that’s what I think.
monalisa — good analogy you present there! You’ve come a long way, baby!
worth a read : http://www.accountingtoday.com/news/New-York-Attorney-General-Warns-Tax-Preparers-66099-1.html?ET=webcpa:e6841:430732a:&st=email
I would really like to see a change in terminology. Calling all of us US citizens, or US persons, is really getting under my skin. We aren’t all people who chose to move to Canada. Many of us are citizens of a country, other than the US, who have have US citizenship imposed upon us, or reinstated, after having been told we relinquished it. I believe that if the terminology reflected reality, especially in the media, some would start to “get it”.
This may sound juvenile, but I think it could garner some attention. I’d like to send the IRS, DOS, and every US politician, a list of forms required to complete, to claim residents of other countries (especially duals, and those not allowed to relinquish), as US citizens. Additionally, they should receive a schedule of fees, for the associated costs. Failure to provide the proper forms, results in penalties to each US politician, and the inability to travel to that country. All should be retroactive to, oh, say 1971. It should be stated that ignorance of this process is not an excuse, and does not absolve them of penalties.
This just reinforces what Calgary411 and others have said here, that it’s difficult for others to truly empathize with what we are going through, no therapist, no tax professional who meets thousands whose lives have been turned upside down in the US’s hungry pursuit of revenue. I know personally, that in my 56 years I never really knew what persecution was until I experienced it myself. If I can take anything positive away from this experience, it’s the ability to empathize with those being persecuted. Perhaps that alone will be worth it for me.
@bubblebustin – Yes, well said.
@monalisa1776 – If you’ve recently renounced, then you have about 15 months until you need to file for 2013. Surely you will have your CLN by then, don’t worry. Really, the DOS has no option but to provide you with the CLN sooner or later, and no one I’ve heard of had to wait that long.
@Calgary and @Bubblebustin, exactly. I don’t want to belittle what Victoria in Paris has been through with her illnesses on top of all these IRS problems. But I feel as though I’ve had to suffer almost the equivalent of a masectomy.
When I had my OMG moment, and especially once the enormity of all the problems was understood, I never in all my life felt in such desperation. I genuinely feared that I might lose everything I’d ever worked for, including even our jointly owned home. My marriage would have been finished. I could have wound up not only bankrupt but heavily in debt because IRS bills are not written off in bankruptcy.
One accounting firm and attorney were going to charge me around $25,000 for each return and that would have multiplied by eight for 8 years…I suspect they would have pointed me towards O V D I. That would have possibly cost me another $150,000 on top of the professional fees; and all for having held a few dozen individual (relatively modest) holdings in PFIC mutual funds that I hadn’t even sold but would have been taxed on phantom gains.
Thankfully, I will not have expatriated for tax purposes though because had I retained my U.S. citizenship, my now compliant investments would likely no longer produce any tax liability or only a de minimus one.
I left to simplify my life and reduce all the red tape and compliance burdens.
I was on the verge of being sectioned; had things gone horribly wrong, I honestly think I would have tried to commit suicide.
So, yes, @Bubblebustin, I truly know what it feels like to experience persecution. Renouncing will hopefully simplify my life going forward but, like having part of my body amputated, I have had to lose a big part of myself. Giving up one’s birthright has still been traumatic. I will recover but my life will never quite be the same.
edelweiss – it’s called a “reciprocity fee”. The US charges them, so they charge Americans. An American travelling throughout South America would shell out a grand or more just to enter into the countries. Yeah, I also see it as a negative strike against a US passport.