To be honest, 
I wasn’t sure if I was making the best decision. Some people advised against renouncing US citizenship while others recommended it. Yet, after unsuccessfully warning American politicians, I elected mission safety and handed in the blue passport.
To the left is a picture of my buddies and myself on the right, loading a ship to bring us to Somalia.
Now, it is official. I could hardly believe it when I read it, but it is true. Renouncing US citizenship saved the mortgage for our primary residence. Two days ago, the provider of my mortgage stated the following in press:
“In the mean time, we have distanced ourselves from almost all of our American customers. Currently, the bank has 5 investment accounts and 39 bank accounts belonging to US citizens. The only thing in the path of reducing that down to zero is that we haven’t been able to contact the clients yet.”
Source
To the right is a picture of my grandfather who fought for America during WWII.
There is no guarantee that I would have been able to refinance my mortgage with any other service as a US citizen and neither the US Veterans Administration nor the U.S. Department of Housing and Urban Development are willing or able to assist Americans living outside of US jurisdiction.
Unfortunately, the Office of Fair Housing and Equal Opportunity (FHEO) does not have jurisdiction to handle complaints outside of the United States.
STATUTE – It is the policy of the United States to provide, within constitutional limitations, for fair housing throughout the United States.
Sec. 802. [42 U.S.C. 3602] Definitions
(g) “State” means any of the several States, the District of Columbia, the Commonwealth of Puerto Rico, or any of the territories and possessions of the United States.
FHEO administratively enforces federal statutes, executive orders and regulations designed to afford all persons an equal opportunity to live in housing of their choice and to participate in HUD-assisted programs and activities without regard to race, color, national origin, sex, religion, familial status (families with children under 18), disability, or age.
Source
I volunteered to fight for America in the US Army, yet which American politician fought to save the home of an American veteran living abroad? I could care less about banking secrecy as long as the innocent are protected and I’m all for combatting money laundering. Yet, America needs to do much more to ensure that its policies do not cause harm to innocent Americans living overseas in violation of US federal laws prohibiting national origin discrimination.
Federal law prohibits housing discrimination based on your race, color, national origin, religion, sex, familial status, or disability.
Source
A residency-based tax system would prevent national origin discrimination against Americans for having a mortgage on their primary home or local checking account, and fighting for such would not violate US federal laws. Maybe it is time to fight for America and Americans like how my family and myself have done so.
@SwissPinoy, Yes, but as I understand most of the cantonal banks’ attitude, they don’t want to become FFI’s in the first place because of the cost of implementation. So they will continue to deny US persons banking facilities regardless of any agreement. For them, they simply had too few US clients to justify the cost of becoming compliant which is why they dumped them in the first place. It’s different for the big 3, UBS and Credit Suisse have a lot of US based business and PostFinance wasn’t allowed to refuse any Swiss resident an account if they asked for one, though they are also now sending out the letters to clarify US status.
@Swisspinoy
AKB is precisely the type of bank that was envisioned as a beneficiary of the local bank exception deemed compliant FFI status. They have 31 locations in Aargau and surrounding cantons and one subsidiary located in Zurich. They therefore appear to have all their operations in one country which is one of the most difficult conditions to meet. If they have >98% of their deposits from Swiss resident account holders (individuals and businesses) then they could potentially attempt to qualify under this exception (provided they meet the long list of other conditions).
It is, however, clear that they have no intention of seeking to qualify for the local bank exception by virtue of the fact that they discriminate against US person customers (which automatically disqualifies them from the local bank exception). I think it’s safe to assume that if they are touting the fact that the only US persons they have remaining as customers are ones they have been able to contact that they have successfully dumped every US person they have been able to contact.
As I’ve been suggesting for a while, there does not appear to be any benefit to any FFI to attempt to qualify under the local bank exception. Indeed, here we have a bank ostensibly for whom this exception was created opting not to attempt to qualify under the exception designed for them.
The fact that AKB is not seeking the “local bank exception” goes on to prove that FATCA has created and continues to create immense collateral damage to Americans abroad regardless of IGAs and the only rectification is a repeal of CBT (to be replaced with RBT) and a Constitutional amendment which explicitly limits the application of US laws to US land and sea borders as far as US persons are concerned. Short of that and renunciations (including my upcoming one) will continue.
Folks ….. The collateral damage is not just to US Citizens and Green Card Holders and those who the IRS might deem from time to time to be US Persons ….. the damage is to EVERY economy and EVERY Nationality around the world as poor countries are bullied into FATCA compliance at immense cost. Which cost is in addition to the HUGE compliance cost that NON Americans are going to be forced into when they get DEEMED to be US Persons and end up having to PROVE that they are not liable to US taxation.
The biggest money laundry in the history of the World is the USA – it is to that country that people have historically run with whatever money they have been able to salvage from the terror of dictatorships and tyrannies around the world since the 1400s when Columbus sailed to be followed by Portuguese Jews and other refugees. The TAX effect of FATCA is NOT the main issue …. in my humble opinion it is the terror imposed and the removal of the ability of oppressed people to quietly amass their little savings to protect their families and finance their flight from tyranny. The USA is becoming the worst tyranny of all; the friend and enabler of oppressors and dictators worldwide !
You’ve got it right, NervousInvestor. The main issue is the terror imposed by tyrannical USA. That is their MO, the US way of governing.
@nobledreamer,
I am unable to find the thread …I think that is what it is called, where you asked me to get in touch with you and I said I would before the meeting on Saturday. Could you please let me know where I can find that.
Tks
@WhiteKat….just to clarify so I understand yoyr comment, “you did not make a choice to become a Canadian”
I was a Canadian at birth (born to Canadian parents) so not sure what you mean in your comment above.
Tks
@Tortured,
Here’s a link to nobledreamer’s message to you: http://isaacbrocksociety.ca/2013/05/27/traumatized-by-the-irs-and-us-reaching-into-canada/comment-page-4/#comment-376398. I hope you two meet up at the June 15th meeting!
@Tortured, What I mean is that you were born dual as I was. Others who were born in USA with American citizenship only, then expatriated to Canada, obtained their Canadian citizenship as an adult swearing allegiance to the queen which in and of itself is an act of relinquishment of their American citizenship. All they have to do to get out of IRS clutches is to apply for a Certificate of Loss Nationality effective the date they became Canadian. They are off the hook for back filing of taxes and exit taxes because they relinquished their US citizenship when they acquired their Canadian citizenship and are no longer Americans. The CLN gives them the proof they need if their bank starts asking questions.
You and I are not so lucky. Because we were born BOTH Canadian and American, we must formally renounce our citizenship which requires a promise to back file 5 years worth of tax forms.
There are some posts here at IBS and I believe at Maple Sandbox on the difference between relinquishment and renunciation. Relinquishment is the easier route to go, but not possible for you and me.
http://hodgen.com/dual-citizen-exit-tax/
Similar to your question, Tortured — I would really like to know if a Canadian born American is subject to the exit tax if they have never lived or worked in the US.
Yes. You have to go through the exit tax processes. The fact that you have that magic U.S. passport is enough to cause that unfortunate result. You may be able to get out of paying any exit tax, but you will still have to do all of the paperwork and filing requirements — five years of up-to-date tax returns in the United States and the Form 8854.
Here is how it works. A U.S. citizen who gives up citizenship is an “expatriate” for purposes of the exit tax rules. So for you that is unavoidable. With “expatriate” status comes a job of doing a lot of paperwork.
But what you really want to do is avoid “covered expatriate” status — this is where you have to do paperwork AND pay tax to the USA when you give up your citizenship. You may be able to do this.
A quick excerpt from the Exit Tax book that I’m writing now (shameless pimping on my part!):
Regardless of your financial status, you are not a “covered expatriate” if you satisfy all of the following items [see Section 877A(g)(1)(B), Notice 2009-85, Section 2(B)]:
You became a U.S. citizen at birth; and
You also became a citizen of another country at birth; and
On your expatriation date you “continue” to be a citizen of that country (FOR YOU, RENUNCIATION IF YOU CHOOSE TO DO SO); and
On your expatriation date you “continue” to be taxed as a resident of that country; and
On your expatriation date you were not a U.S resident for 10 of the 15 tax years that end with the year that you expatriated.
Note, however, that you will still have to certify that you are up to date with all U.S. tax requirements.
Failure to do so will render you a covered expatriate even if you satisfy all of the dual citizenship requirements.
(MAKING SURE YOU COMPLETE THIS STEP, IF YOU DECIDE TO RENOUNCE YOUR “SUPPOSED” US CITIZENSHIP, MEANS YOU WILL NEVER BE SUBJECT TO THE US EXIT TAX THAT UNFORTUNATE OTHERS WITH ENOUGH WEALTH ARE — EVEN IF YOU ARE A VERY, VERY, VERY WEALTHY PERSON, THE US CANNOT TAKE ANY PART OF YOUR WEALTH THROUGH THEIR EXIT TAX SINCE YOU WERE BORN A DUAL CITIZEN AND MET ALL OF THE ABOVE REQUIREMENTS.)
Your action plan should be:
Make sure you have five years of clean U.S. tax returns on file with the IRS already. E.g., if you give up citizenship in 2013 be sure that 2012, 2011, 2010, 2009, and 2008 U.S. tax returns (PLUS THE PARTIAL RETURN UP UNTIL THE DATE OF RENUNCIATION IN 2013) are all hunky dory.
Make sure you fit within this exception to “covered” expatriate status. This answer won’t necessarily be obvious or easy. But it might. E.g., what does it mean to “become a citizen of another country at birth.” What if you didn’t qualify for that citizenship until your parents did a bunch of paperwork for you which they got around to doing when you were 15 years old?
THEN AND ONLY THEN give up your U.S. citizenship.
Do your “year of expatriation” U.S. income tax returns plus Form 8854.
Throw a party for all of your friends.
@Torturerd,
Here are the links re: relinquishment versus renunciation
http://isaacbrocksociety.ca/2011/12/12/relinquish-dont-renounce-if-you-can/
http://maplesandbox.ca/2012/renunciation-and-relinquishment-what-are-the-differences-is-there-a-difference/
Additionally, Tortured, read the Consulate Report Directory that Pacifica maintains for more valuable information, all in one place, plus renunciation and relinquishment experiences as reported to us at Isaac Brock. The link to get there is in this post: http://isaacbrocksociety.ca/consulate2/
@WhiteKat,
That really clarifies it….Thank You ….then in my case to renounce is probably not an option.
So it seems they have us for life. I try to be optimistic but finding some days are worse than others.
I imagine if we file the five years then there is a large percentage of our assets taxed or penalized and if we do not pay up we will not be issued our CLN and are “out there” in their system. I think I read that they would want 39% of your RRSP’s as part of the tax to renounce.
&Calgary …thank you for all the input….is yours the hightlight portion or is that taken from somewhere else.
Sorry sometimes my head is like a block of cement.
I’ve capitalized and bolded and italicized parts of what is at the Hodgen link I provided — easier.
No, Tortured, you CAN renounce if you choose to do so (another option is ‘doing nothing’ as KalC says, but you have to be risk adverse for that). You were born in Canada to US parent(s) so born a dual citizen. That is very positive if you want to use that to your advantage. I don’t know if you will want or need to cross the US border in the future, but that is a consideration for what you decide as well. Your Canadian passport does not have a US place of birth that would alert border guards to your further questioning when crossing the border (at least at this point).
You will NOT be subject to the Exit Tax if you do exactly as outlined in the link I provided — you, WhiteKat, my son, my daughter and so many others were born dual citizens. You will, however, have to certify on Form 8854 (by June 15th of the year after such renunciation) that you are in compliance with IRS tax returns for five years. (This is not necessary before your renunciation but MUST be completed by June 15 of the year following your renunciation.) Besides that certification of five years of compiance, you will have to complete a partial year 1040 for the year in which you renounce, to the date of your renunciation — if you choose to renounce. Do it correctly and you, born with both Canadian and US citizenship, WILL NOT BE SUBJECT TO THE US EXIT TAX. Do it correctly and you will not be deemed a “Covered Expatriate.” You never, never want to be deemed a “Covered Expatriate” if you can help it (and you can as you are given an out by having been born a dual citizen!) as that is when you are subject to the horrendous Exit Tax.
It’s hard to understand all of this nonsense. Just take your time. Read, read, read (starting with the links that WhiteKat gave you regarding the difference between Renunciation and Relinquishment) and then the comments and much good advice you receive here at Isaac Brock will make more sense for you.
@ Tortured,
Re: “if we do not pay up we will not be issued our CLN”
Dept of State alone handles issuance of CLNs. They do not know or care if a person has filed or not with IRS. According to regulations, they send a copy of each CLN to IRS, however. A person has until June 15th of the year following renunciation to file their 8854, on which they certify they are tax compliant for the five years preceding renunciation. In fact, the CLN, and the loss of citizenship, remain valid, whether or not a person does this. Also, as noted, if a person is born dual, although they too are required to fill out the 8854, they will not be subject to exit tax.
Also, Tortured, your renunciation appointment would be made at a US consulate or embassy, under the US Department of State. The Department of State will also effectively approve your renunciation and prepare the Certificate of Loss of Nationality (CLN) which will be mailed to you or you can pick up at the consulate or embassy at which you renounce (sometimes a short wait; sometimes a longer wait for receipt of the CLN). The CLN is what you will have as further proof to your bank that you are NOT a US citizen.
The IRS is an agency of the US Department of Treasury. That is where your US tax returns (1040’s and all supplemental forms). The Department of Treasury also heads the agency FinCEN, where your Foreign Bank Account Reports are sent. As Shadow Raider reported in a comment earlier today, the FBAR information is not provided to the IRS without court order or as part of a criminal investigation. Further, if you wish to believe it, we should hold the Government of Canada responsible for the promise made by Finance Minister Flaherty that Canada WILL NOT collect any penalties for the Foreign Bank Account Reports (FBAR) for US Persons in Canada, whether they be citizens of or just resident in Canada. He further “promised” that Canada will not collect either taxes owed to the US or any penalties for taxes FROM THE TIME THE US PERSON IN CANADA WAS A CANADIAN CITIZEN. You were a Canadian citizen from birth. What Mr. Flaherty “promises” you is that Canada will not collect from you on behalf of the US. It is important that “collection of taxes” promise is upheld in the IGA negotiations with the US / that an IGA does not override what is now in the US – Canada Tax Treaty.
And that’s in the tax treaty as well. S. 26A(8) provides that CRA will not assist IRS with collection against a person who was a Canadian citizen at the time the IRS debt arose. And FBARs are not included in the treaty at all, so CRA has no obligation to help IRS collect penalties from anyone in Canada, whether the person is a Canadian citizen or not.
@WhiteKat you say
“You and I are not so lucky. Because we were born BOTH Canadian and American, we must formally renounce our citizenship which requires a promise to back file 5 years worth of tax forms.”
You DO NOT!!! have to promise anything about taxes to renounce!
Well said, TrueNorth. As I understand it…
A certification (by June 15 of the year following expatriation; i.e. after renunciation and, hopefully, receipt by then of the CLN) that one has complied with five years of US tax requirements is with IRS Form 8854, so as not to be deemed a “Covered Expatriate,” which in turn relates to the US Exit Tax. That is again up to the person who has expatriated based on their level of risk tolerance and / or the wealth they want to hand over to the US. There are then, of course, consequences to plan around. What that might in these days be defined as is another issue.
So, the solution to the whole FATCA problem is to “Just say No.” US is attempting to divide and conquer. The rest of the world should just unite and conquer.
It’s very simple:
1. All countries of the world unite and agree on No to FATCA; and
2. No to financing any more US debt.
That’s all folks.
@TrueNorth,
Then the lawyer I spoke with (recommended by someone here at IBS) doesn’t know what she is talking about. She said, ‘no one gets away without 5 year’s of tax com-pliancy’
I must be missing something. Whether you are tax compliant of not when you renounce, my understanding is that there is the promise of future tax compliancy under oath.
What am I missing? Why did my lawyer tell me I must submit to 5 years tax compliancy if I renounce.
Sure, I can get a CLN in the mail if I renounce without being tax compliant. But am I not still on the hook for 5 years tax compliancy? Isn’t that part of the ‘deal’? Or is everyone suggesting that the ‘deal’ means nothing?
What I think I am hearing is, go ahead and renounce, get your CLN, forget about filing 5 years of taxes even though you signed something that obligated you to file such taxes after your renunciation.
Is that right?
If it was that easy, I would have my CLN already!