Closely following on the heels of their previous announcement that the $2,350 fee for renunciation — twenty times as high as in other developed countries — “protects” the human right to change nationality, the folks at the State Department have announced that they’ll be extending that “protection” to people who relinquished U.S. citizenship under 8 USC § 1481(a)(1) through (4) and seek to obtain Certificates of Loss of Nationality documenting that fact as well.
In the latest Schedule of Fees for Consular Services to be published in the Federal Register on Tuesday (80 FR 53704, 53707), Under Secretary of State for Management Patrick F. Kennedy or one of his ghostwriter minions proclaims:
Currently, nationals who renounce nationality pay a fee of $2,350, while nationals who apply for documentation of relinquishment of nationality by the voluntary commission of an expatriating act with the intention to lose nationality, do not pay a fee. However the services performed in both situations are similar, requiring close and detailed case-by-case review of the factors involved in a request for a Certificate of Loss of Nationality, and both result in similar costs to the Department.
In the past, individuals seldom requested Certificates of Loss of Nationality from the Department to document relinquishment. Although the Department was aware that an individual relinquishment service was among the most time consuming of consular services, it was rarely performed so the overall cost to the Department was low and the Department did not establish a fee. Requests for a Certificate of Loss of Nationality on the basis of a non-renunciatory relinquishment have increased significantly in recent years, and the Department expects the number to grow in the future, causing the total cost of this service to increase. At the same time, the Department funds consular services completely from user fees. The Cost of Service Model continues to demonstrate that such costs are incurred by the Department when accepting, processing, and adjudicating relinquishment of nationality cases; therefore, the Department will collect a fee from all individuals seeking a Certificate of Loss of Nationality. Taking into account the costs of both renunciation and non-renunciation relinquishment processes, the fee will be $2,350.
If you do not need a CLN in the first place, nothing in the Immigration and Nationality Act requires you to obtain one to document your loss of US citizenship, and people who relinquished before 4 June 2004 did not have to report their relinquishment to the State Department in order to end their status as U.S. tax subjects either. However, FATCA regulations and IGAs require people with U.S. indicia to show their banks a CLN or provide a “reasonable explanation” of why they do not have U.S. citizenship.
See this earlier post for discussion of what banks might accept as a “reasonable explanation”, and let us know if you find a bank which will accept the absurd price-tag as an explanation of why you don’t have a CLN.
@mjh you will still have relinquished and no longer be a Usa citizen
Part of the problem. Is solved
A cln is an optional piece of paper that is. Very nice to have but not required to lose your. Clinging Usa. Itizenshkp
There are some brockers getting along fine self documented
@George
Please don`t forget that Canada offers some protections. Other countries do not. It is a lot easier to ignore american demands when you know you are not going to be extradited or have your assets confiscated or account locked. So it is not a “one size fits all” situation.
@Polly the number of countries which you cite is a handful and that’s the dirty secret America shuts up about
On these matters for most former pats uncle Sam speaks loudly but has a small stick
“Does IRS just love history for history’s sake, or is there a reason that all possible needed 8854 forms are provided at”
Mostly neither. When disputes arise about past events, it’s important to review past versions of forms and instructions.
When I needed to cite Form 1116 instructions for tax year 1976 or thereabouts, the nearest one I could find was from 1979, which was immensely different.
I ought to see if Form 1040 instructions for tax year 1993 are available. That was before ITINs were invented, I obeyed instructions to apply for an SSN for my wife, and the SSA has never granted nor rejected that application. When the IRS told us to apply for ITINs we did, and the IRS rejected them until I used my Canadian passport. Court of Appeals for the Federal Circuit ruled that my failure to report an SSN for my wife demonstrated frivolousness. I had to fabricate an SSN for my wife. Fabricating an SSN used to be illegal before this Federal Circuit ruling.
Some older versions are published for historical interest, but not all older versions.
This is current IRS rules just because does someone wrote something on a thread. It does not over rule IRS.
“Expatriation Before June 4, 2004
If you expatriated before June 4, 2004, the expatriation rules apply if one of the principal purposes of the action is the avoidance of U.S. taxes. Unless you received a ruling from the IRS that you did not expatriate to avoid U.S. taxes, you are presumed to have tax avoidance as a principal purpose if:
Your average annual net income tax for the last 5 tax years ending before the date of your action to relinquish your citizenship or terminate your residency was more than $100,000, or
Your net worth on the date of your action was $500,000 or more.
The amounts above are adjusted for inflation if your expatriation action is after 1997 (see Table 4-1).
Table 4-1. Inflation-Adjusted Amounts for Expatriation Actions Before June 4, 2004
IF you expatriated during . . . THEN the rules outlined on this page apply if . . .
Your 5-year average annual net income tax was more than … OR Your net worth equaled or exceeded
…
1999 110,000 552,000
2000 112,000 562,000
2001 116,000 580,000
2002 120,000 599,000
2003 122,000 608,000
2004 (before June 4)* 124,000 622,000
*If you expatriated after June 3, 2004, see Expatriation After June 3, 2004, and Before June 17, 2008 or Expatriation After June 16, 2008.
Reporting requirements. If you lost your U.S. citizenship, you should have filed Form 8854 with a consular office or a federal court at the time of loss of citizenship. If you ended your long-term residency, you should have filed Form 8854 with the Internal Revenue Service when you filed your dual-status tax return for the year your residency ended.
Your U.S. residency is considered to have ended when you ceased to be a lawful permanent resident or you began to be treated as a resident of another country under a tax treaty and do not waive treaty benefits.
Penalties. If you failed to file Form 8854, you may have to pay a penalty equal to the greater of 5% of the expatriation tax or $1,000. The penalty will be assessed for each year of the 10-year period beginning on the date of expatriation during which your failure to file continues. The penalty will not be imposed if you can show that the failure is due to reasonable cause and not willful neglect.
Expatriation tax. The expatriation tax applies to the 10-year period following the date of expatriation or termination of residency. It is figured in the same way as for those expatriating after June 3, 2004, and before June 17, 2008. See How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) in the next section.
http://www.irs.gov/publications/p519/ch04.html#en_US_2014_publink1000222370
@homebody, I’m sure the IRS has lots of rules, but how many they actually work to is another question. There have been many people who have obtained a relinquishment based on an action taken before 3rd June 2004 and who haven’t filed an 8854. None have been bothered by the IRS – that understaffed, overworked organisation doesn’t have the resources to chase possiblly zero return ex-US citizens. Only if, by some miracle, they suspect someone owes millions in back taxes would they bother.
They’re supposed to fire any IRS employee who wilfully doesn’t file their returns, but most haven’t been – they probably need them too much to get rid of them.
“Nearly 1,600 IRS workers were found to have willfully evaded taxes over a 10-year period, including some who were responsible for enforcing the nation’s tax laws, a government watchdog said Wednesday.
It’s a small percentage of the tax agency’s employees — about 160 workers a year out of a workforce of 85,000.
A new report by the agency’s inspector general said most were not fired, even though a 1998 law calls for terminations when IRS workers willfully don’t pay their taxes.”
http://news.yahoo.com/report-1-580-irs-workers-evaded-taxes-over-185646891–finance.html
As the saying goes, rules are there to be broken. The IRS does it when it suits them, same as anyone else.
Homebody, Medea is right. Please reread the discussion at the link in the right sidebar ‘ For those who expatriated before June 3 2004 ‘ it is all explained there. I admit it is very confused and confusing. Basically the IRS will not bother anyone who relinquished/ expatriated before that date with or without a CLN. I know what the boilerplate says. The rules were impossible to apply and so they were changed. The old rules are still impossible to apply. To make things harder to follow, , there are 148 comments on that thread.
@homebody, I’m sure the IRS has lots of rules, but how many they actually work to is another question. There have been many people who have obtained a relinquishment based on an action taken before 3rd June 2004 and who haven’t filed an 8854. None have been bothered by the IRS – that understaffed, overworked organisation doesn’t have the resources to chase possibly zero return ex-US citizens. Only if, by some miracle, they suspect someone owes millions in back taxes would they bother.”
I am certain a bunch of people who have renounced 2008 or later and have not file taxes. The government just think they are small fry. If they have a record of you earning money in USA or they suspect you are very wealthy will they go after you. A possibility. In the future could they enforce the rule if you cross the border? It is till best to get a pre 1996 relinquishment.
Peter Dunn did not do FBAR for his 8854. His main worry was could be extradited due to perjury. Canadian law would protect him.
For Canada you do not need 8854 to avoid FATCA.
Other countries do not have the rule.
Russia does not have an IGA but allows Bank that do business with USA to use the original rules.
If a country does not have an IGA would banks use the original rule against large $ accounts to avoid 30% withholding?
I am certain a bunch of people who have renounced 2008 or later and have not file taxes are not bothered by IRS. The USA government just think they are small fry.
“Russia does not have an IGA but allows Bank that do business with USA to use the original rules.”
http://sputniknews.com/business/20150128/1017469026.html
“NOVOSIBIRSK, January 28 (Sputnik) — Russian banks have been forced to cancel contracts with their US clients due to the Foreign Account Tax Compliance Act (FATCA), law that requires foreign banks to provide information on US citizens’ banking activities, a senior Russian official said Wednesday.”
I think if client does not agree with 30% withholding the bank shuts down account.
@homebody, you just pointed out what I said. Unless they suspect you have millions hidden away the IRS doesn’t really care when you relinquished/renounced – 1995, 2004, etc. Yes, they threaten penalties, but how many people outside the US have actually been penalised and had to pay up. Not many I suspect.
Peter Dunn (Petros) did cross the border in July 2013 for personal reasons and had no problems in doing so. Here’s his comment:
“I passed US formalities in Vancouver. I was asked why I was going to the US. Once I mentioned that it was to search for my father who was missing I received a concerned look and a good luck. The officer did not ask for my CLN. I did not volunteer it. My impression is that for now, if a vocal person like myself has nothing to fear, the vast majority of the rest of us have even less to worry about.”
Even US Border Control has a heart sometimes.
If a country doesn’t have an IGA I doubt they even know of the “original” rule, certainly banks won’t. And IGA’s only applies to current accounts, not retroactively.
@homebody, Russia’s problems with FATCA have nothing to do with the IRS’s “original rule”. That is only to do with the 8854 form, FATCA deals with reporting of US clients’ accounts. They are simply doing what a lot of Swiss banks did years ago, chucking out US clients so they don’t incur a 30% withholding. FATCA is written to protect banks, not US citizens.
My sister became a Canadian citizen in 2003. I should read the post about relinquishing prior to June 2004. She may not be a citizen after all.
“None have been bothered by the IRS – that understaffed, overworked organisation doesn’t have the resources to chase possiblly zero return ex-US citizens.”
Yes they do. They pursue penalties even when they know the amount of tax is zero. They don’t issue Notices of Deficiency because they know the amount of tax is zero, but they still pursue penalties.
They bother you only if you tell them about yourself.
NOBODY has been approached out of the blue.
“Peter Dunn did not do FBAR for his 8854. His main worry was could be extradited due to purgy.”
I was worried too, but it turns out that it was illegal for me to worry! 26 USC section 7206(1) makes wilful perjury punishable, but unwilful perjury isn’t addressed by that section. The IRS, Tax Court, Department of Justice, and Court of Federal Claims all agree that the preprinted jurat has to be signed without alteration even if you know it’s false. You have to commit perjury, unwilfully, so it isn’t punishable.
The Federal Circuit refused to address that issue when they affirmed, and the Supreme Court refused to address it.
A non-Brocker friend asked the Calgary consulate if the US$2350 paid for a denied relinquishment claim could be applied to a follow-up renunciation or if the fee would have to be paid again. The reply was that they haven’t started charging the new fee or seen any instructions, but felt that the existing paid-for case would just be reworked for a renunciation.
Of course, this could change, and might not apply in other offices around the country or around the world.
“They bother you only if you tell them about yourself.”
Wrong. I think their original reason for pursuing me was that I declared US wihholding that Ameritrade had reported on Forms 1099 and 1042-S, when I didn’t know that IRS data entry clerk Monica Hernandez was stealing withholding from people’s Forms 1099, but the IRS hasn’t admitted that yet. In court the IRS and Department of Justice said they penalized me for illegally telling the truth on returns, and for failing to fabricate a social security number for my wife.
Medea Fleecestealer says
In the future I expect the USA will be stricter regarding taxes at the border.
Their budget deficit is expected to explode in the future. So they will look at new ways to collect from people who can’t vote.
The USA was going after relative of people who owed social security. It is is suspended for now.
Anybody should read the rules, figure if they are going to be exposed and make the decision according to their own situation.
The original USA FATCA rule you needed 8854 and they used the US person for tax purposes.
Canadian FATCA is only for US citizen and USA resident individual. The present Canada government FATCA exclude a bunch of people who would have been picked up in original rule (e.g snowbird too many day. green card holder, US citizen who did not do exit taxes.)
The Swiss and various European agreement is more like original FATCA rules.
On Russia agreement
“Despite the fact that the law resolved most of the issues for Russian financial
institutions, the law contains no provision authorizing Russian banks to perform 30
percent withholding. This issue remains burning for Russian financial institutions because
FATCA requires them to act as withholding agents for the IRS needs, but under Russian
bank legislation money cannot be withhold from clients bank account without their
consent other than under court decision. As a result, withholding by Russian bank may
result in claims from affected clients requiring compensation of real damages and
payment of interest on the amount that was unduly withheld. ”
http://fatca.thomsonreuters.com/wp-content/uploads/2014/11/Europe-Compliance-of-Russian-financial-institutions-with-FATCA-rules-U.S.-requirements-versus-national-legislation.pdf
I guess if you sign that you are ok with 30% withholding you can not be kicked out.
I guess you can get a Russia local bank but you would be limited in owing foreign property (European bank would apply FATCA rules to corresponding banks).
Norman Diamond says
September 9, 2015 at 6:35 pm
“Peter Dunn did not do FBAR for his 8854. His main worry was could be extradited due to purgy.”
I had a typo
First it is perjury. Also include “Canadian law would protect him”
Slight correction
The present Canada government FATCA exclude a bunch of people who would have been picked up in original rule (e.g snowbird too many day in USA, green card holder in Canada, US citizen who did not do exit taxes, people who thought they lost USA citizenship when they became Canadian)
Gotta love their tell-it-like-it-is style:
“Requests for a Certificate of Loss of Nationality on the basis of a non-renunciatory relinquishment have increased significantly in recent years, and the Department expects the number to grow in the future, causing the total cost of this service to increase.”
No wonder.
@Homebody… Once ADCS wins the court case, Brockers need to set up a bank in Canada in Canadian dollars that can serve as a clearinghouse for all the non-FATCA banks worldwide.
If they cannot do business with USA banks they could do business with that bank. Bank of Canada would still clear the cheques. Central banks that are government institutions are exempt from FATCA. I’m still waiting for a reply from my letter to the Bank of the Federated States of Micronesia, member FDIC, which has no FATCA registration GIIN. It would really be awesome to clear New York USD cheques through that, but why bother? Why not just use CAD?
A Global News article dated August 28, 2014 said this:
“But the memo suggests the State Department expects applications (for renunciations) to drop after the fee is implemented: to about 2,700 from the current 3,000 a year.”
Current FY2015 forecast of renunciations from the Federal Register is 5,986, so somewhat more than twice what was forecast a year ago.
http://globalnews.ca/news/1532175/want-to-get-rid-of-u-s-citizenship-fee-just-quadrupled-to-2350/