When it comes to compliance there is a lot of confusion as to:
- what day does loss of citizenship occur and
- what roles do f8854 and a
- Certificate of Loss of Nationality play?
The filing requirements are explored in two posts by John Richardson.
BRIEF SYNOPSIS
Before June 3, 2004 (before the creation of the “Tax Citizen”)
The date of your “expatriation”was determined solely by the provisions of the Immigration and Nationality Act.
June 3, 2004 – June 16, 2008 (after the creation of the “Tax Citizen”)
You continued to be treated as a “U.S. person” for tax purposes UNDER THE INTERNAL REVENUE CODE until you gave “notice” of your “relinquishment” to a government agency. For this period part of the “notice” was filing Form 8854 with the Internal Revenue Service. In other words, there was no way to cease to be a “U.S. person” for tax purposes until you had notified the IRS.
After June 16, 2008 –
A.The issuance of a CLN is confirmation that the State Department has agreed that you have relinquished U.S. citizenship. A CLN is a confirmation that you have met the “notice requirement” under the Internal Revenue Code.
B. The CLN is one way (a self-certification is also possible) to satisfy “foreign banks” that you are NOT a U.S. person for tax purposes under the Internal Revenue Code. (In other words, a CLN is a “sufficient” but not a “necessary condition” to prove non-USness.
Read more HERE
*****
1. Is the loss of U.S. citizenship for nationality purposes dependent on having a Certificate of Loss of Nationality (“CLN”)?
The answer is absolutely not.
349(a) of the Immigration and Nationality Act specifies conditions under which one relinquishes U.S citizenship.
2. Is the loss of U.S. citizenship for tax purposes dependent on having a Certificate of Loss of Nationality (“CLN”)?
Prior to June 3, 2004 – NO for either immigration or tax purposes
June 3, 2004 – June 16, 2008 – NO for either immigration or tax purposes.
After June 16, 2008 – No for immigration purposes – It is necessary as a confirmation of having met the “notice requirement” to end U.S. citizenship for tax purposes
3. What is the role of a Certificate of Loss of Nationality (“CLN”)?
For Immigration and Nationality Purposes – no relevance whatsoever
For Tax Purposes – The Internal Revenue Code
The accusation of U.S. citizenship is triggered by various indicia (U.S. place of birth, U.S. residence, U.S. phone number, etc.). The U.S. “place of birth” is the most dangerous indicia. Those with a U.S. place of birth can rebut the accusation of U.S. citizenship with either:
A. The CLN; or
B. A “Self Certification” (that must meet specific requirements) documenting why:
– the person has relinquished U.S. citizenship; and
– does NOT have a CLN.
A denial of U.S. citizenship will generally require proof.
In general, those who have relinquished U.S. citizenship under the Immigration laws of the United States prior to June 3, 2004 are more likely to be able to “self certify” that they are NOT U.S. citizens even though they do NOT have a CLN. This position is consistent with the August 2015
4. Why is the Certificate of Loss of Nationality (“CLN”) of value?
It’s simple. Unless you live in the United States, life as a U.S. citizen abroad, in a FATCA, FBAR and CBT world, will be an endless source of anxiety and difficulty. A Certificate of Loss of U.S. Nationality is becoming one of the most sought after documents in the world today.
5. What is the role of a Certificate of Loss of Nationality (“CLN”) in a FATCA inquisition?
June 16, 2008 – Present
IF (you relinquish U.S. citizenship under the Immigration and Nationality Act) THEN
You continue to be treated as a “U.S. person” for tax purposes UNDER THE INTERNAL REVENUE CODE until you give “notice” of your “relinquishment” to a government agency. The “notice” requirement is NOT to the IRS, but to the State Department. (See S. 877A(g)(3) and S. 877A(g)(4) of the Internal Revenue Code.) Once “appropriate” notice is given to the State Department you cease to be a U.S. taxpayer from the date the notice is given (on a prospective basis).
Read more HERE
i have received my CLN and my accountants are preparing my last US tax documents for the IRS. i have contacted my banks and financial advisors with copies of my CLN so that they are no longer reporting about me to the US government.
is there anything else that i need to be doing now that i am not a US citizen?
is there anything that i should watch out for or be aware of in the future?
(i live in canada and was born here. i got my citizenship through my mother who was born in the U.S.)
@renounced…whatnow?
There is nothing else you need to do .
It’s pity you employed an accountant to comply with expensive tax filing etc as a non US born Canadian citizen it would be simple to ignore the filing and just renounce. Canada does not have a tax collection agreement with the US for Canadian citizens who were Canadian at the period of time the tax assessment is made. But maybe you have been compliant all along and it is simple to file the last documents?
I do hope the accountant’s fees have not been a financial burden to you. They are the condors in this travesty, feeding off those unfortunate deemed US citizens.
For others’ future reference, a Canadian-born dual can simply ignore all this. Identify yourself as a Canadian citizen only (even to banks in other countries that demand passports as ID). No need to renounce, file any tax forms, pay any accountants, or otherwise make your presence known to the US government, even if at some point in the past you had obtained a US passport or had your birth registered.
Renounced what now. Double check that your accountant knows that as a dual citizen at birth you are not and never were liable for the exit tax. Don’t let them charge for filling in superfluous forms.
@ renounced …whatnow
Not sure if you are above the threshold but Portland is correct….
Exception for Dual Citizens
Under the dual citizen exception, a renouncer who fails either of the first two covered expatriate conditions (the net income or net worth tests) will still be exempt from the exit tax if the following conditions are met:
You became a U.S. citizen at birth;
You also became a citizen of another country at birth;
On the expatriation date, you continue to be a citizen of that other country;
On the expatriation date, you continue to taxed as a resident of that other country; and
You have been a resident of the United States for not more than 10 taxable years during the 15-taxable year period ending with the expatriation year.
The 8854 must be filed and you must certify you have met all federal tax filing obligations for the 5 yrs preceding the renunciation year.
Have 7 days as U.S. citizen. Born in Canada, no connection to the U.S. Plan to only file 8854 and that is it. Comments?
Jim A
Why would you even bother with a 8854?
And if you were born in Canada, you could safely just lie low, surely, and not worry about renouncing?
After I got a FATCA letter from the bank I renounced and have a CLN. I do not want to be extorted any further and don’t want to pay anymore accounting fees, especially for an income of $50.00 for the last period of being a U.S. citizen. Wondered if anyone else did their own final forms? Was there any follow-up? My bank was notified last year of my status so they should not be sending any records to the IRS. Thanks
I did some of our final forms. we filed only because our grandchildren live in the US . otherwise wouldn’t have bothered. i did the 8854 and fbars. An accountant backfiled 5 years of taxes.
We didn’t bother with the final partial year tax return. No acknowledgement, no follow up, nada. They are a little preoccupied right now.
The general principle is to file as little as possible. Don’t tell them anything they don’t already know.
In your case, I wouldn’t file anything.
@JimA
Yes, as a dual born in Canada you needn’t have bothered with any of this. But if you filed a return for 2018 you will eventually receive the $1200 benefit, despite having renounced, so that should help recover some of the money you spent.
@JimA
Think of the situation this way: As a US citizen you are “obligated” to adhere to the US tax code and file all required tax returns and information forms with the US government. The day you are no longer a US citizen, all those requirements and obligations cease. That’s the whole point of renouncing, right?
So although the US may claim you are “required” to file a Form 8854 and a final partial year tax return after you lose US citizenship, you have zero obligation to file or do anything because the relationship between you and the US government has been permanently severed. Its just an oddity of the silly US tax code that can be safely ignored; they are powerless to do anything to you if you don’t file it.
Form 8854 asks you to reveal far more information about your financial circumstances than filing US returns and none of that information is any of the IRS’ business. After going to the trouble and expense of renouncing, it makes no sense to then turn around and give the IRS a “shopping list” of all your assets. No good can possibly come from doing so. As Portland says above, never tell them anything they don’t already know.
Form 8854 is a very complicated multi-page affair and there is a significant risk of making a mistake, even if you pay a professional. Far more people get into trouble by filing IRS forms incorrectly than by not filing them at all. Don’t do it.
As little as possible sounds good to me. People should know that at present Canadian banks are actively helping the IRS.
@JimA
Yes indeed. Under FATCA, Canadian banks are required to report to the IRS information concerning some accounts of customers identified as US persons. Fortunately it’s very easy for customers – even those born in the US – to not be identified as US persons.
Correction, sorry. Banks report that data to CRA, which later transmits it to the IRS. In this way banks do not violate Canadian law by “actively helping the IRS.”
” People should know that at present Canadian banks are actively helping the IRS.”
To be precise, the main interest of Canadian banks is to make sure they don’t violate the terms of the IGA signed by the US and Canadian governments. “Helping the IRS” might be an indirect result but that’s not the banks’ fault and they couldn’t care less whether they help the IRS or not.
Once you renounce, even if a bank doesn’t get the memo and erroneously reports something to the CRA which later gets passed on to the IRS, so what? None of the info would be of use to the IRS because they don’t chase after former citizens.
@JimA
http://isaacbrocksociety.ca/2016/11/01/dual-citizens-of-sweden-france-netherlands-denmark-canada-take-note-your-country-will-not-collect-for-the-u-s/
Even if the IRS decide you owe them money, there is no collection agreement between Canada and the US if you were a Canadian citizenship living in Canada at the time of the so called tax debt. You have nothing to fear from them.
If you are worried about the ability to travel to the US again if you fail to fill in the 8854 and are labeled a ‘covered expatriate ‘ then it must be noted that the reed amendment is considered unworkable and so far no one has been denied entry because of this.
If you feel that you can fill in the 8854 simply and would feel more at ease in doing so, then go ahead but to my knowledge, no one has reported any problems by just ignoring the post renunciation tax filing.
Ok, thanks for your perspectives I am “non covered” so they exempt me from the exit tax. They would have to send Seal Team Six to get a dime from me. I kept my status very quiet and have zero connection to the U.S., yet I still got two rather persistent letters from my Canadian bank which I found rather perplexing. Where did they get the information or were they just fishing?
@JimA
All banks go fishing
@JimA
The guys and gals above are much more knowledgable in the proper course to take . But why, in God’s name , volunteer ?
Since you are in their sights anyway, I wonder if it isn’t worth asking them how they came to that conclusion . After all, they are not citzenship lawyers. Also, when dealing with people whose only interest is to cover their own ass , tell them only what they need to know , as briefly as possible,with as little detail as possible. You shouldn’t even be in this position.
@RR – JimA has already renounced. He only appears to have questions about doing the 8854 form himself, if at all.
@JimA – What’s done is done, but you could have responded to the letters by telling the bank that you were not a US citizen, and avoided any US tax filing (it’s not clear from your messages what if anything you did file) along with the renunciation costs. Whether you should bother doing the the 8854 now is an open question. It’s a fun thought, but depending on what you filed and when, you may receive the stimulus benefit, even after having renounced.
@JimA
Usually the reason why you receive an “ are you an American “ letter from a bank (apart from having an American Birthplace), is because you have some other identifying factor on file such as an old US address, telephone number, or you may have received a payment from a US source. Another trick they play is if you open another account even in the same bank, it gives them the chance to ask the ‘are you an American’ question.
This happened to me when I received a US sourced pension even though I do not have a US birthplace. It was quickly resolved with my 8 yr old CLN.
In Canada the banks generally never asked for or recorded place of birth information, so it would be very unusual to receive a letter based on suspected US birthplace. It is however fairly common for Canadians to sometimes study, work or buy vacation properties in the US, which can lead to old US mailing addresses on file.
This, I suspect, is what triggered the awkward conversation with an investment advisor some years ago. During the first phase of FATCA compliance they examined their records and found a US address dating back to our time in graduate school. More recently, in any dealings I’ve had with banks they will ask the US or foreign tax residency question (so both FATCA and CRS) any time you open a new account or update personal information. But of course it’s only a question, so a verbal “no” and on to the next piece of paper. Easy.
@JimA
Getting back to your original question about filing Form 8854, here’s some fun reading for you on Phil Hodgen’s website:
https://hodgen.com/filing-form-8854-late/
He points out a curious void in the US tax code silliness; the $10,000 penalty for filing Form 8854 late only applies to “covered” expatriates. That penalty doesn’t apply to “non-covered” expatriates if they file it late. It gets even weirder when you consider that Form 8854 is the only way the IRS can gather the information they need to determine whether or not you are a covered expatriate. So not filing the form puts you into a state of limbo that befuddles the IRS system, assuming they even notice, which they probably won’t. They’ve got lots of far more important stuff on their plate, like sending out all those stimulus payments.
Not filing a Form 8854 can be considered to be a special case of filing the form late, because theoretically one always has the option of changing their mind and filing it, even years after the fact. (However, I can’t imagine why anyone would decide to do that!) Have fun and enjoy your new found freedom!
Thanks again for all the input. It feels good to be putting this stuff behind me. I really don’t know how the average American copes, their tax code looks like it was designed by a deranged super computer. How can they live in a country that hates their own citizens and denies them so many basic freedoms?
@JimA
When I had my OMG moment, back in 2018, I went quite far down the line of trying to complete US tax returns. Fortunately, I found this site and gained enough insight to decide not to file anything (I’d never been in the US tax system). But I agree with you. I do my own UK taxes, and it takes me around 40 minutes. The US returns were utterly beyond me, and I used to work in the finance industry.