US expat tax and FBAR: Discussion thread (Ask your questions) Part Two
Please ask your questions here about US Expat tax and FBAR.
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NB: This discussion is a continuation of an older discussion that became to large for our software to handle well. See US expat tax and FBAR: Discussion thread (Ask your questions) Part One.
I wouldn’t have filed anything, if I had understood the situation then as I understand it now.
The crucial practicalities that I know now:
a) filing the forms, providing income information, and signing under penalty of perjury represents what amounts to a contractual undertaking to pay the tax assessed by the IRS as due;
b) other countries don’t help collect US tax from their citizens;
c) the US has no right to tax non-US-source income of a person not resident in the US; saving clauses by the bucketload can’t change that simple fact. It doesn’t matter a hoot if they’re a US citizen or not, the US has no right to the flippin money.
Render unto Caesar the things that are Caesar; haven’t got any of C’s stuff? then there’s nothing to render. All’s well,
the things that are Caesar’s
Except I might be ‘outed’ if my parents were to leave me anything in their wills (both are in the USA) and I’d like to be able to leave money to my sister’s children.
I’m not bothered about inheriting, I’m more bothered about the IRS learning about me.
I also make a little bit of money with my self-published books with Amazon (below US filing limit). I plan to update the tax information page with my UK NI number, but also I’d feel a bit better about filing in ‘non US tax person’ if I’ve sent off that blasted last form.
@Plaxy and BirdPerson
I think many are still scared of the Reed ammendment (proved to be almost impossible to implement) with the possibility of not being allowed into the US at some future date. Filing the 8854 and checking 5 yrs of tax compliance will serve to assuage that worry.
@BirdPerson
Your parents can laeve anything within US limits at the time to a non US person without a tax implication, it’s when a covered expat leaves to a US person that the problem of a 40% is applied to the covered estate.
Heidi and BP:
Sorry, in my head I was putting into words what my position would be, if I was renouncing now. Apologies if the last para gave the impression I was dispensing advice to others. Each must work out strategy according to their circumstances and priorities, absolutely. What feels right for one person, might not feel right for another. With that I totally agree.
@plaxy
No need to apologise to me. I came on here for opinions such as yours!
‘Talking’ to all of you has been like a lifeline of sanity in a fear mongering world. I am very grateful!
I think someone has written that ‘you won’t be totally happy with whatever decision you reach.’ And I think that’s true.
BP – I reckon I can guess who said that, lol.
I’m very happy with my outcome, at any rate, and I’m sure that’s true for many renunciants, and trust it will be true for you.
I’ve been able to sleep better at night over the past week, and my red wine consumption is returning to normal levels. But what an emotional whammy it’s been. Thank goodness there places like this, and on Facebook, where I’ve been able to seek support and advice.
I hope to be able to offer help in return.
@BirdPerson
The IRS seek to control and collect through fear, they don’t have right on their side.
There needs to be ‘like’ button on this blog!
@Portland
OK, thank you.
But I’m still not clear why I would even file 1040NR. Form instructions (if I’m reading them correctly) have a table that lists all those who must file, and I fit none of the categories… Would the purpose of filing in my case be just so I’d have a place for numbers transferred from 1040??
The purpose of a relinquisher (including renunciant) filing Form 1040NR is to show that it’s a final return. Only if you don’t have to file a return at all due to income below a threshhold etc., then filign Form 8854 by itself is good enough.
As for IRS instructions not “covering” relinquishers (renunciants) etc., aren’t we used to that by now. Legally you don’t get to rely on IRS instructions the way you’re supposed to be allowed to rely on court rulings, statutes, regulations, and Internal Revenue Bulletins. But if you can’t afford a high powered lawyer, you also get screwed if you try to rely on court rulings, statutes, regulations, and Internal Revenue Bulletins. In other words, there’s no hope. If IRS instructions are printed on paper, they can help when my elderly cat doesn’t get to the sandbox in time.
@Norman Diamond
Ahaha, my elderly cat could use those instructions in a similar manner as well.
Ugh, I guess I’ll send them everything (with zeroes, as I don’t have a tax liability even for the portion of the year when I still was a citizen) and be done with it!
Thank you!
Oh Dear. Correct. It makes no sense.
“Would the purpose of filing in my case be just so I’d have a place for numbers transferred from 1040??”
Yes.
You can’t file a part-year 1040 so they resort to this little gimmick to get round the technicalities.
Because they must somehow make it both possible and seemingly necessary for a former citizen to file a US tax form for the period leading up to the day of the big pretend garage sale – Exit Tax Day, when those worth more than the exit tax threshold helpfully pretend to sell all they possess worldwide, so that it turns into US money and can be taxed by the US.
For those over the threshold, 8854 is the bullet and 1040/1040NR is the gun.
But for those of us under the threshold, the cobbled-together 1040/1040NR (if filed) probably doesn’t get much attention beyond the cashing of any attached cheques.
I have a hypothetical question.
Suppose a former USC, who is a citizen and resident of another country, one day (during the SOL period) receives a tax bill from the IRS because they are deemed to owe some money. The former USC chooses to ignore the IRS’s demands because they have no US assets and nothing can be collected.
What if that former USC inherits US assets at some future date when, for example, a US family member dies? Would there be a lien placed on any inheritance? Or is the former USC safe from any action by the IRS since they are no longer a passport-carrying, social-security-number-toting member of the USC club?
So basically, can a non-USC who was formerly a USC face any US inheritance “complications” if they are deemed to owe taxes to the IRS after they have ceased to be an American citizen?
I’m just curious…
Interesting question, Petlover. The premise seems a little improbable to me. I don’t believe for a minute that the IRS wastes any time poring over past returns from former citizens unless they have evidence of crime.
However, speaking hypothetically, I think the citizenship status of the non-resident heir would be irrelevant. US tax will be due on any income from the US assets, and the payer will want a W-form for withholding; the IRS will receive the information on the withholding, complete with the heir’s SSN, and will then be able to issue a levy/lien on the assets for payment of the outstanding debt.
That’s only my guess – may be wrong.
@plaxy
Thanks for your answer. I only see one hiccup in it. The IRS wouldn’t receive the ex-USC heir’s SSN because there isn’t one. The heir would have to apply for an ITIN because their SSN became invalid when they filed 8854, correct? Would that affect the IRS putting a lien on the assets? I don’t know…. Perhaps being treated as a non-resident alien with an ITIN would save the heir from any exposure to the IRS as having an outstanding tax debt?
I think this hypothetical situation is quite feasible. Imagine you relinquish, do the final filing, but then the IRS comes back and says there’s a tax debt. What I keep reading here on IBS is that if you are no longer a USC and have no US assets, the IRS can’t touch you. Thus, it begs the question, what happens when US assets suddenly appear (in the form of an inheritance/estate)?
I thought the SSN lived on forevermore. I don’t think it disappears even after renouncing.
Many people who are not US citizens (in any way) have SS numbers if, for example, they studied in the USA for a year.
My greater, personal concern is if you decide not to file at all… I’m not expecting much of an inheritance, and I won’t be leaving much of one. But I’d hate the IRS to wake up and realise that I exist.
Someone, please, correct me if I am wrong.
The 8854 severs the IRS tie and renders the SSN defunct, no? I really thought that was the whole point of the 8854, to effectively close your account with the IRS.
From what I’ve read, the SS number lives on until you’re dead.
But the SS number has nothing to do with your citizenship. It’s just a method the USA uses to link EVERYTHING about you. Which is why there’s talk about getting rid of them, due to the security risk this creates.
For example, when I was at university in the USA, your exam grades were posted on a board, using your social security number (not names) so no one else would know your results.
The 8854 just checks you out of the IRS.
Your SSN continues on even after you have expatriated until you eventually go to the happy hunting gound. I am not sure it is ever reallocated.
Many renunciants receive a SS pension which requires a SSN, also private US pensions are linked to your SSN. If you wish to keep a US bank account you will need your SSN.
SSNs were once posted on your driver’s licence , so any identity thief had access to your name, address and SSN. It was stopped some time ago after increasing reports of fraud.
Petlover:
“The heir would have to apply for an ITIN because their SSN became invalid when they filed 8854, correct? ”
Not at all. SSNs are the ID for social security first of all; they don’t become invalid in any way just because you stop being a US citizen.
“I really thought that was the whole point of the 8854, to effectively close your account with the IRS.”
The point of the 8854 is to give the IRS a chance to try to get you to pay the exit tax.
Heidi, sorry but is there really any such thing as checking out of the IRS? What does that even mean?
I know it’s what people say but I’ve never seen any explanation.