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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.

3,618 thoughts on “US expat tax and FBAR: Discussion thread (Ask your questions) Part Two”

  1. My relinquishment of foreign (as in US) nationality will be complete when the Japanese gov recognizes it as complete. If the US makes it too difficult to abandon US citizenship, then Japan will only require a statement declaring that duals-at-birth and nationalised citizens choose Japanese citizenship and reject any foreign citizenship they might possess.

    Here’s something that might be of interest. When I naturalised in Japan the Ministry of Justice, which administers matters relating to the nationality law, gave me 2 years to abandon my US citizenship. But when applied for a Japanese passport immediately my naturalization, the application has a question asking “do you have citizenship in any other country”. When I answered ‘yes’, they wanted an explanation, after which they said to answer ‘no’ based the Foreign Ministry’s interpretation that if I am a naturalised citizen of Japan, then by definition any other nationality I might have previously possessed is now null and void.

    My point is that if the country in which you possess your ‘real citizenship’ acknowledges that your are a citizen solely of that country and not a citizen of the US, than that is that. US law has no validity outside the US, unless the other country allows it.

    Obama was able to automatically lose his Kenyan citizenship at age 23 because Kenya does not allow dual citizenship. He never had to file anything or appear anywhere or pay anything to do this. Why is he not willing to allow others to benefit from this type of basic human right?

  2. @TokyoRose, “My point is that if the country in which you possess your ‘real citizenship’ acknowledges that your are a citizen solely of that country and not a citizen of the US, than that is that. US law has no validity outside the US, unless the other country allows it.”

    B-I-N-G-O

    In essence that is the core solution. Besides the Hague Convention on Nationality, that the USA never signed, gets right to that issue.

    I would go further that if you naturalise as a Citizen of a country that signed the agreement then you have a single citizenship at least whilst outside the USA.

  3. @TokyoRose, riddle me this.

    I understand your getting the CLN as that was the procedure required by your government which is their Sovereign right.

    You had two years to sort out saying adios to the USA.

    Lets assume in that interim period, you sought the protection of the US Embassy in Japan for something. What do you think the Japanese Government would say?

  4. @ George

    I’m not sure exactly what you’re asking. Legally during that 2 years I have the right to be a dual national, so I have (or actually had, since I completed the relinquishment process at the consulate a few weeks ago), I guess I had the right to seek refuge at the US embassy.

    And as much as I feel more comfortable being a citizen Japan than of the US, I have no delusions that Japan is a multi-cultural, multi-racial country. As a Caucasian, I will always be considered a “stepson”, even after having lived here for 36 years and speaking the language relatively fluently, while the Peruvian dictator Fujimori was welcomed as a “son” and offered sanctuary from extradition for serious crimes simply because he is pure Japanese by ethnicity even though he had never lived here and does not speak Japanese.

    But Japan strongly recognises the human right to change nationality. There is no fee charged to naturalise and no fee for renouncing Japanese citizenship. And if in the future the US makes it even harder to abandon citizenship, the Japanese will most likely eventually simply accept a declaration of choice as evidence of single citizenship. I fully believe that Japan would stand up more for naturalised citizens who were formerly US citizens than what I have read about some unfortunate naturalised Canadians who were told at the time of their naturalization that they were automatically giving up their US citizenship, only to find many years later that the rules had changed. Once my loss of “foreign (US) nationality is part of my permanent record, than that is the “law of the land” as far as Japan is concerned. So the usefulness of my CLN will be extend for about 15 minutes as I file it and a translation.

  5. @George.

    When entering by car at a land crossing, I think US customs by treaty grants a Canadian citizen an automatic 6 month visa waiver entry unless they have reason to believe that person might overstay their allowable time or thinks there might be some other “problem”. However, even without a passport stamp I’m sure their system has record of when I enter the US and when I leave (via exchange of data with the Canadian side).

    I’m always careful to stay the length of time I indicated if I am asked. (i.e. don’t stay a month if I said I was going to shop for the day.) I’m sure their system also reflects the fact that I suddenly started traveling on a Canadian passport after years of presenting a US passport. I believe that the best way to be considered solely a Canadian is to act solely like a Canadian. I don’t take that US passport with me (because I believe it shouldn’t even be in my possession as I’m no longer a US citizen) so there is no way I can be forced to present it. If they were to turn me back because of that, so be it. So far they haven’t and I know for a fact (based on the conversation) they have noticed my US birthplace.

  7. I was very discouraged in August when I had my relinquishment appointment that the Calgary Consul recommended to the State Department that my application for relinquishment in 1978 be denied. Although I know it will be a year or more until Stare will bless me with their decision I guess I had better start getting prepared. My questions:

    1. My husband & I have a joint non-registered account. To make things clear going forward we plan to split it 50/50 into individual accounts. I realize this will not impact back FBAR filing but does anyone see any problem with doing this now?

    2. We have transaction/signing authority on n all of each other’s accounts. Should we remove these both ways?
    Thanks

  11. How are former US citizens at IBS dealing with W8-BEN (or, from January 2015, W8-BEN-E) forms? is it correct that (A) completed W8 forms self-certify that one is an non-US-resident, non-US-person for US tax/FATCA purposes? (B) that the older (simpler) W8-BEN form can be used until the end of 2014? (C) that W8-BENs should be supplied not to the IRS but to one’s financial institutions? (D) that W8s should go to *each* of one’s financial institutions, regardless of how little is held in one’s name by that institution? (E) Is anyone taking the initiative to fill these in and submit them, or is everybody waiting to see what their financial institutions demand of them? Advice? Reasons? Many thanks for any thoughts on this.

  12. @KingOfTheRoad, my suggestions: A, yes; B, yes (note that the new W-8BEN-E is a nightmare but is for ‘entities’ only and as an individual you shouldn’t have to deal with it, whereas the ‘new’ W-8BEN for individuals is barely distinguishable from the old/current one); C, yes; D, theoretically perhaps, but probably only if/when requested by that institution; and E, the possible exception to D is that you might pro-actively send a W-8BEN to any any financial institution to which you have already sent a W-9 or similar,and so ‘negate’ it.

  13. @KingOfTheRoad

    I’ve only provided a W-8 when requested to do so. I have done this on the assumption that if they suspected that I had US indicia they would be duty bound to solicit a W-9. If they haven’t requested a W-9 or a W-8, I haven’t proactively provided anything. I have only received W-8 requests from brokerage account providers and only because I received US listed shares as part of an M&A transaction one of my investments was involved in.

    I have received nothing in relation to any other type of account with the exception of an equity compensation “account” with a former employer. I sent the former employer a W-8 and a certified copy of my CLN (even though they didn’t request it) with the “explanation” letter I was required to provide. Failure to provide the explanation letter would have resulted in automatic “backup withholding” of 30% on any transactions (in addition to local withholding tax).

  14. @ King of the Road,

    I think the W8-BEN-E is only for entities. I see that:

    the current W8-BEN form says, just below the title at top of page:
    “For use by individuals. Entities must use Form W-8BEN-E.”

    the draft W-8BEN-E form says, just below the title at top of page:
    “For use by entities. Individuals must use Form W8-BEN.”

    Re (C) and (D). My understanding is that each financial institution individually asks for W8-BEN and it is kept on file by the FFI, not sent to IRS. (note: my understanding of IRS can be pretty shaky, so it would be good if someone confirms this.)

    Re (E) I’d wait and see if the FFI brings it up or not, but everyone’s circumstances are different. That’s generally how I feel about things.

    I note that it sounds like an FFI might use a different form — as the Canada-US IGA says in Annex 1, “A self-certification that the account holder is not a US citizen or US person for tax purposes (which may be on an IRS W8-BEN form or similar agreed form).” So, I’d tend to wait and see what the FFI does.

  15. @ Cheryl
    Try to stay hopeful on your relinquishment, others have had negative comments during their appointments as well and still got their CLNs. It’s too bad the wait is so long, it must be terrible to be left wondering.

    1) My non US husband transferred his money from our joint accounts to separate accounts but we were advised to make sure that money transferred into his accounts was truly his. We were able to split investments so no gains were incurred. I think the US may consider some “gifting” to be going on with transfers if you can’t prove ownership of the money – there is an amount allowed to be gifted from a US spouse to a non US spouse on a yearly basis for US tax purposes. In Canada, the income earned on money given to a spouse must be still declared by the giver for tax purposes.
    As a person opening a new account, you may be asked to declare your US Person status. We opted to keep my money in the joint accounts to avoid this question. For estate planning purposes we were told individual accounts would have to go through probate, this is why we had joint accounts. The US makes life difficult.

    2) Regarding signing authority, if a US person has access to an account (by transaction/signing authority or jointly held) and the balance meets the critera to be reported it must be listed on the FBAR regardless of who the money belongs to. The non US person is identified on the FBAR as well. I don’t think there is an issue with the non US person having authority on the US person’s accounts although if held jointly both persons would be identified on the FBAR. Changing transaction/signing authority would impact future filing of FBARs

    The inconvenience of separate accounts must be considered, paying bills is now a nuisance. It reminds me every day how the US has intruded into our lives.

  16. Cheryl –

    Useful words from heartsick. If these accounts are in Canada, the attribution of the funds is a separate matter from their proportion in the account. Example. Say one person has put in all of the funds to a joint account. That one person is supposed to have been reporting all of the income (interest or whatever) to CRA. Split the account into two separate accounts, 50/50. That same person will continue to report all of the income in both accounts to CRA. Not doing that? It’s tax evasion and could get you into trouble. Trouble in Canada to compound those troubles with the US.

  17. @heartsick & @usxcanada. Thank you so much for taking the time to respond. I do my own taxes and didn’t want to go to an accountant about all this…at least not yet. It would be very difficult at this point to figure out whose is whose so I’ll just sit tight.

    All of you at Isaac Brock have been a godsend. Thank you.

  20. Hi,

    Does anyone know if a US Citizen living in Canada for the past 40 years can gift US and CDN Stocks to a non US Citizen spouse who has lived in Canada all her life without incurring US gift tax?

    Thank you

  21. @CDN:
    This is from the Phil Hodgen Law Intl Tax website:

    “Gift tax when the recipient is a noncitizen
    When the recipient spouse is not a U.S. citizen, the unlimited federal gift tax marital deduction does not apply. Instead of the unlimited marital deduction, gifts to noncitizen spouses have a large annual exclusion. The amount is indexed annually for inflation. For 2012, the amount that can be given to a noncitizen spouse tax-free is $139,000.

    This means that every property settlement where the transferee is a noncitizen must be scrutinized for potential gift tax liability for the donor.

    But more important, this same rule applies even to a couple that never gets divorced. If the recipient is not a U.S. citizen, the unlimited marital deduction does not exist.”

    http://hodgen.com/property-transfers-between-spouses-gift-tax/

    It appears possible to give annual gifts of less than $139,000 (2012) to avoid the US gift tax, but you should do more research to confirm this.

  22. Thanks Innocente,

    Some of the web sites I looked at mention that place of residence (e.g. in or outside of US) also impacts applicability of gift tax between US citizen and Cdn Citizen. I’m having a difficult time, however, getting clarity on this.

  23. @CDN

    If you wish to gift more than the annual NRA spouse amount, you can do so via the unified gift and estate tax credit. This is a lifetime credit of $5,340,000. If your gifting does not exceed this amount, it is not subject to the gift tax. This can be used to bring one’s net worth below the magical $2,000,000 threshold used to determine covered expat status when renouncing.

    Note, however, that to make use of this credit, you will have to file the appropriate IRS form(s).

    You are also able to gift about $14K per year per person to any number of people; no filings required.

    See. for example: http://www.forbes.com/sites/deborahljacobs/2013/10/31/irs-raises-limit-on-tax-free-lifetime-gifts/

  24. tdott is correct. You can gift up to 5.34 million. This reduces the estate tax exemption by the amount of any gift. This all supposes that one is inclined to file a gift tax return.

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