Just Saying No: Not Renouncing/Relinquishing Nor Complying
Some people cannot afford to renounce (or relinquish and get a CLN) and some people will not renounce or relinquish because they do not consider themselves to be US citizens.
This thread is a place for people in this situation to share information and experiences. Thanks for sharing — your stories will be very helpful to others!
That wasn’t entirely my point, but no need to further quibble.
I was born in Canada but became an American citizen in 2000 thinking it was a good idea. We worked low paying jobs and my American husband went to a state college there and I had a baby there. We also naturalized our other Canadian-born son in 2001. We left the US around 2004 as we couldn’t get into the housing market and returned to Canada where my American husband became a naturalized Canadian and so did my American born daughter! We did pay our taxes while in the US for the years we were working.
Now I find our we were supposed to be paying US taxes all this time. I am confused as to whether we should comply or ignore. I have an online US expat expert accountant ready to file but the cost is still huge for us as we are middle income earners (15% tax bracket) although own a house in Canada and have saved in a TFSA about 45000 each (which is taxable by the US I now understand).
Before I pull the trigger on complying I would love some comments.
I am also confused as to whether we need to be compliant if we wanted to renounce/relinquish (which is it) our US citizenship…there are so many different opinions. Thank you for any help.
Wow. Yours is more complex than most.
1. You do not have to be compliant before renouncing. This us a common misconception. What happens is that the state department gives the names of renunciants to the IRS. They also tell you that it is your responsibility to contact them. What the IRS does is up to them but they have no resources and little interest in minnows.
2. Your TFSAs are not reported to the IRS. They have no way to know about them. Best to keep shtum.
There is controversy as to whether or not the IRS considers them trusts. They have not issued guidance. Some condors say they are. More reasonable experts like Max Reed say otherwise.
If you have no US assets, and no interest in ever returning, let sleeping dogs lie. You will surely get a lot of conflicting advice. In the end you make the decision based on what is best for you. Not necessarily what US law says you are supposed to do.
@F. M Pogue. Above all else, don’t make a single move until you have thoroughly researched your situation on this and other forums. Trying to comply fully with US rules could cause you catastrophic financial harm. Those who have tried to comply are the ones who have been hurt the most by this unjust US policy. In particular, don’t let some compliance lawyer scare you into sending a good chunk your life savings off to the IRS or charge you a hefty fee for self-serving (for them) advice. Whatever you choose to do you can do yourself for free.
For starters, if you are all Canadian citizens the IRS can’t touch you because the CRA doesn’t collect on behalf of the IRS from Canadian citizens. Even though discovering you have a US tax obligation is alarming (otherwise known as an oh-my-God moment, or OMG) there is absolutely no rush to do anything and you may well decide that you will never do anything. Sounds like its been 15 years and nothing bad has happened so far. So relax and learn as much as you can before you start to make important decisions.
Next, make sure your bank doesn’t know about your US connections. As portland mentioned, TFSAs aren’t reportable but do your best to avoid having any other accounts reported as well. You are safe (Canadian birthplace), but others in your family with a US birthplace are at risk.
Portland’s last paragraph above is especially good advice. There are many here at Brock who are ready and willing to answer specific questions you may have.
I would add something except I’m basically repeating what’s been said above.
– Do nothing impulsive – take your time and do research. There is no rush.
– Your Canadian assets are safe from any attempt at collection from the the IRS, though by the sounds of it you would have owed nothing anyway.
– Do not identify yourself as US citizens to any of your banks. If you are not comfortable with lying, don’t open any new accounts; you won’t be asked for existing accounts. If you are comfortable with lying, answer “no” when asked if you are a US citizen. (Canadian banks don’t routinely ask about birthplace, so even your US-born husband and child are fine as long as they are willing to “self-certify” as Canadian only.)
– Your TFSAs are not subject to FATCA reporting so the IRS will never know if you don’t tell them.
– It’s not necessary to be compliant before or after you renounce.
PS At least your husband had the commendable good sense to obtain Canadian citizenship after you moved back. A surprising number of people don’t do that, and sometimes it can really bite them in the ass.
“ I am also confused as to whether we need to be compliant if we wanted to renounce/relinquish (which is it) our US citizenship.”
You can renounce immediately, and if I were in your place that’s exactly what I would do. It’s expensive (4 * $2350) but it’s easy, it costs less than a tax advisor and it solves the problem.
To renounce (if that’s what you decide to do), contact your nearest US consulate and request renunciation appointments. They’ll tell you what documentation you need to gather and what forms you need to complete. Attend the appointments, pay the fees, and swear the oath of renunciation. Them wait a few weeks for the Certificates of Lost Nationality to arrive, and you’re done. No need to even give a thought to the IRS.
F M P. You relinquish by renouncing.
I said:
“It’s expensive (4 * $2350)”
Or $2350 for each US-born family member. I may have over-counted. 4? or only 3? There’s probably no need for your Canada-born family members to renounce.
“I was born in Canada but became an American citizen in 2000 thinking it was a good idea.”
Don’t kick yourself too badly. In 2000, no one knew what was coming.
“returned to Canada where my American husband became a naturalized Canadian and so did my American born daughter!”
Surely your daughter was born Canadian and could not naturalize in Canada.
If your husband did not act American after naturalizing in Canada, he could claim that he had intent to relinquish US citizenship when he naturalized.
You’re still trapped. Your daughter is still trapped unless she finds a way that she wasn’t born Canadian, in which case she could claim that she had intent to relinquish US citizenship when she naturalized.
I can’t guess if you’re better of renouncing now or doing nothing. When you show your Canadian passport to Canadian banks, you show them your Canadian place of birth. The IRS might never be reminded of your existence. Your daughter might have to renounce.
“I am also confused as to whether we need to be compliant if we wanted to renounce/relinquish (which is it) our US citizenship”
If you don’t wish to be a “covered expatriate” then you need to do some backfiling and become compliant. If you don’t care about being a “covered expatriate” then you don’t have to become compliant. Either way, the renunciation (if you renounce) or relinquishment (if you find a way to relinquish without renouncing, as your husband might be able to do retroactively) is valid regardless of possible tax problems.
If your daughter keeps US citizenship and she inherits from you, you don’t want to be a “covered expatriate” and should consider becoming compliant.
(1) “When you show your Canadian passport to Canadian banks, you show them your Canadian place of birth.”
It’s not necessary to show a passport when opening an account in Canada. A drivers license is sufficient, which does not show place of birth. Keep the passport hidden in a drawer if it shows a US birthplace.
(2) “If your daughter keeps US citizenship and she inherits from you, you don’t want to be a “covered expatriate” and should consider becoming compliant.”
Only if the daughter was US tax compliant, which may not be the case if she remains in Canada, and even then it’s not clear that the IRS has actually figured out how to apply the punitive tax to gifts/bequests from covered expatriates. See the IRS Medic comment I posted recently on some thread or other – covered expats are not exactly a priority.
Further corrections:
(3) The husband still has to pay $2350 to claim relinquishment so there’s no advantage to going that route unless it predates 2004 and removes the tax exit requirements, which may not be a big deal anyway. I doubt that the daughter could demonstrate intent to relinquish if naturalized as a child, and I expect she was dual from birth anyway. Simpler to just renounce.
(4) Nobody is “trapped” – both those with Canadian and those with US birthplaces can easily stay off the radar, because birthplace is not checked by banks. If the situation looks to change one day in the future, renounce; possibly only those born in the US would need to do so.
This covered expat business is overblown. If a renunciant doesn’t file anything, the IRS doesn’t have a clue whether they are covered or not. If they don’t renounce the IRS knows even less. Besides, if the inheritance happens totally in Canada, what the IRS may or may not think about it (if they think anything) is irrelevant anyway.
Hopefully none of this inheritance stuff will be an issue until many years down the road at which time things will undoubtedly be different so it doesn’t need to be considered for present day decision making.
The only thing that needs to be dealt with immediately is to take steps to make sure nobody gets “outed” by their bank.
I’m a German born American and have been living overseas for 27 years. I have dual citizenship. Only when the Obama administration began pursuing American expats for $ did I become aware of citizenship based taxation – I had honestly never heard of it. FATCA also concerned me but because my country of birth is Germany I figured I had nothing to worry about.
I looked into voluntary disclosure but was paranoid about entrapment. I looked into filing tax returns but US tax specialists charge in excess of $3,000 for their services which I really don’t want to pay for considering I owe no money, have no US financial interests and do not benefit in any way from US tax payer funded services. I looked into renouncing but I have family in the US so I thought I should hang on to it. I also have children born overseas (births have not been registered with the US consulate) who might one day benefit from a US passport.
I’ve been flying under the radar but I am worried for the future. I will be inheriting property and money from US family and am concerned that I might have trouble should I be exposed as a tax delinquent. Would I be best off renouncing now? I’ve read the thread and it appears I won’t be penalized if I do. Also, if I renounce would my children cease to be US citizens or will it not affect them? They are both under 18. I’m thinking if they want passports maybe I should arrange that now and then renounce? It’s all such a pain really and difficult to know what to do.
Hi Kent – you can certainly renounce without getting involved with the US tax system.
1. Contact your nearest US consulate and request an appointment to renounce. They’ll explain what documentation you need to gather and what forms you need to complete.
2. Keep the appointment, pay the outrageous fee ($2350), go through the swearing of the oath of renunciation, and you’re done – no longer a US citizen. Your CLN should arrive within a few weeks.
Your renunciation doesn’t affect your children’s entitlement to claim US citizenship. They can apply for passports when they’re adults, if that’s what they wish. To get the passport, they must prove their entitlement, so you may wish to prepare a packet with the documentation they’ll need.
@Kent
I assume that you were born in Germany, spent some time in the US, and moved back to Germany, and that your children were born in Germany, and that both you and your children have German citizenship.
If you only ever use German ID with German birthplace you will have no trouble with German banks or financial institutions. As long as you do not identify yourself as a US citizen, you will avoid FATCA reporting, and stay off the US radar.
For you it seems pretty simple, just continue to ignore the IRS and the IRS will continue to ignore you. No reason to think about becoming compliant. Whether you renounce or not should have no impact on your ability to inherit from the US, though I am not exactly an expert on this so check with others. The estate pays any taxes, not the recipient. Money would simply be wired to your German account; real estate or other property might be more complicated.
If you travel to the US, do you use your German passport (with ESTA waiver) or a US passport. Renewing a US passport is one point of contact with US bureaucracy, but there is no evidence that the IRS follows up on any Social Security Numbers it receives by way of passport applications.
Your children’s citizenship claims will not be jeopardized by your tax compliance status, or even a decision to renounce. Presumably you met the criteria for passing on citizenship? (Five years total in US, 2 of which after age 14.) If so, gather the documentation to prove it and put it in a safe place, they can use it later if they so choose. It was wise of you not to register their births. In the meantime, they too should avoid disclosing any possible US citizenship to banks, to avoid FATCA reporting.
Overall, with German birthplace and citizenship, you should be quite safe doing nothing. No reason to worry.
If the new Brocker posted his real name, I hope the moderators can edit it before search engines see it.
The status of each child depends on the parents’ situation at the time of the child’s birth: were the parents married, which parent(s) had US citizenship, and for what length of time and at what ages had each parent resided in the US before the birth (sometimes, physically present instead of resided, because laws are laws). The parent cannot renounce for the child even if they both want it; the child has to decide for themselves, and should be prepared to decide if they want to take action between ages 18 and 18.5 but they can still decide later too.
If the new Brocker was naturalized in the US then it might be hard to stay off the radar, but if he was born dual then maybe it will be easier to stay off the radar. There is a chance that inheriting from a US citizen might reveal his status. More seriously, if he renounces but becomes a “covered expat” but then if his heirs are still US citizens when they inherit from him, they’ll get taxed unfairly. If you owe no money and your net worth is under US$2,000,000 at the time of renouncing, you can back-file to avoid becoming a “covered expat”. Otherwise you have to try to guess, which miserable course of action might be less miserable than the others.
KB. What you do won’t affect your children’s choices. ( Provided they have all the right documentation ). It also won’t change your ability to inherit from the US. In the US system, the estate pays anytaxes due and anybody can inherit.
Avoid voluntary disclosure. I would avoid filing if I were to owe any taxes because , in that case, all kinds of penalties come into play.
https://en.wikipedia.org/wiki/Kent_Brockman
@Kent
Relax. The covered expat business is a non-issue, much beloved of the tax compliance industry but would have no significance unless your children moved to the US and you died, and even then probably not. If you have a German passport with a German birthplace then there is a course of action fully available to you that is not in the least bit miserable: do nothing. Even if you inherit from the US, there will be no misery.
“https://en.wikipedia.org/wiki/Kent_Brockman”
Thank you for that. I’ll have to see if I can watch 30 years of reruns of The Simpsons someday. It wasn’t broadcast in Japan, nor did I have a TV back in the day.
He would be a covered expat if he renounced. Someone needs to make an episode for that story.
I owned Matt Groening’s book “Love is Hell” before he invented the Simpsons.
Thanks everyone for the quick replies. I see some of you picked up on my Simpsons user name! I was born in Germany to American parents during the Vietnam War. We moved back to the US when I was 2 and I lived there until I was 22 at which time I moved to Australia. I’m married an Australian who at one time held a green card that has long expired. I have dual Australian/US citizenship. My passports have ‘Germany’ as my birthplace.There is a tax treaty between the countries with a fairly high income threshold so it is doubtful that I would ever have owed any money. Some assets were quietly rearranged some 10 years ago which has left me in a favorable financial position to renounce. Even though I could probably let sleeping dogs lie I find myself being more and more drawn to the idea of renouncing – $2350 is a small price to pay when I think about how much I could end up paying down the track. It’s also good to know that the decision won’t affect my children should they decide they want to live and work in the US – not something I would encourage because of these draconian taxation laws, but I guess it’s up to them. Thanks again!
You have three basic options. 1. Stay off the radar (do nothing). 2. Renounce but don’t file any tax returns. 3. Renounce and exit the US tax system by filing the paperwork.
With an Australian passport showing a German birthplace you are not at risk. Any old option will do really, but #1 is the simplest. Renouncing will give a degree of security, with or without the tax fuss.
You wouldn’t end up paying anything down the track, under current law at least, because the US would have zero ability to collect from you in Australia. Renunciation may still be cheap peace of mind, however.
Seems to me that an Australian citizen with a German birthplace can continue to live their life in Australia and not have to worry at all about interference from the US government. The only wrinkle I can think of is that dormant US citizenship would preclude running for political office in Australia but that would be an issue with Australian law, not US law. I’d stick with option #1 unless you’re thinking of taking a run at the Prime Minister’s job.
By the way, those green cards don’t exactly expire. I think you are supposed to formally surrender them (you can look up “I-407” to read all about it). So technically, your wife may still be a US permanent resident. But there’s no need to shout that from the rooftops, either.
KB:
“It’s also good to know that the decision won’t affect my children should they decide they want to live and work in the US – not something I would encourage because of these draconian taxation laws, but I guess it’s up to them. ”
As maz57 says, dual AUS/US citizenship can hamper your children’s futures in Australia, should they wish to run for office. To avoid the fate of many a dual Australian politician, they’d need to renounce. Merely not applying for a US passport would not be sufficient. You might just want to make sure they’re aware of that, so they can make an informed decision should the need arise.
The USA-born child, upon reaching age 18 should consider relinquishing then. One way to hedge is to accept employment with a non-USA government, by working at the polls on election day.
Notice how the wording allows hedging, as you can later decide whether to assert what you intended, (“with the intention of relinquishing United States nationality”) and claim US citizenship if you want to.
Notice how working for a town’s summer jobs programme qualifies if the town is the employer.
Notice how getting naturalized or making an oath of allegiance applies if you are 18, but this does not even require that you be 18.
Under US law you relinquish US citizenship by accepting employment with a foreign government.
U.S. Code, Title 8 §1481(a)(4)(A):
(a) A person who is a national of the United States whether by birth or naturalization, shall lose his nationality by voluntarily performing any of the following acts with the intention of relinquishing United States nationality—
” accepting, serving in, or performing the duties of any office, post, or employment under the government of a foreign state or a political subdivision thereof, after attaining the age of eighteen years if he has or acquires the nationality of such foreign state; or (B) accepting, serving in, or performing the duties of any office, post, or employment under the government of a foreign state or a political subdivision thereof, after attaining the age of eighteen years for which office, post, or employment an oath, affirmation, or declaration of allegiance is required; ”