Renunciation Questions Thread
Ask your questions about Renunciation here.
This thread will be focused closely on renunciation questions and answers. If the conversation starts to ramble, those comments will be moved to another thread.
Sub-topics (more will be added as they occur):
Farrell v. Tillerson. Plaintiff is contesting Bern Embassy’s rejection of his CLN application due to his not having appeared in person at the embassy and his having been issued a passport after the relinquishing act.
Renunciation Spin-Off Conversations. Conversations that spin off from questions asked on the main Renunciation Questions thread are moved to this one.
Previous Renunciation Threads:
Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions)
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I’ve heard many good things about John Richardson.
https://www.taxconnections.com/John-Richardson/12262041/Canada/Ontario/Toronto/profilepage
@Eva
You will need a tax lawyer who is experienced in renunciation/ relinquishment matters not a tax accountant as lawyers have client confidentiality.
J, your bank will probably start to send information about your account automatically to the IRS (that is, balance or value at end of calendar year and interest paid or credited to the account, plus your personal data). However, even though the IRS might receive this information about you, I think the view from this forum is that they would never have the manpower to go after people of small net worth, particularly if they do not have any assets in the US.
Unless you earn more than $162k/year or you have a net worth >$2Mi you probably would not have an exit tax. However, filing the form 8854 might bring a lot of other headaches in terms of compliance with other regulations and you still have to file tax returns for the 5 years prior to renunciation, it’s a can of worms.
Please ignore the post above, I got lost with the date of the comments and replied to something old by mistake
@J
Minor point to correct future posts. The exit tax threshold is not $162k income, but $162k tax liability. That means you earn a whole lot more without worrying about the exit tax, though I expect the $2m net worth is what gets people.
@Ron and @J, I believe the IRS can try to tax a percentage of one’s retirement accounts even when the 8854 shows they’re worth below $2 million if they believe the renunciant is still “covered”. Murky stuff.
@Eva,
As far as I understand gains on disposition of US property by a non-resident alient (NRA) would indeed be subject to US tax (see e.g. https://en.wikipedia.org/wiki/Foreign_Investment_in_Real_Property_Tax_Act). I also believe gains on dispositions of non-US property by an NRA _would not_ be US taxable. In your case there is the complication of join ownership of the US properties with your USC husband who of course would _not_ be an NRA unless he renounced. I agree with others that it’s best to find someone else who has specialised knowledge of these things for better advice.
Non-resident aliens may need to pay tax to the US in certain cases where they have “US-connected” income like capital gains on property in the US (filed via form 1040-NR). As you might already know this tax regime would only apply to you after you reliquish your GC and move out. AFAIK the capital gains tax you would owe would be _the_ NRA tax by definition and not something “extra”. For some prelimiary light reading you might want to look at IRS publication 515.
(Note: I’m not a tax pro and have never dealt with NRA taxation / form 1040-NR but this is what I’ve absorbed from reading around).
@Eva
There are legal ways to avoid or reduce any tax liabilities that your green card relinquishment may trigger. If your husband remains a US citizen you may be able to put assets in his name before you relinquish
if he also renounces then Careful division of assets is important especially if either one of you has assets over $2,000,000. As Ron says you are allowed approx , $162,000,000 in gains before an exit tax kicks in. US pensions are tricky areas. You may need to sell your house before relinquishment to take the $500,000 gain allowance and avoid this being part of your 162,000,000 allowance.
A tax lawyer dealing in relinquishment issues can advise you. A colleague of ours used a Robert Ward based in Bethesda Maryland and Vancouver. He seemed to think he was OK.
@Heidi
I don’t mean to speak for Eva but she has said that she’s planning to relinquish her green card _before she becomes a long term resident_, therefore the net worth and income tax tests will not apply to her as she can’t be a covered expatriate. There might be some complexity involved in filing for the last year of residence in that situation (I’m not sure) but I don’t think that a professional specialised in relinquishment would really be needed (?). Wouldn’t such a person just be treated the same as any other foreigner who is terminating tax residence?
(I’m just pointing this to avoid potential confusion).
@coffebean
Thanks, you may be right, I didn’t read her full intentions thoroughly, on the long thread. It is always worth taking professional advice especially with an American spouse and a large net worth. I believe there are also other implications with inheritance for an Alien spouse..
@monalisa1776
I assume you refer to US retirement accounts? The IRS can’t touch non-US accounts.