Renunciation and Relinquishment Questions – Part 1 of 2
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.
Previous Renunciation Threads:
Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions)
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This thread is now closed. Please comment on Renunciation and Relinquishment Questions – Part 2 of 2
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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.
Interesting read regarding increased attention from IRS towards tax compliance for renouncers:
https://www.treasury.gov/tigta/auditreports/2020reports/202030071fr.pdf
Many are eager to renounce as soon as possible. Although this article does not really bring any news regarding when this might again be possible in most parts of the world, at least it gives an indication that the Department of State acknowledges that routine services such as this is not possible these days. The article was recently updated, which shows there are still people left in the State Dept. At least one.
https://travel.state.gov/content/travel/en/News/visas-news/phased-resumption-routine-visa-services.html
>We are closely monitoring local conditions in each country where we have a U.S. presence. Local conditions that may affect when we can begin providing various public services include medical infrastructure, COVID-19 cases, emergency response capabilities, and restrictions on leaving home.
So do what you can wherever you live to contain the virus, I guess.
I understand that at least some embassies/consulates began doing passport and visa services some months ago, but I haven’t heard of any who are doing expatriations. I’d like to know: Does anyone know of any embassies/consulates that are doing expatriations at this time?
I agree with Maz57: “Previously they purposely limited the number of available appointments in order to keep the renunciation numbers artificially low. Now COVID19 gives them perfect excuse to eliminate those appointments entirely. Not a big surprise, but nevertheless its a rotten thing to do.”
I’m a mod on a Facebook group called ‘Renounce US Citizenship–Why and How’. Several members have been able to book renunciation appointments. Looking through the postings, this is in Italy and in Singapore. Other members express frustration with Frankfurt, Vienna, and Stockholm not accepting appointments. Those consulates which are accepting appointments seem to be limiting the service to citizens living in that area/country.
I sent in my request for Canada on 7 November, the day the election was called for Biden. Have not heard a peep apart from the automatic acknowledgement e-mail.
I might have an opportunity to speed things up by doing it Europe late next year, though that scheme could be dependent on residency status.
No rush though, from a stimulus benefit perspective.
Hong Kong resumed renunciation appointments a few days ago according to their latest US Citizens Services announcement. For a long time they limited renunciations to bonafide HK residents, though interestingly, that is no longer pointed out on their website. In any case, for now HK is not letting in visitors who are not bonafide HK residents, so not a place to plan a renunciation holiday. Just to illustrate that other consulates are starting to resume services.
We will resume renunciations on Monday, November 16. Please contact us by email at renunciationhk@state.gov on or after November 16 to start or restart your renunciation process. Please note that we will not be able to accommodate all renunciation cases right away and that resumption of this service could be scaled back at any time depending on local public health conditions.
https://hk.usconsulate.gov/u-s-citizen-services/
Hi!
I renounced in 2016 without having obtained a social security number. I applied for a ITIN (Individual Taxpayer Identification Number) in conjunction with the tax filings that were done prior to the renunciation. At the time fear drove me to do the back taxes streamline thing. The CPA that I used was a IRS Certified Acceptance Agent which made him eligible to examine and certify my passport in order to apply for the ITIN. For the tax year following the renunciation I tried as best as I could to do the required flings by myself. I got some things wrong and the IRS sent me some letters with instructions on what was missing. I sent in what was needed and after a while the letters stopped coming. Time has passed and this ITIN route seems to have worked out OK for me. I could probably just have renounced without filing but I was afraid of the severe penalties and I had admitted to my bank that I had American citizenship.
Hope it wasn’t too too costly
It wasn’t cheap but less costly than many other offers I got. I was offered a set fee of 3500 USD if I remember correctly.
I was actually more worried about entering the US tax system than I was in staying out! So I didn’t file anything and I renounced in October 2018. Haven’t heard a thing from the IRS and I don’t expect to.
In hindsight I regret that I filed but at the time it felt like a very kafkaesque situation that I just wanted to free myself from. If hadn’t mentioned my citizenship to the bank I could probably just have laid low and spent the money on better things 🙂
I understand that the Canadian embassy/consulate system has begun catching up on the cancelled appointment backlog and is setting CLN appointments for the Spring, but I haven’t heard of any having taken place yet.
If you’ve applied for a CLN appointment in Canada during the pandemic, I’d appreciate knowing how long your wait time is (or was) – don’t need exact date, months is fine. You could post here or e-mail me at pacifica at isaacbrocksociety dot ca
Thanks.
Hi to all
1. I have some confusions as my CPA interpreted to me that as I am a Singaporean. Singapore is not a tax treaty country with USA. Hence, even if I giving up my green card before 8 of last 15 years, I would automatically considered as Long Term US Permanent Resident (not a short term PR) and subject to Exit Tax. Do you know anyone like me, from a non tax treaty country and relinquished green card before 8 years of last 15 years. Do we have to file Form 8854 (after giving green card but before 8 years rules) and subject to Exit Tax?
This is what my CPA interpreted when we searching for answers on Exit Tax and the 8 years rules but we are not 100% sure if we understand what it really means:
“WHO IS A LONG-TERM RESIDENT?
“You are a LTR if you were a lawful permanent resident of the United States in at least 8 of the last 15 years ending with the year your status as an LTR ends.
In determining if you meet the 8-year requirement, don’t count any year that you were treated as a resident of a FOREIGN COUNTRY UNDER A TAX TREATY and didn’t waive treaty benefits applicable to residents of the country”
2. As a general principle, the day prior to expatriation. In many cases, the “deemed sale” will generate “deemed profits”. You are then taxed on those “deemed profits” (assuming i am a “covered expatriate”). Can someone enlighten me:
For example, I purchased a Singapore property at $500,000 in Year 2000 (way before I became a Green card holder) and I obtained my green card in Year 2019 and the property fair market value (FMV) at that time was about $850,000. On the day my expatriation, the FMV of the Singapore property is estimated at $900,000. The “deemed profits” is $50,000 ($900,000 – $850,000) OR $400,000 ($900,000 – $500,000)? Is $50,000 or $400,000 the deemed profit? If the deemed profit is $50,000 (this will be the “deemed” capital gains and will be taxed? Note: The Singapore property is currently a rental property.
3. If I giving up my green card on 4th year (less than 8 of last 15 years), I do not have to meet the “Compliance Test”, am I correct? As I will not be able to meet all U.S. tax obligations for the five years before expatriation.
4. For a short term US permanent PR, will I get the “Tax Exemption of $725,000” on Exit Tax? Or the tax exemption is entitled only for US Citizen who renounced their US citizenship?
5. I heard that most Title Deed Company will not agree one of the joint owner removed her from the US property, is that correct? If this is incorrect, how much would cost to remove the ownership from a joint ownership property in US?
Again, Thank you very much in advance for all of your input and time.
5.
If you have no US assets or income, I would just get rid of the Green Card and avoid doing any US tax returns. Just like many of us have renounced US citizenship and not filed any US tax paperwork.