Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part Two
Ask your questions about Renunciation and Relinquishment of United States Citizenship and Certificates of Loss of Nationality.
Participants will need to provide their e-mail address (real or fake) and an alias. The only written rule is that participants must use a same alias each time they post (and not “anonymous” or derivatives thereof).
Bear in mind that any responses that you get from participants is peer-to-peer help, and it is not intended as a replacement for professional advice. Also, the Isaac Brock Society provides this disclaimer: neither the Society nor any of its members are professionals. We offer our advice here only in friendship and we recommend that our readers seek professional advice if they need it.
If you wish to receive an e-mail notification of comments, check the box to that effect when making your first comment.
NB: This discussion is a continuation of an older discussion that became too large for our software to handle well. See Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part One
@moonstruck. I understand from Phil Hodges that your option (2) is what we should do. 1040NR with 1040 attached with the required schedules. The 1040 shows worldwide income up to the date of expatriation, and the 1040NR shows only US connected income from that date to the end of the year. The 8854 shows the income figures from the 1040 and I imagine they cross-reference that. If your accountant didn’t file the 1040 you couldn’t take the 2555 exemption on earned income outside the US, because you take it on the 1040 only, not the 1040NR. If you have Social Security income, you will continue to file the 1040NR to the end of your days, but you may have a treaty-based tax exemption for that (in the UK, you do). So you pay the tax to your country of residence, but file with the tax treaty exemption claim forever. That’s what I’ve found. I’m in the process of preparing now, so I don’t know for sure that this is all a correct ( ie, acceptable) interpretation of the code.
@Rev Susi
“If you have Social Security income, you will continue to file the 1040NR to the end of your days, but you may have a treaty-based tax exemption for that (in the UK, you do). So you pay the tax to your country of residence, but file with the tax treaty exemption claim forever. That’s what I’ve found. ”
Are you sure about that? Could you please cite the IRS document which states that? I seem to remember reading in some official documentation (not sure if it was from IRS or SSA) that if income is only from SS paid outside the USA and covered by a treaty, no filing (i.e. 1040NR) is required.
@moonstruck, Rev Susi, Monalisa and others:
Here is what Moonstruck wrote:
@allou,
Yes, please do post here if you get any answer about this 1040/1040nr filing business from Phil Hodgen.
It is still my understanding that we can either (1) file full year 1040 which means you must declare full year worldwide income or (2) file 1040 as a statement which captures worldwide income up to expatriation date and attach it to a 1040nr as the actual tax return but which only contains worldwide income up to expatriation date + any U.S. source income for the period after expatriation. I don’t have any wages so I cannot use the 2555 anyway.
Here is what Phil H. replied to my query:
Thanks for the email Allou.
These are good questions but hard to deal with fast.
You have to file Form 1040NR because on 31 Dec you are a nonresident.
You must attach Form 1040 as a schedule to the Form 1040NR because you are filing a dual status tax return. Publication 519, Chapter 6.
You are going to exclude foreign earned income on the Form 1040. But look at whether it is easier/better to use the foreign tax credit to reduce or eliminate double taxation.
That’s it for now. Subscribe to my weekly Expatriation mailing list, and I will be doing a full-on multi-part workshop in the fall for questions just like this.
I can see from Moonstruck’s later comments that we don’t have the same situation. I only have non-US wage income, plus a piddling amount in interest on a bank account. I have tried to figure the 1116 form, but it is beyond me at this point. I have previously filed the 2555EZ. Perhaps I will include a 1040nr full of 0’s and a letter of explanation. The important thing is to get it done and sent, to the best of my ability and make sure the 8854 is filed within a year of renunciation. I am still waiitng for the CLN , getting on for 9 months…and there are no US tax accountants where I live. Good luck to all!
@Calgary411 – thanks for adding those 8854 filing details.
And, reading over my earlier post, I see I indicated that my 8854 would be sent in in April 2014; this was a typo since – – I renounced in 2014, the 8854 gets filed in April (or later) 2015. Sorry for the confusion.
@Rev Susi
I need to make a note to myself about this. I think I’ve looked it up at least once before.
According to Pub. 519, “You do not have to file Form 8833 for any of the following situations.
…
3.
You claim a reduction or modification of
taxation of income under an International
Social Security Agreement or a Diplomatic
or Consular Agreement.”
According to Pub. 901,
“Disclosure of a treaty-based position that
reduces your tax.
If you take the position that
any U.S. tax is overruled or otherwise reduced
by a U.S. treaty (a treaty-based position), you
generally must disclose that position on Form
8833 and attach it to your return. If you are not
required to file a return because of your
treaty-based position, you must file a return
anyway to report your position. The filing of
Form 8833 does not apply to a reduced rate of
withholding tax on noneffectively connected in-
come, such as dividends, interest, rents or roy-
alties, or to a reduced rate of tax on pay re-
ceived for services performed as an employee,
including pensions, annuities, and social secur-
ity. ”
So apparently you do have to file a return (e.g. 1040NR), but not Form 8833 for claiming SS treaty benefits.
@allou, moonstruck and others. Phil Hodgen’s response clears up for me the question of using the 2555 and FEIE; those go with the 1040 as normal, and for me that’s better than the tax credit. As for the 1040NR for Social Security, I don’t know if the totalisation agreement means you no longer have to file because everyone knows it’s taxed in the residence country. I also have CIvil Service Retirement, and they too pay it without withholding, so maybe the same thing holds, but it’s a different article in the tax treaty, and applies to people who are not just resident, but also nationals of the UK, so I think to be safe, I’ll file in the future, even if you all think I could give it a pass on the Social Security.
@LM, or anyone…
LM, I know you’ve just done this, so my question is I’m filling out the 4079 form to send to U.S. consulate to get an appointment to renounce. One of the questions (19) is “Did you know that by performing the act (Canadian citizenship) you might lose U.S. Citizenship? Please explain…. ? What should I say to that? I want to say I want to renounce to get out of all the damn paperwork and hassles you inflict on all of us. I wouldn’t lose it unless I’m voluntarily renouncing, but I don’t want to say the wrong thing. Your help is appreciated. I’m so nervous in just filling out this form!
Is this the form that the US Consulate sent to you when you inquired about possible renunciation, Swanee?
From the link to the Consulate Report Directory, http://isaacbrocksociety.ca/consulate2/, page 6 will give you the forms the U.S. Consulates will use for renunciations and claims for relinquishment. Form 4079 is a form that is used to help determine if you could effectively claim a relinquishment vs. renouncing. (Some Consulates use it for both renunciation and relinquishment.) In that Directory you will find useful information, including reports of the experiences of others at various Canadian and some other country US Consulates around the world.
@Swanee
I have recently had my appointment in Ottawa to inform them of the fact that I had relinquished American citizenship when becoming a Canadian – and that had been my intent. Intent is the key word for a relinquishment. As Calgary411 says, Form 4079, alias Request for Determination of Possible Loss of US Citizenship, helps determine or prove your intent at the time as you work your way through the various sections. Using a US passport, voting in US elections, paying US taxes, etc. indicate the intention of keeping US citizenship after becoming the citizen of a different country.
Excerpt from report on my appointment (soon to be included in directory):
Step 3: I read everything carefully and filled out the Request for Determination of Possible Loss of US Citizenship document (92705) keeping in mind that my goal was to inform the U.S. State Department that I had become a Canadian citizen years ago and that my intent at the time had been to give up my American citizenship – thus I had already relinquished. I had been living as a Canadian and was now finally letting them know:
• married, landed immigrant status, applied for Canadian citizenship & met with judge then ceremony – with appropriate dates 8(d)
• oath to Queen etc. 9(a)
• residences and house ownership – places and dates 12(a&b).
• voting in Canada for every level of government 12(d), and even running for provincial jurisdiction office (11), but never in the US 13(d)
• other ties 12(e) – banks, past jobs, French language, volunteer activities, eventual Canadian pension, Ontario health insurance card, Canadian RRSPs, ON driver’s license, etc.
• nothing in the US except for family 13.
• paying Canadian taxes when applicable, but not filling out US forms until recent OVDI panic 13(e)
• travelling with only a Canadian passport, including to the US 14 & 15
Plus section 19: I said something along the line of I knew that I could lose US citizenship by becoming Canadian and that was my intention. The rest just shows how I proceeded to live as a Canadian.
(N.B. on filling out Request for Determination etc…: You can print it out and fill it out by hand or do it all at once on line and then print it out. You cannot save it and come back to it. I tried doing it on line but found that for dates it would only accept its way, meaning date and year whereas I sometimes only knew the month and year. I ended up leaving it blank and filling that portion in once I had printed it up. Then I was able to scan the whole thing and send it as an attachment – the only way proposed. To be signed there.)
The Brock site and the Request for Determining Possible Loss are very useful for figuring out your status – renouncer or relinquisher.
As for renouncing, check out what others have said for their reasons. Personally I would keep it very ‘Zen’ and not give myself an opportunity to get all worked up and blast the consulate folks. The main thing to avoid is suggesting that you want to drop US citizenship to get out of paying US taxes.
@Calgary 411 thanks and yes, that form was sent from consulate when I requested an appt. to renounce. So I have to fill it out and send back. But I’ll go on the directory for more general info.
@Voyons, wonderful, your breakdown of form is so helpful. I was not being so precise in answering number 12. You think I should really go into past places I lived (rented) before we bought our current house in 1988? Guess it can’t hurt, but more dates to remember! Thank you for prompt reply all!
I put all of the places and dates in Canada. My logic was that they want to know if you have really been living in your new country and becoming part of its ‘fabric’ or are you just passing through and your real loyalty if the US.
@ Swanee
This is what I entered for question 19 on DS-4079:
I knew that taking an oath & becoming a citizen of another country HAD (in the years before the early 1990s) been a potential expatriating act. Bowever, I did not act to acquire Canadian citizenship until I became aware of the US Supreme Court ruling & legal precident that doing so would NOT automatically be interpreted as an expatriating act and that I would be able to retain my US citizenship along with Canadian citizenship.
This may not fit with your situation but I felt that just being clear and to the point was the best approach. Avoid any display/writing about your anger and just state the situation factually. No reason you couldn’t say “I became a Canadian citizen because after XYZ years of living/working/having a family in Canada I had more connection to this country than the USA” or something like that. Bland and no rancor. You took Canadian citizenship to become a Canadian (to be able to vote here, to have the right to sit on a jury, to demonstrate your tie with this country) not just to run away from the US.
I was nervous about filling out these forms too, but it helped just focus on the facts; for you, this is the facts of why you became a Canadian and you won’t draw their ire or attention. Good luck
Swanee. If you are going to renounce rather than claiming that you relinquished, you don’t need to put any detail at all on 4079. 4079 is a bastardized form. It was originally used for people who had lost their US citizenship and were trying to reclaim it. Then they flipped it 180 degrees and it is used for people who claim they wanted to give up their US cit.
For those who have to renounce, it makes no difference what you put down. It is your right to renounce at any time for any reason- just don’t mention taxes. In fact, you don’t have to give a reason. Don’t lose any sleep over 4079.
@ Voyons
Amen!!!!!
Duke of Devon, that’s good to know. Voyans had stated he filled out all his residences with dates and that would slow me down further since I came here in 1975. I’ll keep it simple. I am renouncing and will pay the $450 gladly. I also realized that since citizenship in Oct. last year, I went to Florida in Feb. with both passports and U.S. customs frowned on why I would use Canadian so I showed them my U.S. passport. In reading other blogs, I realize you nullify your relinquishment argument if you DID travel after taking oath. Always something new to learn about all this! Oh well, I’ve got to get this going. Thanks LM for help with question 19. My rant was for IBS only.
I tried to post a comment the other day but it doesn’t seem to have gone through, so I’ll try again now.
@allou,
Thanks for providing Phil Hodgin’s email response to you. It seems pretty clear from it that we should file a 1040 statement and 1040nr tax return. Our income situations may not be exactly the same, but we are both trying to figure out how to fill out these stupid forms.
@monalisa1776,
In response to my last query about if/how your accountant entered the income from your 1040 onto the 1040nr, you wrote:
“Moonstruck, I’ll try to check tomorrow. I must admit that I didn’t fully understand what she did. It might in fact just be easier , as a Canadian, to file a full-year 1040 for your final year if you’re allowed to do that. I seemed to understand from the Serbinski forum that Canadians expatriating can submit full-year 1040s instead of dual-status returns…but as a UK resident, didn’t have that simpler option”
I don’t mean to keep bothering you, but I am still hoping to get some clarification on the issue of if ANY of the data we need to enter on the 1040 “statement” gets entered also on the 1040nr. And if so, where on the 1040nr? Your feedback on what your accountant did would sure help people like me and allou and probably other DIYers who don’t have the benefit of a U.S. tax accountant.
I’ve read the 1040nr instructions and pub 519 chap 6 several times and am still confused. I don’t see how non U.S. sourced wages, interest, dividends, capital gains, etc fits their description of “income effectively connected with U.S. trade/business”, so I’d be inclined to agree with allou’s idea to just enter all zeroes here; and I don;t see where non U.S. sourced income from the period when one was still U.S. citizen would fit on the schedule NEC either. Still it seems kind of weird to not enter a non-zero value for adjusted gross income somewhere on the 1040nr, if that form is supposed to be the actual tax form for the whole year??? Also, are we supposed to write in dates at the top of the 1040 and 1040nr or just write “dual status statement” on 1040 and “dual status return” on the 1040nr?
@Rev Susi,
Thanks for your continued feedback also. I don’t know either what to think about the Social Security payments and continued filing of 1040nr.
@all,
How have/are people answering the question F on schedule OI of 1040nr? It asks “Have you ever changed your visa type or U.S. immigration status”? If you answered Yes indicate date & nature of the change” Does renouncing/reliquishing U.S. citizenship constitute a change in U.S. immigration status?
@Moonstruck, she only listed my income on the 1040-NR itself and left the income on the 1040 blank; she typed ‘dual status – return’ on the top of 1040-NR and ‘Dual status – statement’ at the top of my 1040.
She lists my filing status on the 1040-nr as ‘other married nonresident alien’, and had me claim myself as an exemption ($3900); on the 1040 statement, she left my filing status blank, though I ticked ‘married filing separately’ and listed out my husband’s name with (NRA) in brackets; on the exemptions section of the 1040, she puts a double asterix with ‘See form 1040NR for exemptions claimed’. I presume she did that because she did NOT claim the standard deduction for me ($6100).
I understand that 1040nr only allows for the personal exemption of $3900 rather than that plus the standard deduction.
I also need to point out that she did, however, list out in detail all my types of income on the various schedules attached to 1040 such as schedule B for interest and ordinary dividends; schedule D for capital gains and losses; 8949 for listing out various capital gains and losses; 1116 for: passive income; general category income; 6251 for AMT calculations; plus a second version of 1116 to calculate using AMT (which I didn’t have to pay); 2555 (which the IRS rejected in my case for some mysterious reason); 8854; 8938; plus several tax worksheets showing how she determined my taxes for schedules D and 1116.
The whole thing came to just over 60 pages which was short compared to almost 300 pages for an earlier tax return a couple years back, when I had even more complexities.
I don’t know how necessary it is to include all these various forms but I feel safer knowing that it was pedantically.
Part of me wants to contest the IRS over the refused FEIE, but as it less than $300, I have decided to forget about it because I don’t feel confident approaching them myself; nor do I want to involve my accountant in a expensive game of pong pong. Mother fees are already going to be painful enough.
Moonstruck. I’ll try 1 last time and then I give up. ‘Dual status’ refers to ‘aliens’ who are resident and non resident in the same year- that’s not you. If you have no US source income, you do not need to file a 1040 NR. Period. By treaty US social security is filed on your Canadian return and not on a US return. i.e. if your only US income is social security and you are resident in Canada you still don’t have to file a 1040NR.
http://www.fin.gc.ca/faq/usssfaq-eng.asp#ussocsec FAQ #9
I was going to say something derogatory about Mona Lisa’s accountant but my mother told me if I had nothing nice to say then I shouldn’t say anything.
Besides all this, if you are a minnow, it really doesn’t matter what you put down. They won’t have time for you.
@KalC
Being “subject to US tax” and not having to file 1040NR for SS benefits are 2 separate issues.
I’ve seen no official IRS documentation thus far which explicitly states that recipients of SS benefits outside the US who are not subject to US tax due to a tax treaty do not have to file 1040NR. On the contrary, all the docs I’ve seen thus far suggest that there is indeed a filing requirement. Can you cite any documentation which states otherwise?
@Kalc, with hindsight, I agree that my accountant charged me too much. But when I had my OMG moment three years ago, the IRS climate seemed far more ominous.
My situation was also less straightforward because I hadn’t been reporting my British passive income, so it could have appeared more like tax evasion. At the time, my situation seemed more precarious than for the standard non-filer.
I also had a huge PFIC mess to clean up…given that I was already in the system, I still believe I probably made the right decision for my situation, especially as the full compliance has also enabled me to more safely lof out of the system.
She kept me out of OVDI too. At the time, many accountants would have considered a quiet disclosure too risky due to the unrecorded accounts and income. It was a cancer that had to be painfully removed. I’ll always regret with hindsight that I hadn’t sought out financial advice before blindly self-investing in all those damn mutual funds!!
At least I’m coming to the end of what has been the scariest three years of my life. It’s been a real eye-opener. 🙂
My CLN is IN and I am OUT. YEA!!! YEA!! Dancing and singing!!!
Took 7 Months!!!
Non US persons, i.e. a Canadian living in Canada without US source income has never and will never have to file a US tax return. Even most of us with US source income don’t have to. If I own shares in IBM, tax is deducted at source. I do not need to file. I claim a foreign tax credit on my Canadian return. If I won a million dollars at Vegas, taxes would be deducted at source. In that case I might want to file in order to get some of it back altho it is probably not worth the trouble. I suppose you could argue that every case is different. A large majority of us who renounce do not need to file 1040nr
@Saddened: Fabulous news!!! Change your name to Ecstatic!