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.
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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
@allou,
What did you decide to use as the exchange rate date to convert amounts to USD on the 8854, 1040/1040nr, related schedules, and the FBAR? Did you decide to use the same exchange rate date
for all of them? I’m debating whether to use the exchange rate for the day before expatriation on the 8854 and possibly on all the other tax forms or just to use the average exchange rate that Treasury publishes each year and Dec 31 rate for the FBAR. Conversions with the average rate result in lower income amounts.
For the FBAR did you just give them data up to your renunciation or the whole year?
How have you decided to answer question F on schedule OI of the 1040nr?
@Kalc,
Yes, I think Phil H. is probably the best info source, but I still read his comments as requiring you to file a 1040nr even if you don’t have any U.S. source income to report based on his statement:
“The tax liability reported on your Form 1040 also flows to the 1040NR and the total tax liability for both returns is reported here.”
Did you only file a 1040 with your income up to day before expatriation? If so, did you ever hear anything back from the IRS?
Moonstruck. When I said I was a NRA, I’ve always been a NRA. I don’t file.
@Moonstruck, on Schedule OI: she answered question F with ‘yes’ concerning whether I’ve ever changed my visa type (nonimmigrant status) or U.S. Immigration status. I’m sure , in hindsight, that she should have indicated the date of my expatriation and nature of the change (renunciation) though she left it blank.
I wish now that I’d spotted this potential oversight and double checked with her but, alas, too late now. Like Calc as said, I doubt if anything will come of it but regret that I hadn’t checked more carefully because I am a natural worrier.
I had no U.S. sourced income AT ALL during 2013, all non-U.S. So all income carried over from 1040 to 1040NR was non-US.
She did not write any dates on either the 1040 or 1040NR because the 1040NR covered the whole calendar year 2013 but used the attached 1040 and it’s various schedules as a statement to demonstrate what had been US-taxable worldwide income during the early part of the year that I was still a US citizen.
I believe the reason she didn’t put anything on the filing status nor check the exemptions on the 1040 was because she filed it as an attached statement with these listed on the 1040NR itself.
@ monalisa1776
This is way off topic but I just wanted to direct you to an interesting article about Mona Lisa.
http://news.yahoo.com/did-da-vinci-create-3d-mona-lisa-202630503.html
I was able to stereo the images with my eyes using a technique similar to this.
http://www.instructables.com/id/How-to-view-stereo-graphic-images/
Blue/red 3D glasses don’t work. Anyway, when Mona Lisa appears in stereo she is more beautiful than either of the 2D images. Thought you might like some fun today — no forms involved.
There may be another possibility for those that renounced early in 2013 or 2014 and did not earn enough income in the period you were a USC to be required to file a 1040 (9K for filing single?). If you have no US source income for the rest of the year I don’t see why you have to file 1040 or 1040NR as you would be below the filing limits for both. In that case, according to the instructions for 8854, you can simply send the 8854 to the Philadelphia address and forget the other forms.
Only works if you are under the 1040 filing limits though.
Anyone agree/disagree?
@MedeaFleecestealer & Tricia, Thank you so much for the Congratulations! I am very happy!!
@hogwarts
Your premise sounds reasonable, personally I can’t try it out as I relinquished near the end of 2013.
There are many people who file even if they’re under the requirement, generally because they are entitled to a refund. And the worriers amongst Brockers would probably do it anyway
@allou
Have been following the conversation as well as Phil’s blog and personally I can’t see any reason to file a 1040NR and am not doing so myself. I think sometimes we tie ourselves in too many knots.
Question: As a Canadian citizen (since birth), If I renounce my US citizenship how long before I can apply for a work visa (O1 / P1 / P2)? Can I apply before I receive my CLN? Or am I in that state of limbo? Can I apply for a visa as a Canadian while in the CLN limbo? Obviously I cannot work on a US passport as it will be handed in when I renounce. I am compliant.
FACT: I was born in Canada to an American parent. I have a music company that employ Canadians. I have paid for their P1 O1 O2 visas for over 10 years. No one has been denied (even those with criminal records).
@Matthew, I think it would be better to wait until you receive your CLN. Technically once you renounce you are in a state of limbo until you get the “official” approval from the State Department with the issuance of the CLN. If you try and do anything before then it may only confuse matters as you’ll still be down as being American until you can prove otherwise.
@moonstruck, others
1.Exchange rate: I used the official Treasury rate for all calculations on all forms
2.FBAR – information prorated to reflect the months I was still USC (former years of course full year info)
3. Question F- “No” because I did not have and do not have a US visa and I did not change immigrant status.
I think the 1040NR was designed for non USC who can change visa types and (work/study etc.) and often shift between resident/nonresident alien status. When we renounce we change from USC to nonresident alien status, but there is no specific form for this. When you are a USC you are considered US for tax purposes no matter where you live because of CBT (in the EU banks are changing their customer regulations to reflect this).
That may the reason to file a dual status year, since there is a change of status. The US operates with a 01-01 to 12-31 tax year.
This where it gets confusing, since logic says they know we are no longer USC since we are filing a 8854. Maybe it is just a case of form OCD? The 1040NR “wraps it up” and indicates that you no longer are a US resident/USC.
Comments welcome!
Hey all, I am running into some expats that wish to renounce and for the last three and possibly five years have all had income BELOW the limit for joint with spouse where a return even needs to be filed. less than @ $20,000 (US) per year. Not sure they had a FBAR obligation, but what if no filing obligation but an FBAR obligation?
What do you do on a 8854?
Do you go into simplified in order to get back into the system then to get out?
@allou, others,
I agree with you 100% that it is confusing about the use of the 1040nr and the instructions that go with that form certainly are not geared towards people in our situation that have renounced/relinquised, so it is difficult to know what to do. Have you definitely decided to do the 1040/1040nr and fill the 1040nr with zeroes?
Your plan for the FBAR makes sense to me. As for question F on schedule OI, I didn’t know if the IRS considers our renouncing U.S. citizenship to be a “change in U.S. immigration status” or not. The visa business definitely has nothing to do with us.
Also, you responded about the exchange rate:
“Exchange rate: I used the official Treasury rate for all calculations on all forms”. Great, but which official Treasury rate did you opt for, the Dec 31 rate, the rate on date of your expatriation or other? I’m still struggling with that one.
@shunrata,
You wrote:
“Have been following the conversation as well as Phil’s blog and personally I can’t see any reason to file a 1040NR and am not doing so myself. I think sometimes we tie ourselves in too many knots.”
Yes, we do tend to get tied up in knots and I know I have been going in circles with how to proceed on filling out the final year tax forms. Have you already filed yours yet? Are you/did you file the 1040 and only include income up to your expatriation or the income for the entire year?
@monalisa1776,
Please, please do NOT worry yourself now about anything your accountant put or did not put on your final year’s tax forms. I’m sorry if my question about schedule OI generated any stress for you. I certainly would never want to do that. I think you are like me and a big worrier.
I appreciate your feedback very much on this stuff. I still can’t get my head around why she did not write in any income amounts on the actual 1040 form itself (but only on the various other schedules/forms), since I think that would be valid on a “statement”, or have I misinterpreted your comments on this?
@Low Income,
I’d say nobody knows for sure. My 90-year-old mother renounced late last year. She has been under the filing limit for decades. If you ask an accountant if you should catch up “just in case”, of course they will say yes. In my mother’s extremely simple case, I knew the filings would cost less than $3000 so we did that. There are just two many uncertain issues such as, what will they think and do when they see an 8854 form stating compliance with filing obligations when a person hasn’t filed in 40 years and has never filed an FBAR? What if you file FBARs but not tax forms and state your are compliant on the 8854?
My best guess was that not having TFSAs or mutual funds made it relatively safe for my mother to do the Streamlined filing. Everything is neat and tidy now. Oh, except the timing was such that she has filed everything before receiving her CLN. We knew that, but decided to go ahead. At her age, we didn’t want to extend everything another year.
@moonstruck
1. I believe I used the year – end Treasury rate
2. I am following Phil H’s words (he knows a lot more than me and his firm has been very kind in replying and very clear in saying to file the 1040NR even though I have no US income/assets before or after renunciation.
3. “change in immigration status” = in my mind, when a person changes from one type of immigration status to another= visa XX is exchanged for visa YY. Not relevant in my case, I had no visa before or after renunciation.
4. Remember short listing of assets question 19 form 8854 – how much are your car, phone, pots and pans worth, a bit like a forced auction…
@ Ecstatic Canadian (formerly Saddened)
I’m so glad your CLN has arrived!!! It gives such a sense of closure and relief! I remember “meeting” you on the internet like two years ago, so I feel like I know you and I’m really really happy! All the best as you move on with your life!!!
@Ecstatic Canadian, I am so glad this ordeal is over for you!
@Moonstruck, I still don’t understand why she left the 1040 itself blank; all I can surmise is that she was of the opinion that because my 1040NR was the actual return filed, she chose to list all the taxable income on it rather than the 1040 (since the 1040 itself was just an attached statement, along with its attached schedules). She probably believed that filing the 1040NR would further indicate that I’m now an NRA.
@Em, that was cute about the Mona Lisa in 3-D!
@Low Income & WhatAmI, the Streamlined program may be the way to go with this if they only need to file FBAR’s. I had no US income so didn’t need to file any tax returns, only the FBAR’s for the last 6 years. I have the final FBAR to file this year and the 8854 to say I’m compliant and then I’m done. This was done with the advice/help of a US tax preparer so he doesn’t see any problems with doing it this way. He added a note to the Streamlined Questionnaire which states “Although a streamlined questionnarie is being submitted, the taxpayer is not filing tax returns because she has no income to report.” So if you acquaintances are under the limit for reporting I would think it would be the same.
Using Streamlined meets the 5 years of filing requirement for the 8854 compliancy test too. And Low Income, I did this after I renounced in March 2013 so they could do that first and then get the necessary back filing done afterwards. Or they could enter the Streamlined program and then renounce. They just need to make sure they time things right as FBAR’s have to be filed by the end of June with no extensions so if they want to renounce first they should make sure they get an appointment date in July or later which will give them plenty of time to get the filing done before June next year.
@moonstruck
Accountant is filing 1040 until expatriation date. I have zero US connection – no accounts, no income, no Social Security, zilch, and haven’t had for 40 years. Worked 1 quarter in the US when I was 19.
@AtticusinCanada, Thank you so much! I appreciate it.. Have you received your CLN yet?
A question for anyone out there willing to help:
I am dual Canada-US citizen by birth. I lived in the US for less than 2 years directly after birth, and have lived and worked and paid my taxes in Canada ever since (about 48 years). Having never filed US tax forms in the past, last year I took advantage of the streamlined process and filed my 3 years of tax forms and 6 years of FBARS. In October of 2013 I renounced my US Citizenship in order to escape this reporting nightmare.
I am now preparing to fill out my form 8854, and my question relates to Part IV of the form. On question 1 I have zero tax liability for the 5 years preceding expatriation. On question 2, my net worth is less than 400,000 CDN (a tax minnow in other words). On question 3 I answered YES, as I was born a dual citizen (born in the US of Canadian parents). On the brutally-worded Question 4 I answered YES, as I have lived exclusively in Canada for the last 48 years. On question 5 I answered NO.
My question relates specifically to question 6. I have only filled out tax forms for the 3 years preceding my date of expatriation. I actually asked someone at the IRS whether I should submit 5 years of forms through the streamlined process, but they said no, submit only 3 years. That now looks like very bad advice, since I may be considered a covered expatriate. So my question is this: can I submit the missing 2 years of tax forms with my form 8854 (note: my tax liability for both of those years is zero) and still avoid being considered a covered expatriate?
Any help at all would be greatly appreciated.
@Mannix,
Interesting situation! Here’s my take. Hopefully you will get a few more to help you to do what seems best to you.
As far as I can recall, your post is the first with a quote from somebody at the IRS saying whether or not it is OK to send 5 years to the Streamlined Filing Process. Most accountants seem to think it’s OK and I’m sure many people have done it. Of course, you never hear back from the IRS so who knows.
My mother’s accountant didn’t trust the Streamlined people to process the extra 2 years properly, so this is what we’ve done:
– filed all 6 FBARs electronically. The confirmation of this filing was sent with the Streamlined Filing.
– filed just 3 years to the Streamlined Process.
– waited 2 or 3 months (for the Streamlined to be processed/entered into the system), then filed the 1040 for 5 years ago to the normal filing address (not the Streamlined one). I sent this yesterday.
– wait another week, then we’ll file the 1040 for 4 years ago to the normal filing address.
The delay of filing the older 2 years is because he was afraid the IRS might go sideways if the old returns were processed before the Streamlined filing.
My mother’s income is below the filing threshold, so she maybe/probably didn’t have to file any 1040’s at all. Accountants, of course, say it’s a good idea to make sure it’s clean and they aren’t confused or raise any flags. Who knows that answer? I figure with this in mind, what she has done should be OK. How can you get into trouble for sending a return that isn’t even required to the wrong place?
Both ideas seem reasonable to me, but what does reason have to do with the IRS?
For you, my _guess_ is that you should file the extra 2 years (1 envelope or 2? I don’t know) to the normal filing address (not the Streamlined one). Apply for the filing extension for 2013 and send the 2013 1040 and 8854 later this year (Aug? Sep?). The idea being that your extra 2 years should be in the system by the time they process your 8854, and accept your declaration that you have done the required filings.
WhatAmI
Extremely helpful reply. Hopefully some others will chip in with their own experiences, as this has been one major nightmare for my family and I.
Thanks, and all the best.
@Mannix,
I’m sure you know this but just to be sure and for the benefit of any newcomers who haven’t gotten this far yet:
As a born dual-citizen, you are exempt from the first 2 tests on the 8854: net worth over $2M and tax bill over ~$155K. You just have to certify 5 years required filing.
Thanks again – I was aware of that. The only issue for me is whether I can certify 5 years of compliance after renunciation rather than before. Your response seems to confirm that this is, in fact possible, which is very reassuring. A couple of days ago my spouse dug up an article written by some Swiss-German lawyers that came to basically the same conclusion (from a theoretical point of view), but so far I have not come across any cases where an individual has reported using this strategy successfully. Have you come across any such cases?