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
@Meteor
To get out of filing taxes and FBARs, you would have had to perform an expatriating act over the age of 18, prior to 2004. Not your case.
You could still try to claim a 2012 relinquishment based on your government employment. It would save you the US$450 cost of renouncing. However, there is a bit of a pattern that renunciation CLNs arrive in about 5 months, whereas past relinquishments take more like 10 months. Not always, but that’s the pattern that I see. A few people have recently or are about to try to claim municipal-level employment for INA 349(A)4(a), but it will be 8 months or more before we know if they are successful. I would renounce in your case. It’s guaranteed to be successful, and you might be done in 5 months. If you try the relinquishment and it’s denied, you have delayed sorting this all out for up to a year. Then you start over and it will take another 5 months not to mention waiting a month or three to get another appointment to renounce.
There doesn’t seem to be a definitive answer to whether or not a person who is legally under the filing threshold has to file anyway for the 8854 declaration. My guess is not, but I had my mother (age 90) file taxes and FBARs anyway, just to be sure. It cost about $2500.
Everyone, thanks for your advice! I think I’m going to try to relinquish. I’m optimistic that municipal-level employment is still considered “employment under the government of a foreign state or a political subdivision thereof”. My case does appear quite simple compared to others, so an extra year of waiting probably won’t make too much of a difference… I might need to fill out an extra year of tax forms? My only asset is my bank account, so the forms shouldn’t be too difficult (and my yearly income is below $10,000).
I’ll have to research more about 8854 and FBARs to see if I need to fill them out. I’ll probably fill out the form 8854 if it clarifies for the IRS that I don’t need to fill out income tax forms. Does anyone know if you have to fill out the previous 5 years of tax forms from the date of relinquishment or from the date of application for a CLN? Also do you still need to fill out tax forms for a couple of years after you’ve finished relinquishing/renouncing?
Thanks!
After 2004, the IRS date for tax filing requirements is the date of the relinquishment appointment, not the date of the relinquishing act.
You don’t have to fill out tax forms beyond the year of the relinquishment appointment.
The 8854 requires the previous 5 complete tax years. If your appointment is later this year, that would be 2009-2013. You would file a partial for 2014 up to the day before the appointment.
The tax clock stops the day you sign your CLN forms at the consulate.
US Code s. 877A (g)(4)(B),
Instructions IRS form 8854, page 1, column 2.
So if you do it in 2014, the previous five full years would be 2009-2013, plus the 8854 and the partial year form for 2014, to be filed by June 15th, 2015.
I’m finally going July 8 to U.S. Consulate for my appointment to renounce. I’m nervous but excited! Thank you IBS for being there these last few years. I don’t know what I would have done without the updates and words of wisdom to all of us who found you.
@Swanee66, good luck for the 8th! Let us know how it goes when you get back.
@WhatAmI and @pacifica777
Thanks for the help!
I have recently become a naturalized citizen of Japan and will soon begin the process of relinquishing my US citizenship, after which I will file form 8854 and my final 1040. Most of our savings are in brokerages accounts in the US, one joint account which is primarily about $70,000 in cash and one belonging only to my wife, who is an NRA, with about a balance of about $300,00. We have no US earned income; all of the funds deposited were wired from Japan over a period of more than 30 years. We want to repatriate the funds to Japan, paying Japanese taxes on the capital gains, but I’m not sure of the best timing to do this: (1) Now, before completing the relinquishment process, or (2) After the date the loss of nationality is accepted by the consulate but before actually receiving confirmation from the State Department, (3) After receiving confirmation from State, but before filing 8854?
Any advice/comments would be appreciated.
@TokoyoRose
I am no expert but would suspect it is better to move your money to Japan while you still are a USC. You may want to do this in stages rather than all at once. Do you have any expenses you could use these funds for rather than just a straight transfer To your own account (eg a trip or large purchase or gift to someone?)
@TokyoRose
I am no expert either, but I understand that you have already become a Japanese Citizen (ie performed a relinquishing act with the intention of losing your US citizenship. Hopefully you have not traveled on a US passport since receiving your Japanese citizenship or done anything else American such as vote? If this is the case you have already lost your US citizenship. You should go to the Embassy and apply for a backdated CLN and it should be backdated to the day you received your Japanese citizenship.
I take it you are not going to formally renounce and pay the $450 ?
If your total assets are not over 2 million then you should not be classified as ‘covered’ and you should not have to pay tax on the unrealised gains in the US.
If you have assets over 2 million then you should look carefully at your finances ie giving some to your (non US spouse?) and then renounce rather than relinquish. Read carefully the renounce citizenship guide on this site.
@TokyoRose
If you read the instructions for Form 8854, you might agree that your expatriation date is the date you notify the US of your expatriating act, not the date of the act. The CLN will be back-dated for citizenship purposes to the day you obtained Japanese citizenship, but “for tax purposes” your expatriation date is the date you notify the US. As Heidi mentioned, if you renounce instead of claiming the relinquishment, then there is no argument about your expatriation date being the date of your appointment.
All of the net-worth questions to determine if you are a covered expat are for your assets as of the date before your expatriation (your consulate appointment). Therefore, if you need to do any re-arrangement of your finances to have a net worth of less than $2 million, you’d need to do that before your appointment. Note that certain pension plans use an actuarial valuation of Fair Market Value. This is the total future value of the money you haven’t even received yet, based of your age, life expectancy, etc.
Wow, thanks for all the prompt comments! While I’ve always filed a 1040, the Foreign Income Exclusion has always easily exceeded my annual earned income, and I’m completely in the dark re most US IRS requirements.
I haven’t paid or been liable for US taxes for more than 30 years, with less than $50,000 in annual earned income in Japan, and while me wife’s earned income is more than that, she is an NRA and only subject to Japan filing.
I have no worry at all about the $2 million net worth; it is much closer to $500,000, even including primary residence.
Re, pension, I do have a very small private pension: paid-in approx. $35,000 over 25 years, current value about $50,000; annual payout of $8,000 stating nest year. Would it be best to just cash that in now? Would that mean reporting a gain of $15,000 rather than a total value of $80,000?
Obviously I would prefer not to pay the $450 to renounce vs relinquish, but some of these responses seem to imply that renouncing might be better. I’m afraid I don’t understand this. Re time frame, others in Tokyo have recently reported a total time frame of 5 months from time of first meeting to final receipt of approved CLN for relinquishing. Also for reference, I am REQUIRED by Japanese law to relinquish/renounce other (i.e., US) citizenship within 2 years of naturalisation.
My primary objective is to secure those funds from our US accounts, since they will be our main source of retirement livelihood (our total Japanese gov pension will be equiv to less than $16,000/year).
Again, thank you for the comments/suggestions, and I apologise for my ignorance.
We were all ignorant to begin with. but learned from each other, the students became teachers.
A CLN from renouncing is often issued faster than from relinquishing but as you are not a ‘covered expatriate’ I do not think it matters as you do not have to do any re arrangement of your assets.
Have you filed Fbars ? These are reports of any ‘foreign’ (read non US) bank accounts you may have that total more than $10,000. If not you will have to back file using the new streamline process, (claiming yourself non will full, ie you didn’t know) to be able to expatriate successfully otherwise you will be deemed ‘covered’
I cannot advise you re your pension. I suggest you call your pension people and ask them the rules re payment and tax treaties with Japan but maybe someone else here can advise.
I had my appointment Tuesday July 8 to renounce/relinquish at U.S. Consulate. Amazingly simple. I thought I would fall under renouncing, therefore paying $450, but I came under the relinquish…so no payment! Yea!!! I became a Canadian last Oct. 2013 and my U.S. passport was expiring July 5, 2014. I went to Chicago in May on U.S. passport knowing I would turn it in at my appt. The lady there said I qualify for relinquishing. It’s always been confusing to understand the difference, but I’m happy. Of the 6 people needing help that afternoon, 3 were there to do the same as me. 6 to 9 month wait she said for CLN. I did ask for a letter saying I am awaiting my CLN and they had one typed up for me. That suggestion was from this blog to deal with possible border problems and I’m grateful that I knew that piece of information. Finally, again, many thanks for IBS. I will be happy to donate to the litigation being attempted. The least I can do. Such an enormous relief to be at the end of this nightmare.
Congratulations, swanee66. At which US Consulate did you claim your relinquishment? Your experience sounds like what it SHOULD be: you went in thinking you would be renouncing and the consulate advised that you could claim a relinquishment. You also used your US passport just before and there was no problem. Another Brocker with a similar situation as yours was told she could not relinquish, but they were told by her to send the claim to Washington, DC for their approval or disapproval — that was at the Vancouver US Consulate that has had a history of giving problems to those expatriating, but we thought that it was in the past.
Great that you also got a letter of explanation from the Consulate in case you have any problems at the border.
We’re all glad that what you learned here helped your expatriation experience. Thanks for reporting. We really need to acknowledge the efficiency and straight-forward common sense of the Consulate you dealt with.
That’s super, Swannee66! Congratulations! It’s great to hear all went well at the consulate and with entering the US too. Which consulate was this at? Sounds like they’re on the ball.
@TokyoRose
Here’s my take on the pension:
I see now that the 8854 says you do not have to pay for an actuarial evaluation, a “good faith” estimate will suffice. I don’t know what the full calculation is, and apparently there are several to choose from. I doubt it would be as much as 50 years * $8000/year = $400,000. (I assume you are about 60?). There’s no way (sorry) that you’ll live to 110, so 50 years times $8K should be easily overestimated. Added to your stated net worth, you are still under $1 million so it seems like you are not anywhere close to being a covered expat (as long as you catch up with your required filings).
Renouncing is one of several ways to relinquish your USC. Other expatriating acts to relinquish USC are to work for a foreign government, acquire a foreign citizenship, treason, etc. That’s the difference.
For your case, I think the only difference between renouncing and claiming your acquired Japanese citizenship as an expatriating act is the $450 cost of renouncing. I think it makes most sense for you to claim the past relinquishment. After all, you took the new citizenship with the intention of giving up your USC, so why try to do anything different?
As for the time to get a CLN, it seems to me that relinquishments based on acquiring a foreign citizenship take about the same time to receive as from a renunciation. What often takes twice as long is a relinquishment based on past employment with a foreign government or INA laws that have since been repealed. I suspect these are reviewed by DoS lawyers, whereas one might guess that renunciations and foreign citizenship cases are rubber-stamped by DoS clerks. There are exceptions to this generalization, of course.
@ Tokyo Rose,
As I’m seeing it, too, relinquishing or renouncing would have the same result for tax purposes.
(1)
If you choose to renounce on, say, 1 September 2014, you’d be performing a relinquishing act and notifying the US govt of it simultaneously, so your citizenship ends for all purposes on 1 September 2014.
(2)
If you instead choose to have your naturalisation be your relinquishing act:
Say you naturalise in Japan on 15 July 2014.
And you do the paperwork at the embassy on 1 September 2014.
Your CLN will indicate that ceased to be a US citizen, because you expatriated yourself, on 15 July 2014. Immigration and Nationality Act s. 349(a)(1).
The IRS, however, according to 26 USC 844A(g)(4) and 8854 instructions, page 1, column 2, will consider your citizenship to have ended on the day you informed the US government, that being 1 September 2014
(3)
There’s a chart of CLN delivery times at the back of the Consulate Report Directory. We’ve only had one report from Tokyo, so not much to go on. It was a relinquishment and CLN delivery took 1 month. That was two years ago. Things may be slower now.
Overall, renunciation and routine relinquishment CLNs seem to take pretty close to the same time — except some relinquishment CLNs take longer, much longer, because the particular case is not so clear-cut (renunciation, on the other hand, is very cut-and-dried). Even then, it’s unpredictable – MyKitty’s relinquishment-based CLN application got a negative recommendation from the Toronto consul this winter and she got her CLN in 5 months – other Torontonians, positive-recommendation relinquishers and renunciants, are still waiting for theirs from last summer.
It’s really hard (impossible) to estimate how long the wait will be, except that Canada is really slow. We only have a handful from your Dept of State zone, East Asia and Pacific, mostly 1-3 months whether renounce or relinquish, except for a 5 month renounce and a 7 month relinquish – and a 15 month renounce because it got “lost in the cracks.” [Seems the consulate dropped the ball on that one. They wouldn’t follow up when the person asked them to. Finally the person contacted DC and he got it about a week later.]
Many, many congratulations Swanee66. Glad to hear it all went so smoothly and that you could relinquish as well and save some cash. Means you have plenty of money for a celebratory dinner (wink).
Congratulation Swanee66, Happy it all went well !!!! YEA!!
Tokyo Rose. How can a pension with a present value of $50,000 pay out 8,000 annually?
Anyway, it doesn’t matter. Go to this site and calculate your life expectancy in years.
http://gosset.wharton.upenn.edu/mortality/form.html
Go to this site and plug in your annual income from the pension, your life expectancy and an assumed interest rate of 4% (or any other rate you choose). You will then have the present value of your future pension earnings .
http://financialmentor.com/calculator/present-value-of-annuity-calculator
Note this is a very rough estimate but good enough since you are well under the limits.
A valuation done by a firm of actuaries will cost you thousands. I’ll let you have it for free.
I don’t see any reason to cash it in- none at all. If it US based and you have relinquished, they will withhold taxes at source and you would’t have to file a US return.
Oops…so sorry, it was Toronto. They really were lovely, straight forward and pleasant. I actually did not have the correct State of Illinois birth certificate – I always have had a hospital birth certificate, which she said is not technically correct. Never had a problem before, but with my U.S. passport, it seems she accepted it. She suggested I write to Illinois to get the real deal. I filed 6 years worth for FBAR in 2012 so assuming I’ll get my CLN by spring 2015 will file 8854 and partial form for 2014. I’m 69, been here since 75 and receive my Canadian pensions AND U.S. social security. Grateful that they can’t take that! I’ll be very nervous going to visit in U.S. for first time, that’s for sure, but armed with letter, hopefully will be ok. You all are just the best. I’ll never forget when I found you and how lucky I felt to be able to read and understand what was happening to all of us. AND be able to ask questions and get opinions back! Hugs to you all.
Thanks for letting us know that it was the Toronto U.S. Consulate who AGAIN stepped up to make your expatriation as dignified and comfortable an experience as possible. Good for them. Theirs is a five-star rating.
Swanee66. All donations gratefully accepted.
@TokyoRose &KalC
I believe that as Tokyo Rose will not be ‘covered’ he will get the benefit of choosing the lower tax rate to pay on his pension (Japan or US?) IF Japan has a treaty with the US. That’s how it worked for spouse. Social security taxes also depends on tax treaties with individual countries.