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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

 

10,433 thoughts on “Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part Two”

  2. I have been waiting for my citizenship to come through (about 18 months now), but to hell with that. I’m making my appointment in Calgary today. 😛

  3. @notamused

    Thank you for posting those links. I’m not pukekonz, but they helped me a lot.

    @all

    So, I am trying to wrap my head around this whole “covered expat” thing.

    Assuming that the only reason someone is a “covered expat” is that they did not do the paperwork (so it’s not a matter of wealth, just the lack of the 8854)…

    What are the practical ramifications of this? Yes, if the IRS catches you, they can fine you or stuff like that, and you can’t leave assets to US citizens without it being taxed. (If you have never been in the US tax system, and have little assets, I would guess the likelihood of them knowing you even exist is remote.)

    Other than that, is there anything? If from a visa-requiring country, can one still get a visa to go to the US? (I know at one point they were trying to ban covered expats from entering, but that fell through.) Can one feel safe flying over/landing on US soil/visiting the US? Can one acquire assets in the US as a non-resident alien? Are there any other considerations to be taken into account?

  4. @Lara, good luck with that. But remember that some embassies won’t allow you to relinquish/renounce if you don’t have another citizenship. It’s not against US law to make yourself stateless, but they refuse to do it anyway sometimes. And if you’re trying for a relinquishment based on your Canadian naturalisation, they’ll certainly refuse it without the correct Canadian documents.

  7. @lara,

    If you expect your certificate to arrive soon you could go ahead and make your appointment. It could be one to three months before you actually get in. Then, if the date gets near and you still do not have your new citizen certificate, reply to your appointment confirmation email and explain that you are still waiting for the document and ask if she would postpone your appointment to a later date. Repeat until it arrives. This way, you could save some waiti time when the document finally arrives.

    I would not attempt an interview without new citizenship. Chances are very high the consul will turn you away.

    Having said all that, another idea is to mention in your email for the appointment request that you do not have the citizenship document. Ask if you can have your appointment, prepare all the paperwork, and then they can sit on it until you deliver the citizenship document to them. They offered something similar to this for me at one point. Yes, I like this last idea the best.

  8. @ Medea Fleecestealer,
    What @WhatAmI said. I can always postpone it if my certificate doesn’t come in time.

    I actually don’t mind the idea of statelessness but I’m too cheap to renounce. : – ) (I like my smileys in ASCII.)

    @WhatAmI – I thought about mentioning that I am still without my documents but decided they might use that as a reason to delay guaranteeing me a spot. I just requested an appointment for January. That should be plenty of time for them (and hopefully for me). I guess we’ll see what happens.

    Thanks to you both!

  9. @RMA

    Thanks for that link. Like most info out there, it addresses more those who have been in the tax system all along. For people who are NOT in the system to start with, who have minimal income anyhow and so would have never needed to file, and who then renounce, I can’t help but think it’s a bit different.

    @KalC

    I was hoping you would weigh in. Honestly, your advice all along seems to make the most sense for someone in a situation with minimal US ties. Yes, if one files forms x, y and z, one can become an uncovered expat. But that requires one TAKING ACTIVE MEASURES to enter a system that does not know of one’s existence. If someone like that files on exit, the IRS only THEN knows about that person, then has 3 years to audit, impose fines, dig for info. (They may be understaffed and never do this, but the risk is there.) If they don’t, the person is home free.

    If the person does not file, then he/she is still not in their system. The only thing is that DOS sends a copy of the CLN to the IRS. Barring an IRS witchhunt to punish renouncers (which who can ever rule out?), how will the IRS even know to LOOK for that person? And as the date from renunciation moves further and further away, how much will they even care? True, the liability of being “caught” will exist “forever”, but isn’t the risk of that much lower than the risk of an audit/fines/penalties if one does file to get caught up?

    Plus once one has a CLN, then they take that to the bank etc, and so ensure that there is never any reporting of assets to the US, since they are not a US person. How is the IRS ever going to be aware that person exists? Whereas if one files FBARs etc, all one does is give the IRS more info to query.

    What I am basically trying to figure out is the practical stuff. I would think one could apply for a visa… all they really want to know is that you do not plan to stow away in the US. The fact that one gave up citizenship should in itself be proof of that.. why renounce if you wanted to stay in the US? I would think one could enter the US – you MUST know if some sort of criminal/civil proceedings have been instituted against you, and in that case you don’t go, but otherwise…

    Is my logic wrong in any of this?

  11. @usxcanada My point is that in Calgary, for example, if you have an issue with a police officer’s conduct, you can complain through the Calgary Police Commission. If you have an issue with a consulate staff’s conduct, there’s nowhere to turn. And quite frankly, the tone of your comment is not helpful. If you can’t contribute something constructive, best to say nothing at all.

  12. If the person does not file, then he/she is still not in their system. The only thing is that DOS sends a copy of the CLN to the IRS. Barring an IRS witchhunt to punish renouncers (which who can ever rule out?), how will the IRS even know to LOOK for that person? And as the date from renunciation moves further and further away, how much will they even care? True, the liability of being “caught” will exist “forever”, but isn’t the risk of that much lower than the risk of an audit/fines/penalties if one does file to get caught up?

    @IsabellaG
    FBAR filings were the law for *decades* before the government got serious (in a big way!) in enforcement. Same for tax returns for expats. So, betting that there won’t be a witch-hunt in the future for non-compliant renunciants is not a bet I’d take. And, as you’ve alluded to, unfiled returns have no SOL, so said witch-hunt is not time limited.

    I’ll also point out that AFAIK, there have been no reports of anyone coming into compliance via Streamlined or QD being hit with audits/fines/penalties. And, given the IRS’s currently weakened state due to budget cuts, it seems unlikely for that to change, at least in the near future. So, I’d put the likelihood of this risk as minimal (and time-limited), and the likelihood of a future witch-hunt as unknowable (and not time-limited).

    In the end, it’s a personal decision and depends on how well you can sleep at night.

    You seem to have thought quite a bit about this, but for the sake of completeness, I’ll add my now standard blurb on the subject.

    ==========================================================

    For the sake of anyone new reading this and thinking 2a (renounce, do not file returns) is perfectly safe, I’ll be the downer:

    There is no statute of limitations on those unfiled returns, because they’re unfiled. So that will hang over your head for the rest of your life.

    By not filing returns, you have probably moved into the wilfully non-compliant category. I don’t know what the ramifications of that are, but I don’t see how it could be a good thing. FWIW, if you don’t file 8854, then you’re subject to a $10K penalty, and 8854 specifically asks about those 5 years of returns.

    By not filing returns (or not submitting 8854), you have definitely become a covered expat. That means, among other things, that you are subject to the exit tax. You will be taxed on mark to market capital gains subject to a $663K (2013) exclusion. As well, you will be taxed on the total (not gain, total) amounts in any RRSPs and, I believe, pensions that you may have, and there is no exclusion. RRSPs/pensions are, I believe, taxed at the highest marginal rate. The RRSP/pension tax is a major issue for covered expats IMO.

    Unless you like to live dangerously, travel to the US is out – that would include plane connections though any of the major hubs. For some people, not a big deal; for others, a very big deal. And, you’d always be concerned when flying over the US to, say, Mexico if you’re a risk averse type of person, due to the (admittedly unlikely) possibility of the plane making an unscheduled landing in the US. Note that increased inter-agency and inter-country data sharing means there’s a reasonable chance that in the future US border people will be aware of all former USCs’ tax status.

    The US-Canada tax treaty will protect you (at least in Canada) from the IRS if you were Canadian at the time the liabilities were incurred. I don’t see how there is any guarantee that the treaty could not be changed for the worse in the future. And although it would clearly be unfair if the changes were retroactive, nobody has ever accused the IRS of being overly fair (and the FATCA fiasco has indicated how much we can expect the Canadian government to stand up for fairness).

    So, IMO, you would have to have a really, really good reason to not file those returns and 8854. One concern people often have about filing those returns is the cost of getting someone to do it for them. A possible route is to DIY and just do the best you can. I’ll leave it to you to determine what “best you can” involves given that you’re almost certainly not a cross-border tax professional. At any rate, at worst you could be audited later and assessed some $$. If it’s a large amount of $$ that you are unable or unwilling to pay, you could then invoke your treaty right and not pay up; leaving you in more or less the same situation as having not filed. OTOH, at best you did a bang-up job on the returns that can withstand any amount of scrutiny, or, more likely, you can expect the IRS to not have the resources or inclination to worry about your piddly returns, leaving you home free (at least after the SOL runs out).

  13. I renounced close to three years ago and never filed the 8854. They do have a copy of my CLN with my name and address. Do they match up all the CLN’s to see if the 8854 form is sent in? I don’t know, but my 8854 is now over two years late and they have yet to send me a letter advising me of the late form.

  14. well, the $663k exclusion for covered expats puts me slightly at ease as my total net worth is under 100k. Just working on all this now and hope to be done by next week. I spare a long rant about how ridiculous this whole process is.

  15. Isabella G Listen to True North and go with your first instinct. They truly don’t have the resources to go after small fish. Cheers. Consider a donation to ADCS.

  16. I often read that not filing the 8854 automatically makes a person a “covered expatriate” and subject to the mark to market expatriate tax. That may be true statement, but the calculation of the tax payable is performed on the 8854, so if one is not filed, on what basis will the exit tax be calculated? Some random set of asset values?

    There is a 10K penalty for not filing the 8854. Even if they received a penalty notice is it likely that a person who chose not to file the form will pay the penalty and then file the form calculating the exit tax owed on a mark to mark basis?

    @TrueNorth – what do you plan to do if you ever receive a 10K bill and demand to file the 8854 form?

    The assumption is that a “covered expatriate” is someone who is in the system who plays by the rules and fills out all the required paperwork.

  17. I sent off my 8854 last Spring, along with my final 1040, after renouncing a year ago. Both 8854 and 1040 were sent to the same place in Philly. The IRS never acknowledges tax returns, unlike Canada. It goes into the IRS black hole. I will call up Philly again in a few days to see if my tax obligations are totally complete. And the 8854 is not very difficult to fill out, just do not make a mistake! I triple checked mine.

  18. @kermitzii, can’t you check your 1040 return’s status online? I did see someone mention that was possible, but couldn’t do it myself as I only had to file FBAR’s and they’re not checkable under the same system.

  19. You can get tax transcripts online now if you want to check your 1040s. The 8854s sent to Philly aren’t part of the master file though. From the little info I’ve read out there, information returns are generally rarely audited and if so usually only in the context of a larger audit of a 1040.

    http://www.irs.gov/Individuals/Get-Transcript

  20. I am trying to book a relinquishment appointment in Vancouver in December. I filled out the Questionnaire and form 4079 which they require before you can even get an appointment. There is a question on the Questionnaire which asks:” Will you swear or affirm the Oath of Rennunciation?” I answered:”N/A because I am relinquishing, not renouncing.” I got an email back saying: “regardless of whether you renounce or relinquish you still have to fill out the form.”
    So now I guess I have to resend the form–I will check “affirm”, but don’t know if this makes a difference (between swearing and affirming). I feel they are trying to trick me so somehow they can force me to renounce instead of relinquish.which I refuse to do. Anyone else have this problem?

  21. Sumergugl,

    Calgary used to have 2 forms that were almost identical, but the relinquishment version did not have that question about swearing or afirming. Then they combined them into one form with all questions. When asked the same question you asked Vancouver, they said just fill out the whole form. I’m sure it doesn’t matter if you say swear or affirm. However, in Calgary, one person answered no I do not want to make a written statement about reasons for renouncing, but the consul asked the question verbally anyway! Other than this last point, I don’t see that there are any tricks in relation to this questionnaire.

  22. @Somerfugl, it doesn’t make any difference. People who feel religious would probably swear while those who aren’t would affirm. That’s the only reason there’s a choice, same as if you were in a courtroom you could swear on the bible or affirm without the bible.

  23. @Somewhere

    Thanks for that link. It was very helpful, and very eye-opening, IMO.

    @tdott

    I appreciate your comments. In order to make an informed decision, I do need to consider all possible angles and hear from as divergent opinions as possible, including the worst-case apocalyptic scenarios.

    @TrueNorth

    Thank you for sharing that. I can’t help but think that the dept that handles the CLNs must be swamped. Renunciations have skyrocketed, and I can probably bet they have no additional staff. So if they never matched CLNs and 8854s before, I certainly don’t think they will have the time/energy to do so now.

    @KalC

    Yep, I do plan to make a donation to ADCS, even though I’m not a Canadian. Canada is carrying the mantle for all of us this time, and deserves the support of the rest of the world. (In my idle moments I wonder if we will actually get to the reporting stage of FATCA.. I do believe the US is slowly beginning to realize what a mess they are creating.)

    @Hogwarts

    “The assumption is that a “covered expatriate” is someone who is in the system who plays by the rules and fills out all the required paperwork.”
    This. Exactly. The onus is on the accidental American to a) enter the system, b) declare, c) renounce, and then d) face the wrath/indifference of the IRS. If one omits steps a) and b)….

    I’m fairly sure which way I am going, but I reserve the right to change my mind. I am just grateful to be able to bounce these ideas off all of you, and to benefit from your collective knowledge/experience.

  24. Medea –

    You got it totally backward.

    Those who refuse to swear often have strong religious warrant.

    Example Matthew 5:34-37.

  25. @WhatAmI, @Medea, I filled out the form, checked ‘affirm’ and resent it to Vancouver. I got a response of ‘Thanks’. Now to see if they will give me a December or early January appointment.

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