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
@Duke of Devon
I am sure there are many different situation for everybody. See the thing is right now the easiest thing for banks to do is turn the account over to CRA. So you have to make then understand that they can help you or you find a bank that will. I mean if the end result is they would send your info anyway then you should at least have the pleasure of taking your money els ware regardless if els ware sends it anyway.
shunrata, unless your daughter can prove she intended to relinquish, she can’t. US rules simply discount that minors can understand the complexity of the issue and also that parental influence is such that a minor isn’t truly making up their own mind but being influenced.
However, as far as I know, no 18 year old has ever shown up at a consulate with proof that they intended to relinquish when they took their new citizenship. It still might get them nowhere but a junior/senior high school student, who actively took the oath of citizenship and documented their intention to relinquish at the time and then 4 or five years later shows up at a consulate to complete the task (having not done anything in the interim to negate the relinquishment) might be treated differently. Or not. Regardless, it is worth a try.
The trouble with past relinquishments is that until recently, people didn’t know they were going to need to prove they did it. They have no paper trial or documentation to back up their claims.
A USC going forward, and who has yet to naturalize, should make a point of documenting. For one thing, in countries like Canada where ppl can self-certify this makes the tardiness of the CLNs easier because they have a documentation of what they’ve done and two, it’s a lot harder for consulates to argue “no, you didn’t!” when you have witnessed and notarized statements from the time in question showing that yes, you clearly did.
I know the minor relinquishment is a long, long shot at best but my child is insisting on documenting her intent. Both my husband and I have pointed out the con side of this but she – like many other Canadians – really doesn’t see the “right to live in the US” for any reason to be all that great a benefit. And why should she? She lives in a first world country and in terms of opportunities, she knows that there are many places on the planet where she can live for education, work or permanently that being a USC would make difficult to impossible for her to do.
RMA, interesting and a good find. The language is not an accident though I find it interesting that the USG would have prepared so little for the FATCA fallout ahead of time but is planning diligently to be even biggers dicks in the future as this plays out.
Just one thing I want to note, I informed the Calgary consulate of my upcoming Canadian citizenship ceremony and my intent to relinquish and mentioned my child when I did. When they replied (promptly, by the way as I sent the email on a Friday evening and had a return email Monday morning first thing), they asked me to email them my child’s name – so they could start a file on her. I found that interesting.
Anyway @ all, oath is soon. Child will try to get judge to witness her relinquishment. I will let you know how that goes.
This afternoon I read my letter re divorcing Uncle Sam and some appreciative commenrts
Thanks to you who sent them.
But where are they? Neither my letter or comments are in the renouncing section
on the first Isaac Brock Society item on the Internet. ie this one
Jennifer
I just read that the US is taxing dual citizens with over two 2 milliion dollars.
I have nowhere near that Can anyone advise? I have had to pay 3 years running – and a lot!
Because I give to charities and have an RRSP I have not had to pay Canadian tax recently.
My MSP is subsidized, I live with my cat in a rented basent apartment in East Vancouver
It’s $450 a month. Very good. I became a Canadian citizen at the time I was told I would automatically lose US citizenship What gives with this?
Jen
@Jennifer,
Are you referring to this?
http://isaacbrocksociety.ca/renunciation/comment-page-136/#comment-3036366
If the link doesn’t go to the right comment (they sometimes don’t), you can get to it by going back one page from here — it’s the comment Sep 16 at 10:04 pm. and there are some comments about it following it.
Great letter — a really apt analogy.
Jen: when did you become Canadian? It makes a difference to what you are supposed to do next.
How FATCA will impact those of modest means (low income families).
Homelanders like to trumpet the fact that we have an “foreign earned income exemption” of 97,000. Unfortunately, the trump card is the “earned income” classification. Earned income means pay checks from an employer. So what does that do to most sources of income for those expats of low-income or on social assistance?
a) Welfare payments are not considered “earned income” in IRS’s POV.
b) Disability payments are not considered “earned income” in IRS’s POV
c) Employment Insurance is not considered “earned income” in IRS’s POV
d) Worker’s Compensation is not considered “earned income” in IRS’s POV
e) Child Support Payments are not considered “earned income” in IRS’s POV
f) Canada Child Tax Benefit payments are not considered “earned income” in IRS’s point of view.
So all of these are taxed by the United States Internal Revenue Service in its overreaching grasp. Since most expats of modest means have a corresponding lack of education, they are furthermore hindered by not being able to understand the intricacies of the US tax system. Furthermore they do not have the monetary resources to get into compliance as their choice is between putting food on the table for their families or starving and coming into compliance.
Secondly all accounts that are not disclosed by means of an FBAR are subject to a financial penalty of $10,000 per account that is not considered wilful non-disclosure – the penalty for wilful is $100,000 or 50% of one’s account balance, whichever is greater. How is someone who makes $18,000 per annum supposed to come up with $10,000 for a non-wilful penalty let alone $100,000 (if the whim of the IRS is that the account-holder is a wilful non-disclosure)? For these families there is no financial safety net to dip into. For these people there is not a single way to come into compliance that would not wreak financial ruin on the family.
“There has to be a better way” is the constant refrain that I’ve been hearing from everyone. Unfortunately there is NO way for those of low-income to even think of coming into “compliance”.
Jennifer –
You provide a case study in one of the mismatches that receives almost no discussion at Brock — generous charitable giving in Canada can result in US tax grab. All should pause to think about why this topic has had to wait for Jennifer. Thank you for sharing and for raising the issue. The listing of mismatch at http://usxcanada.wordpress.com/2011/12/13/2011-dec-13-valli/ remains a touchstone.
@
You wrote: ‘Tough, that’s not good enough, you became a citizen of Elsewhere voluntarily : we’re not going to give you a passport’.
What are you referring to? Since 1986 the presumption is that a USC wants to retain their USC when they commit a potentially expatriating act such as naturalization elsewhere. You simply tell a passport office that you intended to retain USC and they give you a new passport. I think 7 FAM 1220 makes this even clearer than before.
It’s not the physical act of acquiring the new citizenship that is tested as being voluntarily and intentional, it’s the mental state of voluntarily and intentionally wanting to lose US citizenship that is tested.
@ The_Animal
Actually I’ve noticed some Homelanders totally misunderstand the “exemption” bit as meaning we don’t pay tax at all! They don’t realise that most of us are paying quite enough taxes in our own countries, thank you very much.
Also you can add
g) pension payments
@usxcanada @Jennifer
What you say about problems of making tax-deductible donations to charity is very true. To donate from my UK salary to my UK university requires complicated manoeuvring. For my donation to be US tax deductible I have to donate UK pounds to a special “American Friends” US charity, convert to US dollars, and then ask that they forward funds back to the UK, where further steps are taken so UK gift aid can be claimed. I think this is a nice example of what Jack Townsend means when he writes “One of the complex issues in society is dealing with tax systems. That is just an issue to be confronted and solved.”
However, my university is special in having a US-registered arm for these manoeuvres. My direct donations to UK charities (museums, my secondary school, wounded soldiers, medical research) are not eligible for any deduction against US tax. I wonder how this problem can be confronted and solved?
@The_Animal..the penalties are mitigated in accounts less than $250,000 aggregate and further mitigated if <$50,000 aggregate (although they claim to waive them if no tax is due)..
http://www.irs.gov/irm/part4/irm_04-026-016.html#d0e1317
If the maximum aggregate balance for all accounts to which the violations relate did not exceed $50,000 at any time during the year, Level I – NW applies to all violations. Determine the maximum balance at any time during the calendar year for each account. Add the individual maximum balances to find the maximum aggregate balance.
Level I-NW Penalty is $500 for each violation, not to exceed an aggregate penalty of $5,000 for all violations.
To Qualify for Level II-NW – Determine Account Balance If Level I-NW does not apply and if the maximum balance of the account to which the violations relate at any time during the calendar year did not exceed $250,000, Level II-NW applies to that account.
Level II-NW Penalty is $5,000 for each Level II-NW account violation, not to exceed 10% of the maximum balance in the account during the year
To Qualify for Level III-NW If Level I-NW does not apply and if the maximum balance of the account to which the violations relate at any time during the calendar year was more than $250,000, Level III-NW applies to that account.
Level III-NW is $10,000 for each Level III-NW account violation, the statutory maximum for non-willful violations.
@the_animal,,,my mistake…if aggregate is <$50,000 Level 1 penalties apply. As long as any single account doesn't go above $250,000, Level 2 penalties apply. So you have to have at least $250,000 in a single account to get the max $10,000 penalty for that account.
So what you’re saying “if I’m reading this correctly”. is that:
Level I – If the highest aggregate balance for all unreported accounts does not exceed $20,000, the penalty is 5% of the maximum balance during the year for each of the unreported accounts
if your account is $10,000-<$20,000 there should be no penalty as you don't need to file an FBAR or a Form 8938?.
I don’t see that anywhere in the IRS.gov page. Am I to assume that it is the case? I like things spelled out clearly and I get extremely skeptical when I don’t see anything that says that they aren’t looking for people to file with accounts < $10K.
As you can see, I don't trust the IRS as far as I could throw the entire lot of them.
Correction: If your account is <$10,000; you shouldn't have to file an FBAR or Form 8938 and there should be no penalty as a result??
@The_Animal
If you’re aggregate is $10,000 but = or <$50,000, and you fail to report, and they catch you, and you couldn't convince them to give you an FBAR warning letter for reasonable cause, they'd fine you $500 per account up to a maximum of $5,000 (i.e. 11+ accounts wouldn't be fined) per year.
@The_Animal…if you’re aggregate is <$10,000, no FBAR is due.
@The_Animal — 8938 has different thresholds depending if you are a resident or non-resident and if you are filing jointly or separately. The minimum trigger is $50,000 of foreign assets before it’s due. The penalties are different too.
@The_Animal…those mitigations are for the following conditions…it would apply to most minnows abroad..as they’d fit the profile..
1. The person has no history of criminal tax or BSA convictions for the preceding ten years and has no history of prior FBAR penalty assessments;
2. No money passing through any of the foreign accounts associated with the person was from an illegal source or used to further a criminal purpose;
3. The person cooperated during the examination; and,
4. IRS did not determine a fraud penalty against the person for an underpayment of income tax for the year in question due to the failure to report income related to any amount in a foreign account
This conversation has demonstrated how ridiculous the US system is applied to USPersons living abroad, when you pretty much have to hire a tax professional to determine whether you are too income challenged to pay taxes or report accounts.
I just received a US absentee ballot even though I had sent them an email stating that I was no longer a USC. In order to be removed from the voting register, I have to send them a registered and notarised letter stating that I am no longer a USC. For good measure will send a copy of the CLN. So obviously there are delays in registering who is no longer a USC – one more use for a CLN! I renounced more than a year ago.
@all
i am trying to help a family friend who is in their 70’s and does not want to make a mistake in these troubled waters….i am fairly certain i am correct however due to the twists and turns going on i want to make sure….
their canadian citzen certificate shows a date of march 8,1973 and they have been living under the assumption that they gave up their american citzenship as of that date.
last week they were in at their finacial advisors office and were told that they had better come into compliance under the US tax law because of FATCA. i told them it sounds like their finacial advisor was pushing them towards that because they saw dollar signs.
can someone here confirm for me that due to the date of their citzenship certificate that they should only make an appointment with the consulate for a back dated CLN to march 1973.
if this is not the case what would be the next steps for them?
thanks
@mettleman
Yes, that’s what they need to do. If they have done nothing to “act as an American citizen” since 1973 such as voting, using or renewing or applying for a US passport, filing US taxes, etc, there should be no problem. They will not have to pay any fees, they do not have to file any taxes or any other forms.
Mettleman You are 100%. correct. You’re friends assumption is correct. (S)He ceased to be a Yankee in 1973. At that time, the US assumed that someone becoming Canadian intended to relinquish and would no longer issue a US passport to that person. There was also no obligation to inform the STate Dept or obtain a CLN. There is also no obligation to file ANYTHING with the IRS. See ‘ did you relinquish before Feb 1995 ‘ under ‘ our resources’ to the right.
Your friend has at least 3 choices. Make an appointment for a backdated CLN . This is a frustrating and prolonged process. 2) explain to the advisor that the IGA provides that an individual can “cure” US indicia by providing a self certification of non US personhood, a Canadian naturalization cert. and a reasonable explanation why they don’t have a CLN.
If the advisor wouldn’t accept a reasonable explanation ,it might be time for option 3). Get a more knowledgable and reasonable advisor.
thanks for the quick responses
you have just made someone’s life much easier and saner 🙂