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
ricard. I agree although it is complex and full of ambiguities. As far as the balance sheet in Par V. Is concerned , only column (a) is required for a dual at birth. I think it is also important to note the instruction that ” You can make good faith estimates of fmv. Formal appraisals are not required”
@a Duke of Devon
That is helpful to know and it seems reasonable. But what is your reason that only column a need be completed by a dual citizen from birth person? It certainly would be nice to avoid the time and cost of computing the other columns.
Ricard. 2 reasons. A dual at birth will not be subject to the exit tax. Therefore there is no point in trying to calculate the virtual capital gain on expatriation. The instructions state “you can use the balance sheet….to arrive at your net worth”. The other columns are moot. You could write ” not applicable- dual at birth” across them.
Secondly , it is apparent that 8854s are rarely if ever audited for low net worth individuals.
@ Duke of Devon
I hope this doesn’t mean my husband (not a “dual at birth”) will be getting a notice to redo his 8854 because he sent a note along with his paperwork stating:
For lines 1 through 20 I did not fill in columns (b), (c) and (d) because they did not seem relevant to listing the assets I held on my expatriation date.
All his assets listed down to the nubbins didn’t even remotely approach exit tax territory. All he had was cash, property and other (household goods). None of the other lines were applicable except the pension lines which he wrote another note about — basically this is how much CPP/month he could expect (IF he claims it) and this is how much SS/month he could expect (IF he claims it).
MB I seriously doubt they will bother him. As I said, there is little evidence that these things are ever audited for low net worth individuals
This from James Jatras…
Friends
Please see inquiry below. It’s self explanatory. Please respond to Ali asap, as she’s on short deadline. Feel free to forward to whoever else might be interested. It’s a good opportunity to educate the public.
Jim
+++++++++
Hi Jim,
I am writing a story for ABCNews.comabout the record number of Americans who have renounced their citizenship this quarter – some analysts are connecting that dynamic to the burdensome tax laws that are on the books for Americans living abroad.
I wanted to know if you might be able to put me in touch with any Americans abroad who have thought about or went ahead and renounced their citizenship – namely for reasons having to do with the tax strains that Americans abroad are under, but I’m happy to chat with anyone who wants to share their citizenship-change story.
As a 24-hour news site, I’m of course operating on a tight deadline, so if your contacts are able to reach me by 6 pm ET today (Monday), I would be most grateful.
Thank you very much for your consideration.
Best,
Ali
Ali Weinberg
ABC News
Digital Journalist, State Department
Ali.S.Weinberg@abc.com
202 603 5202 (Cell)
202 222 7736 (State)
202 222 7371 (Bureau)
Thanks, Just Me.
I’ve just submitted my thoughts.
Thanks for passing on, James Jatras!!
Yes, many thanks! Don’t want to miss any of these opportunities!
@Phil Hodgen has another Expatriation email out…
It might apply to those that are thinking about this option prior to year end. IBS oldtimers know all of this, but newbies might find something of value. I have reproduced it below. This is not an endorsement, or shilling for his services. Phil is in the incoming producing business, so be forewarned.
This Week
Hello from The Coffee Fox in Savannah, Georgia. If you like Horchata (and I certainly do) then I suggest you order a Horchata Latte, then sit outside and watch the people pass by on Broughton Street. When this goes out to you on Tuesday I will be standing on a dock somewhere on Saint Simons Island, waiting for a boat to Little St. Simons Island.
The year is almost over. If you want to expatriate in 2014, you will need to move fast. I have been having many conversations with people who want to renounce citizenship or cancel their green cards—I probably met twenty or so in Dubai or Riyadh when I was there two weeks ago.
(Shhhh. Super secret message to the U.S. government. The people I met in the Middle East who want to cut their ties to the United States are well-educated professionals and entrepreneurs. The U.S. policy objective of chasing these people away from the United States is working well. Carry on. We don’t need achievers and builders and educated, intelligent people hanging around the United States.) /sarcasm
This week’s email is a distilled version of my conversations in the Middle East. This is the decision-making process you need to go through if you want to expatriate in 2014—either renounce your citizenship or abandon your green card.
1. Can you even get an appointment?
The first problem is the most obvious: make sure you can force the Bureaucracy to meet you and do what you want them to do. This is harder for citizens who want to renounce, and easier for green card holders.
a. Renunciation of Citizenship
In order to expatriate in 2014, you need to formally renounce your citizenship in 2014. If you have a green card, you need to get your Form I-407 submitted during 2014.
This means the hurdle is bureaucracy. You need the bureaucrats to schedule an appointment (or the two appointments) at your favorite Embassy or Consulate to renounce your passport.
November and December are full of holidays. There will be a lot of people who want to expatriate in 2014. The number of appointment slots will be limited. Get your appointment set early.
You can go anywhere in the world to renounce your citizenship.
A few years ago the Vancouver Consulate bounced a bunch of people out of their December appointments and into January. Those people missed their expatriation date target. Be careful. That might happen to you.
b. Abandon Green Card
The process of abandoning a green card is easier. Form I-407 is the magic paperwork and the moment it is submitted is the moment you have abandoned your green card status.
The paperwork can be submitted in person or by mail. Just be sure you can get this done before December 31, 2014.
c. Your Action Step
Your job right now is to start dialing the phone.
For citizens giving up their U.S. citizenship, start calling Embassies and Consulates anywhere until you can be assured that you will have your renunciation appointment before December 31, 2014. If the appointment slots are available, make the appointment. You can always cancel later.
For green card holders, call and see what the Embassy or Consulate wants you to do. From recent experience, the Consulate in Sydney was pretty relaxed: “just mail it in”. That’s good if you send in your paperwork early because what if everyone goes on vacation and your Form I-407 sits unprocessed until January 2015?
My preference (and I think yours, too) would be get get certainty. This means showing up at the Embassy or Consulate and handing over the paperwork. The London Embassy’s summary of what you need to do is pretty good. Sometimes you need an appointment, and sometimes you can just stand in line and hand over your paperwork. Just be sure it happens before the end of the year.
2. Tax Consequences of Expatriation
We now assume that you can actually get the job done. You can abandon your green card or you can renounce your citizenship before December 31, 2014.
That act has (or can have) tax consequences. You need to know what those consequences are. Look before you leap, etc.
This thinking process involves two steps: are you an “expatriate” (meaning that the Section 877A tax rules apply to you), and if you are an expatriate, are you a “covered expatriate”?
a. “Expatriate”?
If you are giving up citizenship, you are a expatriate. The Section 877A rules (the exit tax rules) will apply to you.
If you are abandoning your green card status, you will be an expatriate if you held the green card long enough. This requires some individual analysis of your particular situation. But if you received your green card in 2007 or earlier, you might be an “expatriate” — not counting the possibility that you used an income tax treaty to elect to be a nonresident of the USA for income tax purposes.
b. “Covered Expatriate”?</b
You are a covered expatriate or not based on your answers to the questions in Form 8854, Part IV (the bottom part of page 3 of Form 8854).
c. Your Action Step
Just figure out the answer to the question: am I a “covered expatriate” or not? What is your net worth? How much tax liability did you have over the previous five years? How are you for the certification test—have you filed tax returns and paid all the tax you are supposed to pay?
3. Do You Care About the Tax Consequences?
If you are merely an “expatriate”, you have a lot of tax paperwork to do. If you are a “covered expatriate” you have the possibility of paying some income tax to the United States for the privilege of expatriation. And you have a problem if your heirs are U.S. citizens—their inheritance from you will be taxed heavily.
You might be willing to accept the tax cost of expatriation in order to renounce citizenship or abandon your green card. Or there might be no tax cost at all.
Here are some examples where the tax cost is likely to be zero, or you will not care that you are a covered expatriate:
Your children or spouse are not U.S. citizens are probably never will be (so there is no punitive tax on gifts or bequests to your children);
If you pretend that you sell all of your assets when you expatriate, the total capital gain is under $680,000 (there is no mark-to-market exit tax);
You do not have complicated things like IRAs, pensions, etc. hanging around (these are likely to create taxable income for you no matter what else is going on in your financial life).
If the tax cost is zero or close enough for your comfort, you might be willing to renounce citizenship in 2014 and pay whatever it takes to cut off Uncle Sam from continuing to be a part of your life.
Your action step here is to figure out how much money (if any) it will cost you to expatriate, and decide if you are willing to pay that price. The alternative would be to figure out how to reduce or eliminate the exit tax, and expatriate in 2015.
4. After Expatriation—The Tax Paperwork
Do you have a plan for dealing with the tax paperwork after you renounce your citizenship or abandon your green card?
At a bare minimum this means you need to know how you are going to file your 2014 income tax return and Form 8854. It also might mean some remedial filings of tax returns or other paperwork for the previous five years (2009-2013).
The choices available to you are (in no particular order):
Voluntary Disclosure Program (what a mess that is);
Streamlined Procedure (the more the IRS works on this, the worse they make it);
Just file your stuff and deal with any audits that come up.
Know how this will work before you commit yourself to expatriation in 2014. This means you should know the expected financial outcomes of each of the choices and choose the best one. Choose for certainty first, and cost second.
You might think to yourself “Why should I even file tax stuff? I gave up my passport and the IRS can’t touch me.” First off, this is a Thought Crime and the secret police can and will find you. (Just kidding, but sadly this cliché of science fiction is becoming less and less implausible.) No, seriously. You should do the paperwork because your primary purpose in expatriation is to never, ever have to deal with the U.S. government ever again.
Log out of the tax system cleanly, even if it costs you money and time to do so. You will thank me later.
5. Make Your Final Decision
Now that you have gone through this decision process, you can go back and decide whether you still want to keep that appointment at the Embassy or Consulate and expatriate in 2014.
Maybe you will decide that it is better to expatriate in 2015 after you have eliminated the uncertainty from your analysis—you know, for instance, that you will definitely not be a covered expatriate. Or perhaps you will eliminated the financial cost of the exit tax by re-engineering your financial life to eliminate the net worth test or the net tax liability text as ways to cause you to be a covered expatriate.
Not Legal Advice
This isn’t legal advice to you, of course. Would you make life-altering decisions based on a random email you got from some guy you found on the internet? Nope. Me neither. Go hire someone. March through the analysis and figure out what is best for you.
Next Week
Next Tuesday there will be another expatriation-related question and answer. Send yours in. Hit “Reply” and start typing. When you’re done, hit “Send”.
Phil.
Had my appointment this week to renounce my citizenship. It’s over….done…time for a re-birth.
Now I just need to do the dreaded 8854. I’ll need a few glasses of wine first to sit down with that one.
As for the ABC news journalist….leave us alone already. I’m now of the opinion that more coverage of this issue is just going to make it worse for people trying to expatriate…not better. We all know the horror stories at this point…no need to rehash. The fee for renouncing already went up. Don’t give them another reason to make it go up even more or to throw another form at us. The best advice right now for all of us is just to keep focused, keep our heads down and mouths shut and it will be over soon.
@TonyafromTerrace
*As for the ABC news journalist….leave us alone already. I’m now of the opinion that more coverage of this issue is just going to make it worse for people trying to expatriate*
Oh heck no… the more publicity there is the better… the more people who speak out about this is better… the gov’t hopes we will all obey & quietly do what we are told… heck no… we are all being screwed over & everyone should know about it… And everyone should speak out about it…
*The best advice right now for all of us is just to keep focused, keep our heads down and mouths shut and it will be over soon*
I totally disagree with u… we need to be loud & spread the word where we can so the world knows about this injustice to all US persons. Why should everyone keep this a secret… ohh… heck no… everyone needs to spread the word… make as much noise as possible so that the world knows what is being done to all of us… So donate… donate to ADCS… make your voice be heard… just remember… this is also for our future generations… I do not want my next generation to suffer because nothing was done… I want them to have a better future then being slaves to the US… which is a mistake my parents generation foisted on my generation…. with either a GC or citizenship… My future generations deserve better then that… I will not give my funds to the US… that is meant for my next generation…
@TonyafromTerrace
“Now I just need to do the dreaded 8854. I’ll need a few glasses of wine first to sit down with that one.”
Just 2 brief remarks:
1. Your last tax return and the dreaded 8854 are to be filed next year, not now.
2. I’d do the form first, then have the wine.
@US_Foreign_Person you are very right. I was just pissed off and I am still raw from having to cough up $2350USD to renounce my citizenship. This was such a financial burden that money will be tight for a very long time. My reasons for posting the previous comment was out of fear that the US Government will continue to penalize people for speaking out. I mean that’s what it seems like has happened already. It obviously does not cost $2350 to “adjudicate” (their words, not mine) a case of renouncing citizenship. However, IMHO they raised this fee, err…extortion…as a way of slowing the tide of people ditching their citizenship. It seems they keep making it harder and harder for people to renounce/relinquish and won’t really be happy until they bleed every drop of money out of someone who they feel is not worthy anyhow of their blessed citizenship.
@TonyafromTerrace
ITA about the US making it as difficult & expensive as possible to escape the slave chains… there was a suggestion on this mb regarding the holidays… instead of gifting a gift… put the money aside for them so that they can give up everything they can US… donate the funds… we have started to do this… The anger is good but don’t let it take over your life… u will find most don’t care or they are tired of hearing about it… my own family thinks I am paranoid over nothing… When I feel like I am alone & don’t know what to do… I find that being on this mb really helps me cause I am not alone… So put aside the anger… u will get through this & then u can wave the bird at the US…
In August 2014 I sent in the required forms and requested an appointment with the Vancouver Consulate to relinquish in December when we will be traveling there from Ontario. ( I posted about this on IBS in August when I was trying to get the appointment). Finally, today, Nov. 3, I heard from the Consulate and was able to book the appointment for December 19.
@Somerfugl
Long time coming! Very glad and look forward to hearing it is over and done with for you.
I am very glad for you, Somerfugl! At one time we were celebrating people finally getting their CLN *imagine that* and now it’s got so bad we are celebrating them even being able to get a relinquishment appointment!
Have you guys seen this? WOW! http://www.forbes.com/sites/ashleaebeling/2014/11/04/irs-commissioner-predicts-miserable-2015-tax-filing-season/
IRS Commissioner Predicts Miserable 2015 Tax Filing Season
“Internal Revenue Service Commissioner John Koskinen warned that close to half the people trying to reach the IRS by phone might not get through during the upcoming 2015 tax filing season. “Phone service could plummet to 53%,” he told an audience of tax practitioners at the AICPA National Tax Conference in Washington, D.C. today. That would be down from an already unacceptable 72% during the 2014 filing season. The average hold time projection: 34 minutes! What’s to blame? Budget woes. “All we can do is try to maximize our services as well as we can; as well as we can is still going to be miserable. You really do get what you pay for,” he said.”
The article continues to paint an extremely bleak picture for the IRS. They are literally drowning in work, overloaded, under resourced, failing to meet obligations for basic services much less complex ones. They can barely keep it together which is good news for us. Less likely to divert resources to minnows living abroad I would say.
@overloaded, under resourced
One more reason to document all information sent to the IRS/Treasury. Make copies, remember to send by registered post, copy your receipt and make a print-out of any track and trace records (take a screen print) which show that your papers have been delivered to IRS/Treasury. What happens to them after that is a big mystery, but at least you have proof that you sent them off.
@allou:
Have you tried to send anything from Canada by registered mail? I tried, and was told point blank by the postal clerk: “you’d be wasting your money. We no longer do follow-ups if registered mail fails to arrive. If you want a paper trail, use a courier”.
I may received misleading info, so check for yourself. I’m just repeating what I was told.
I know of a taxpayer whose IRS agent told the taxpayer’s accountant that he wished he could also bill by the hour for all the time he’s spent on the taxpayer’s file. If he was at a job where he could bill by the hour, he’d have been fired for his inefficiencies and errors. To add insult to injury, this comment was stated in a conversation the taxpayer was being billed for!
@ pukekonz
Should our hearts bleed for the overworked IRS? Sob sob sob………
@dt804a
If you’re talking about Canada Post’s Xpresspost, spot on. I used Xpresspost for sending docs to the US. There were some issues on the US side. Canada Post basically said it was now out of their hands and I would have to deal with the US Postal Service. Canada Post was gracious enough to point me to the USPS web site.
Basically you do NOT get end-to-end service with Xpresspost and I, for one, will never use it again for sending anything to the US.
@tdott, @dt804a,
I used Xpresspost to send 3 or 4 submissions (for my mother) to the IRS in Texas. The online tracking showed me when it arrived. Are you saying that the problem is that if an envelope goes missing enroute, _that’s_ where the problem exists?
@WhatAmi
Yes, if the problem occurs en route on the US side, then you must deal with the USPS to get it resolved – Canada Post washes its hands of it.
Canada Post partners with the USPS to get US destined submissions delivered. So as far as Canada Post is concerned, once the USPS takes possession of it, it’s no longer their problem.
Given the importance of US tax returns (What? You’re 1 day late with information form XYZ? That’ll be $50,000 please), I wouldn’t take a chance on Canada Post again given my last experience.