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
@BCDoc, LM and Carolyn
A friend of mine has a heart condition and cannot get medical travel insurance to visit his grandchildren in the US. Medicare gives me the assurance that I can continue to do do however decrepit I become!
@ BC_Doc I was the one who told you about being able to claim Irish citizenship at any age through your Irish grandparents. My brother did it several years ago. Glad I was able to help you out.
Regarding Medicare, is there any monthly fee to be paid or do you just get it because you qualify by paying into it for 10 years? I know someone (former Green Card holder) collecting US Social Security benefits in Canada who was told that hospital bills would be covered if they travelled in the US but not the doctor’s bills. Is this maybe a senior benefit?
@Heartsick
It’s complex but there is info on the medicare site
http://www.medicare.gov/
Basically there are parts A,B,C.
A covers hospital admission and is free.
B covers doctors visits and tests, 80% paid by medicare, 20% patient.
C covers drugs but needs extra insurance.
You have to claim it at the age of 65 otherwise their are …you guessed…penalties.
Payment for part B is around $105/month but may be more if you earn above a certain amount or if you sign up late or miss a year.
@heartsick
Hi– thank you again for that piece of information regarding Irish citizenship! I sent off applications for entry in the foreign births book for each of my children including my 19 year old daughter who may apply for an engineering coop in Germany (so the EU passport will extremely helpful).
All the best,
BC Doc
http://blogs.angloinfo.com/us-tax/2015/03/30/part-iii-living-in-the-past-citizenship-relinquishments-am-i-still-a-us-tax-citizen/
Part III: Living in the Past: Citizenship “Relinquishments” – Am I Still a US “Tax Citizen”?
March 30, 2015
……”..Today’s post will look, in part, at the view of another prominent attorney, John Richardson of Toronto, Canada. John is all too familiar with these laws and the difficult issues they create for individuals who had relinquished US citizenship many years before. Today’s Part III of the post also sets forth the premise that the manner in which legal professionals interpret a particular law will impact how that law is interpreted by other professionals, which in turn will help shape the future evolution of that law. With that as the touchstone, prudence is advised when it comes to interpreting the backward reach of the relevant Internal Revenue Code Sections — Section 877A and 7701(a)(50). Caution is necessary lest the tax professionals, themselves, create a situation where one professional blindly follows the next resulting in a scenario where, without the requisite aforethought and due consideration, the provisions come to be applied retroactively.
…”….
I finally sent in my request for a relinquishment appointment to the American Embassy in Ottawa. This is the response I received:
“Please follow the above instructions and re-send your completed forms in beginning mid-Sept, 2015 and Oct 2015. We are not booking apts at this time.”
That’s almost a 6 month wait.
Proud: This is not unusual. In a case in which I am involved, the application was made in Sep 2014, the appointment granted for last month (Mar 2015) and now comes the 9-12 months’ wait for the CLN.
d5804a,
This report by Proud Canadian may be different — it sounds as if Proud Canadian is to re-send, i.e. start over the booking process in September 2015 / October 2015 to then get an appointment. If *lucky enough* to be able to have them book an appointment then, what will the wait time for that appointment, after which there will be a further wait for the CLN (as you’re in now in the whole process)? Sounds like perhaps a new and additional obfuscation from the Department of State / US Consulates.
@calgary311 – yes, I think your interpretation is correct. This was my first contact with the embassy, as per the great info here at IBS. I sent an email expecting to be given an appointment. Instead, it appears I’m to wait and try again in the fall.
Does anyone know if this is happening at the consulates? I could go to Toronto if there’s a chance I could get an appointment there.
@ Proud Canadian
For renouncing, one can make an appointment and go to ANY US Consulate outside the US. There have been folks in Canada who have gone to a consulate in a not-near-by local, and that is OK. Also, on IBS there has been mention of “Renunciation Tourism”, meaning the person takes their passport from their country of residence as well as their US Passport and arranges for an appointment in a country other than their country of residence while on holiday (e.g. Mexico, Jamaica, anywhere you can get a quick appointment – – indeed, one could fly down for, basically, the purpose of holding this appointment!). Can save time, and if you would like to take a week or few days in this out-of-the-way place while giving up your US citizenship and passport, so much the better!
Hi proud Canadian,
I am one such individual who went abroad to get rid of my American citizenship. My experiences have been chronicled here on the IBS site, but also in the news article that global did.
http://globalnews.ca/news/1671945/meet-the-alberta-man-who-went-to-tijuana-to-renounce-his-u-s-citizenship/
I would be more than willing to talk to you about this if you are interested. Moderators, if Proud Canadian would like to discuss this further with me, you make pass along my email address to them.
Cheers,
Rocky
@Proud Canadian
Since u are in the Ottawa area… have u tried the office in Montreal… distance is not that far so u can make it a day trip to Montreal
@ Krackerjack121
Just wondering: were you unable to use any of the provisions of relinquishing (other than renunciation)? The US provisions have many escape routes to relinquishing (other than renunciation), for example, employment in a government job.
In your case, it’s water under the bridge but I am still wondering why more people are not using this escape route that so far involves no fee whatever.
Thanks, Krackerjack121. I sent your e-mail address to Proud Canadian.
@dt804a
I would have loved to have used the relinquishment verses the renunciation but I was not eligible as I understood the rules. I have never worked for government in any capacity. I was a dual citizen born abroad. My mother was American and I was born in Canada and I used my citizenship to attend school at a state university in Indiana. So I instead elected to go with the renunciation because that was the only option that was available to me.
On a side note, I just emailed the consulate in Tijuana and they told me that the CLN is still in process, but that they would contact me when it was available. It just boggles my mind that it takes that long to process anything.
On well.
Cheers,
Rocky
Has anyone tried Vancouver lately? I live in Ontario but in late August 2014 I requested a relinquishing appointment with the Vancouver Consulate in December since I would be visiting relatives in Vancouver for Christmas. I got the December appointment and received my CLN in March. I hope they are still as efficient for others as they were for me.
@Proud Canadian: I know someone in Ontario who was able to get a fast appointment in Calgary. He and his Canadian born wife flew out there instead of waiting 10 months for an appointment in Toronto.
Or, as Krackerjack did, you can even do it at a Consulate outside of Canada. ArticGreyling reported at Maple Sandbox that he renounced in a South American country. I think it was either Argentina or Columbia but I do not remember which.
Blaze, how long ago was that person in Ontario able to get a fast appointment in Calgary? It should be tried / tested.
FWIW, I attended a Moodys Gartner Calgary presentation on Renunciation of US Citizenship in February. In the presentation, it was mentioned there that the wait time for Toronto expatriation appointments is now into February of next year; wait time for appointments in Calgary is into June and July of this year. It was also noted that Toronto has eight appointments per week (2 a day M-Th) and, although Calgary had been doing 12 appointments a week, that will change (or has already changed?) to, as well, eight appointments a week. For two US Consulates / Embassies in Canada, there is the ability to have a lawyer accompany you to your expatriation meeting — in Calgary and Quebec City.
@Calgary. That appointment in Calgary was in early March of this year.
Thanks, Blaze — then, people should not rule Calgary out.
Hello to everyone,
I have a few questions on 8854, which I need to file by June 15, 2015 (having renounced in 2014).
Part IV, Sect. A #1: Would these 5 years be 2009 through 2013 for me (as opposed to 2010 through 2014)?
Part V (Schedule A), #6 (Pensions from services performed in the U.S.): Would I include U.S. Social Security benefits here? And, if so, how do I calculate the Fair Market Value and U.S. adjusted base?
Part V (Schedule A), #7 (Pensions from services performed outside the U.S.): I don’t know how to calculate the value of my pension from the Ontario government. Could I, for example, estimate how many more years I can expect to live (based on life expectancy for males) and multiply my yearly pension by this number of years – plus an estimated inflation value of, say, 2.5% a year? Would that give me the Fair Market Value? But what about the U.S. adjusted base?
Thanks to anyone who can help this confused former U.S. person!
Wyley
Wyley. You must wrap your brain around the fact that there are no good answers. You can only make your best effort or pay 10K for a specialist to do it for you.
Firstly , I believe it’s 2009-2013.
Now for the hard part. Remember the exit tax was meant for the Eric Saverins of this world where hundreds of millions were at stake. If your net worth is under 2 mill, it won’t much matter what you put down. Remember also, if over 2 mill., you are assumed to have expatriated for tax reasons and they might have a closer look see.
Social security is not (AFAIK) for a service performed in the US. There is no way to estimate it’s value or cost. Best ignored.
Value of Ontario pension. Again no way of knowing. Defined benefit plans are guesswork and the ON gov. will not be able to help. This discussion took place here about a year ago.
Here is one way. Find the present value of an annuity.
http://www.investopedia.com/calculator/annuitypv.aspx
For no. of payments use your life expectancy . There are various calculators on the web. Pick a simple one. This assumes an interest rate and nobody knows interest rates a few years out so the answer is a guess. If you pick a low life expectancy and a high interest rate, the present value goes down.
Anyway, it will give you a number that you can justify. (An actuary will charge a hefy fee to make the same guess.) For cost, put anything you want because nobody knows.
The goal is to keep your NW under 2 mill. If you manage that, they won’t bother you.
OR, you could forget the whole bloody, useless exercise.
@Wyley,
I, too, renounced in 2014 and hubby, the longstanding family tax guru, is currently filling out my last (hooray) forms too. He has, however, deigned to look over your questions and provide answers.
Question 1) the five years are 2009-2013
Question 2) No, do not include US Social Security
Question 3) See the following example to compute the Fair Market Value (column a):
For the purpose of line 7 on Form 8854 (2013) “pensions from services performed outside the United States” you do not have to include CPP. You do have to compute the present value of the employment pension benefits that you will receive for the rest of your expected life as of the day before you renounce your US citizenship. Note that if you renounce your US citizenship at a US Consulate appointment, that is the date when you relinquish your US citizenship for IRS purposes.
The link to find the relevant interest rate to capitalize your annual pension is: http://apps.irs.gov/app/picklist/list/federalRates.html
The link to find Table S for Section 1 (for the adjustment factor based on the frequency of your pension payments) and Table K for Section 5 (for the annuity factor for capitalizing your pension benefits based on your age and the capitalization rate) is : http://www.irs.gov/Retirement-Plans/Actuarial-Tables
Here is an example to calculate the entry you should make on line 7 of Form 8854 if you renounced your US citizenship on 15 April 2014, your annual pension income on 14 April 2014 in US dollars was $50,000 and you were a 68-year-old person at that time:
The relevant interest rate comes from Rev. Rul. 2014-12 Table 1. It is 120% of the Applicable Federal Mid-Term Rate for April 2014. This is 2.17%. The appropriate rate to capitalize your annual pension benefit is, thus, 2.17%.
The relevant adjustment factor to use if you receive your pension benefits monthly comes from Table K of Section 5. The interest rate of 2.17% is 85% of the way from an interest rate of 2% to an interest rate of 2.2%. The adjustment factor for 2% is 1.0091. The adjustment factor for 2.2% is 1.0100. Use 1.0099 for the adjustment factor to account for a monthly pension payment.
The relevant annuity factor to use comes from Table S of Section 1. Go to the sections of Table S applicable for an interest rate of 2.2%; the annuity factor for a person who is 68 is 12.5988. Look at the interest rate of 2.0%; the annuity factor for a person who is 68 is 12.8345. Because the interest rate we are using is 2.17%, we have to interpolate between these two values. To do this we subtract 85% of the difference between 12.5988 and 12.8345 from 12.8345. Thus, the annuity factor is 12.6342.
Now you can calculate the present value of your pension income. Multiply your annual pension income (example here used is $50,000) by the adjustment factor to get $50,495.00.
Now multiply $50,495 by the annuity factor to get $637,963.93. Using the IRS rules, a $50,000 a year pension to a 68-year-old pensioner renouncing US citizenship on 14 April 2014 has a current value (what is often called the “commuted value” of your pension) of $637,963.93.
The US Adjusted Basis (column b) is the total contributions you made towards your pension.
Convert both the C$ values of columns a and b into US dollars using the C$ to US$ exchange rate for the day BEFORE you took the oath of renunciation. You can find this by going to the Bank of Canada Exchange Rates site via the internet (http://www.bankofcanada.ca/rates/exchange/10-year-lookup/). Make sure to exchange C$ to US$ (not the other way around, especially since the exchange rate was close at times in 2014).
LM commenting again – – I hope you understand all this. And, for those who are reading John Richarson’s detailed 9 part article about the Exit Tax and Covered Expatriates, you now can see how it is easy to get past that two million dollar mark – – if a pension of $50,000/year for a 68 year old person amounts to a commuted value of 2/3 of a million dollars and, of course, this doesn’t include any asset amount of your other savings/investments/property/collections/autos/etc. Anyway, good luck, Wyley and all who are filling in their last (hooray) IRS filings.
Thank you SO much for taking the time and effort to give me this information and your thoughts/feelings (which I share 100%). I’ve been filing with the IRS for years but always on my own, refusing to pay an accountant (on principle). So, I will do the 8854 on my own, too – to the best of my ability. I’m a very small fish and hope to be ignored! Thanks again.
Wyley
Wyley. LM has given a detailed answer which illustrates the problem perfectly.
Let’s assume you calculate the present value of your ON pension to be $ 1 million USD.
Let’s also assume you can figure out how much you contributed. How about 100k?
Is your capital gain 900K? I don’t think so. This ignores the ON gov. contribution to your pension. Probably an equal amount. Why should the IRS benefit from the contribution to your pension by ON? The pension contribution was negotiated in lieu of a salary increase. It is an exercise in futility. Good luck.