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
After a wee pause, I’m back at the grind, trying to complete all U.S. tax requirements in the next week or so.
I renounced on January 14, 2014, and have completed 1040 for the period Jan. 1-13, 2014. Will tackle 1040NR for the rest of 2014 tomorrow. In the meantime, I’m not sure how to handle 8398 (Statement of Specified Foreign Financial Assets), i.e., do I complete it for just the first 13 days of 2014 or for the whole year? (Same questions for FBARS.) Thanks in advance. Wyley
Wyley 13 days. After that you were not a US Person
Remember David Alward, Premier of NB? https://expatsinca.wordpress.com/2011/10/12/new-brunswick-premier-david-alward-caught-in-fatca-nightmare/ http://intltax.typepad.com/intltax_blog/2011/10/new-brunswick-premier-caught-in-us-tax-net.html http://hodgen.com/new-brunswick-premier-is-in-the-ovdi/
He is in Boston as a new Canadian consul general, and apparently he renounced:
“……Alward, who had dual citizenship, had to renounce his U.S. citizenship to accept the diplomatic posting there….”
See:
‘David Alward named Canadian consul general in Boston
Former New Brunswick premier named to post by Foreign Affairs Minister Rob Nicholson’
CBC News
Posted:Apr 24, 2015 1:40 PM AT
Last Updated:Apr 24, 2015 4:25 PM AT
http://www.cbc.ca/m/touch/canada/newbrunswick/story/1.3047614
Hello,
I’m asking this question on behalf of someone I know-
For a US citizen born in the US and worked there for less than the required amount of time to collect Social Security, are there any other financial benefits at all for retaining citicenship? He is close to retirment and has no plans to ever relocate there. So the cost/benefit analysis doesn’t seem to make it financially worth it. Do others agree?
Here’s how it breaks down-
Living in Canada. middle class income. not upper-middle, smack dab middle class. Retirement nest egg consists of an RRSP, a TFSA, a company pension. Mortgage is paid off. Cnadian wife has an RRSP and company pension, too. They drive a used car, their small old house, needs work.
I told him if he kept his citizenship he will have these costs:
– paying a tax specialist to get him caught up and then paying each year to have taxes done.
– paying tax on his TFSA
– on retirment: he will be taxed by both countries on his RRSP and pension income.
– if he sells his home, paying tax to US
So the question is: Is a US citizen and/or his spouse who hasn’t paid into social security, entitled to that or any other US government benefits when they retire, that would offset the costs of retaining citizenship?
I looked all over the web and US gov’t sites and come to the conclusion that the IBS holds more experience and expertise and easy-to-understand knowledge than anywhere else on teh planet. So thank you very much for yout input.
d
@dave, I think the short answer is no. Won’t qualify for Social Security, doesn’t qualify for Medicare, etc, so what’s left?
However, just renouncing won’t get rid of any US tax obligations. If he plans to travel to the US at all unless he’s filed a 8854 form he’ll become a covered expatriate. This means he could be penalised $10,000 by the IRS and might even, if Mr. Reed gets his way, be banned from ever entering the States again. Of course if he has no plans to visit or transit through the States then he could decide to do nothing on the tax side. Further research will be required by either you or he and this is probably a good place to start:
http://isaacbrocksociety.ca/introductory-material-on-fatca-info-session-synopsis-history-of-isaac-brock-society/
Hi Dave,
Welcome to IBS.
Agree with Medea, it will also become more difficult for him to function financially anywhere with a US taint.
When did he become a Canadian? Has he done anything American since then, like renewing his US passport or voting in a US election or filing US taxes? If the answer is none of these then he would qualify for a backdated relinquishment with no fee, ie he effectively LOST his US citizenship when he became a Canadian IF his ‘intention’ was to do so. In fact if he became Canadian before 2004, then he should read the section “Important! If Relinquishing Act Performed Prior to June 4, 2004” on the Rt of this blog as it may excuse him from backdated tax filing.
@ Dave In answer to your question: not much benefit, this is why so many are renouncing. Most people find it difficult financially to maintain the US citizenship abroad and be tax compliant. Your friend must not only consider compliance costs but also the US Exit tax assessed if he was to renounce. Does your friend have any investments in non-US mutual funds (PFICs)? These are taxed very punitively (expensive compliance costs as well) and can attract up to 100% tax of the earnings in US tax/interest. No benefit to investing in a TFSA if you are a US citizen, US taxable and significant compliance costs for the paperwork as it is a “foreign trust”. The US does not make it easy to leave especially as you near retirement and have accumulated substantial assets. I believe there is limited medical coverage that can be used in the US when traveling there, hospital only, available to US citizens living abroad. Information available on US Medicare site. In Canada any US Social Security payments (if you have paid into the plan long enough) received are deducted from the Canada Pension benefits so there may be no benefit to those collecting. Citizenship status has no effect on ability to collect SS benefits if you qualify. Others here may be able to provide you with more information.
http://citizenshipsolutions.ca/2015/04/01/renouncing-us-citizenship-how-the-s-877a-exit-tax-may-apply-to-your-canadian-assets-5-parts/
@Dave. I agree that remaining a US citizen isn’t worth it if there are no plans to ever relocate or retire there. It just makes life simpler to not be a US person.
The renunciation picture looks even better if your friend considers that the Canada/US totalization agreement covering Social Security and CPP specifically applies to situations such as you are describing. Qualification for receiving SS benefits depends on how much was paid into the system, not residence and certainly not citizenship.. Writing off US citizenship doesn’t mean writing off US Social Security.
Many Canadian only folks go to the US to work, pay into the US system, return to Canada, and receive SS benefits in Canada when they retire. The agreement ensures that such people do not lose the contributions they paid into the US system if they later return to their home country. (The same is true for Americans who work in Canada, pay into CPP, and later return to the US.) The agreement further specifies that if a person hasn’t paid into one of the systems long enough to meet the minimum qualification, time working and paying premiums into the other country’s system can be counted to qualify for benefits. It is not at all uncommon for people to split their working lives between the two countries and the agreement ensures that such people do not wind up with only “half a pension” when they retire.
So your friend will likely qualify for CPP based on his work in Canada and time paying into the Canadian system. This time can also likely be used to “top up” to meet the minimum number of quarters needed to collect some US Social Security as well. The amount of SS benefit will depend upon how much was actually paid into the US system.
None of this is dependent upon remaining a US citizen. As an aside, by treaty the government pensions are only taxable in the country of actual residence, regardless of citizenship. It is possible that because the CPP. OAS, and SS benefits are totally exempt from US taxation for a Canadian resident, your friend’s US taxable income may fall below the filing threshold or be low enough that even with some modest RRSP and/or investment income he would owe no US tax. This, of course, doesn’t fix all the obnoxious filing rules, FATCA, banking issues, or potential cap gains on a house sale that remaining a US citizen entails. Hope this helps.
@heartsick and Dave
The exit tax will not apply if his net worth is below 2,000,000. In fact it may not apply at all if he was born with dual citizenship and is USTax compliant and lived the requisite number of yrs out of the US.
I am surprised that US SS payments are deducted from the Canadian ones, this is not the case in Switzerland or the UK.
It is NOT true that US Social Security payments are deducted from CPP (or vice versa).
@ WhatAmI I know someone living in Canada receiving both US SS benefits and CPP benefits and there is a Canadian calculation based on the amount received in US SS that reduces the amount of CPP received, This person worked in the US for 10 years and qualifies for some SS payments.
@ WhatAmI I think the intention of the deduction is that you do not receive more than the maximum amount of CPP benefits due to another pension being received. The person I cited is entitled to full CPP benefits in Canada, in total that is still what this person receives except that part is paid from the US SS.
@heartsick
My mother has been collecting both for 36 years. No such deduction for her CPP. The total exceeds the maximum CPP.
Such deductions typically may apply to disability pensions (as is my mother’s case) but they can’t take away earned CPP or US SS.
I could also see the GIS being reduced (which is what your description soubds like), and maybe OAS due to total income thresholds, but never CPP. It’s bought and paid for.
Your friend should investigate. Maybe there is a big refund due.
@ WhatAmI Thanks, I will pass your information on.
I am planning to renounce my US citizenship-I’ve filed US income taxes and feel like I’m ready to let the citizenship go. Calgary is my closest consulate. I’m confused about booking an appointment, though. Do I just go on line and book through the regular passport services page or do I need to talk to someone at the consulate about my intentions? If so, what number do I call? The website is less than helpful. Calgary is a 7 hour drive with two kids in tow, so I want to make sure I know what I am doing.
Peacheykeen,
Correspond with the Calgary Consulate by email, Calgary-ACS@state.gov. For my and my husband’s renunciation, they sent a questionnaire to be filled out and emailed or faxed back. All of our paperwork was prepared and ready to sign on the day of our appointments. Very efficient. Our experience in Calgary was efficient and respectful — that was in November of 2012.
Let us know how long it takes to get an appointment these days — that would be useful information for others.
(If you have no one else with you and need help with the kids while you’re actually at your appointment, I’d be glad to help out.)
@ Peacheykeen
You need to send the consulate an e-mail indicating your intention to renounce. They will send you all the forms they want filled out in advance of your appointment. After they receive these by return e-mail, they will give you an appointment date and ask you to confirm that you accept that date.
The e-mail address is: Calgary_ACS@state.gov
Let us know if you have any questions about the forms. Suggestion: Before you head off for that appointment do a double check with ACS via e-mail to list all the documentation you will be bringing with you and ask if there is anything else they might need. With such a long drive you don’t want to risk not having something they want. Also, take screen shots or copy and paste into a document all of your correspondence with ACS. It never hurts to have proof of all stages of the process.
Thank you so much, Calgary411! My (Canadian-only!) husband will be with me, so the kids will be okay. Your offer is much appreciated, though. I will use the email you’ve provided and let you know the results. I’m hoping for June as we have a family gathering in Alberta in June, but that might be wishful thinking . . .
@Peacheykeen, no it looks like you’ll need to call them. You can’t book it through the usual channels. Use the main switchboard number.
http://calgary.usconsulate.gov/about-us/contact-us.html
If at all possible I’d leave the kids with a relative if you can. Security is VERY strict and you can take nothing in with you – and I mean nothing!
http://canada.usembassy.gov/consulates/security.html
When I renounced here in Switzerland they wouldn’t even let me keep my pedometer in my pocket; I had to leave it with the security staff. Having read the notice I’d made sure that I only brought the documents I’d need, but never gave a thought to the pedometer causing a problem. I did get to keep my tissue though.
Thank you, Embee. What does ACS stand for?
ACS = American Citizen Services
@ calgary411
What a lovely offer regarding Peacheykeen’s kids.
@ Peacheykeen
Use the e-mail address for ACS that calgary411 provided. Although we have both underscore and hyphen in our correspondence with them I think the hyphen is correct.
Ah good, calgary411 and EmBee confirmed that the e-mail is okay to use. I wasn’t sure which is why I suggested calling.
ACS stands for American Citizen Services.
Unfortunately, calling the Calgary US Consulate, unless changed, is a exercise in futility. Use email. I think you will find they will answer promptly and with all the information you need. Then, if you have any questions, you can continue the conversation.
The correct email address uses a hyphen: Calgary-ACS@state.gov
The confusion is that it comes like this: Calgary_ACS
The part within the is the actual address.