Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part Two

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

1. @ Testing,

   Re:

   Page 1 of the 10 pages of IRS instructions for 8854 say: “For purposes of filling out Part I, the date of your expatriation is the LATER of the date you notified the relevant agency of your expatriating act or the date Form 8854 was first filed in accordance with these instructions.”

   http://www.irs.gov/pub/irs-pdf/i8854.pdf

   That’s from the section “Expatriation after June 3, 2004, and before June 17, 2008.” Persons in this group had to send in an initial 8854 and then send one in each year after that (for ten years, I think). Note that the 8854 is titled “Initial and Annual Expatration Statement.” But if you’re after June 16, 2008, that doesn’t apply and you only send the 8854 once.

   If you notified DoS in 2014, you want the instructions on page 2, column 3, of the 8854 instructions, “Expatriation After June 16, 2008,” and your tax expatriation date would be the date you notified DoS.

   Also, if your relinquishing act was prior to June 3, 2004, check out “Important if your relinquishing act was prior to June 4, 2004,” as in that case your citizenship would have ended before the current law existed.

2. Am I correct that one does not file an 8854 until a CLN has been received confirming the relinquishment/renunciation?

3. @RLee No. My understanding (and Phil Hodgen has a post on this if you search his site) is that you MUST file 8854 on time (June 15th for your final tax year) or it opens a whole can of worms because it would be a late filing. There are people who have waited more than a year for their CLN. I wish I was more knowledgeable, but I’m sharing my understanding as of now.

4. http://hodgen.com/when-to-file-form-8854/

   Phil Hodgen May 10, 2013

   When to file Form 8854

   We get questions from our handy-dandy Contact page. Some of them are important questions that apply to a lot of people.

   One such question came in this morning. Someone expatriated yesterday (i.e., in 20132015). He knows he must file Form 8854. But when does he file Form 8854? Today? Next year? That’s worth a blog post.

   You file Form 8854 as an attachment to the income tax return you file for the year in which you relinquish citizenship. You file your income tax return for the year in which you relinquish citizenship according to the standard deadlines that apply to nonresident aliens.

   Look at the Instructions to Form 8854 (PDF), Page 3 under the heading of “When to File”.

   “If you expatriated after June 16, 2008, attach Form 8854 to your income tax return (Form 1040 or Form 1040NR) for the year that includes your expatriation date, and file your return by the due date of your tax return (including extensions).”

   The filing deadline possibilities are April 15 or June 15. Figure out which one applies to you. The filing deadline for your tax return (and Form 8854) is extended if you apply for a filing extension in a timely manner. That can take you until October 15, and in some cases until December 15 for your filing deadline.

   For someone who terminates citizenship in 20132015, this means that the earliest filing deadline possible is April 15, 2014, and the conceivably latest filing deadline for Form 8854 (attached to the 2015 tax returns) is December 15, 2016 (assuming you get the right extension requests filed on time).

   Also, see: http://isaacbrocksociety.ca/expat_tax/comment-page-92/#comment-4734516

   I renounced in January this year and had no income up to the date I renounced in 2014. On that basis, I am not filing a 1040 or a 1040NR for 2014 as I am below the filing limits for both. I shall be sending Form 8854 to the Philadelphia address only, as indicated in the instructions.

   You MAY also need an approved extension so I’d get some advice from someone in the US or a one of those US compliance types PDQ for the three days you now have (I can’t find any extension for just the 8854 going to Philadelphia) Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, http://www.irs.gov/pub/irs-pdf/f4868.pdf.

   Phil Hodgen also says: http://hodgen.com/what-if-the-cln-does-not-come/

   I’m Late I’m Late I’m Late

   You were supposed to file Form 8854 in 2014 because you expatriated in 2013. You are filing it late, in 2015. (Never mind the reason for now. We’ll figure that out later.) What are the consequences?

   Simple: you’re a covered expatriate:

   … and whatever, then, you need to do about that if you can.

   Comments discuss renunciation (the date that you renounced IS the date) and relinquishment (how that date would be determined — and that certainly would have to be proven accepted with the CLN).

   Continuing absurdity. Good luck.

5. Testing You didn’t say whether you relinquished based on some prior action or whether you renounced in 2014. This could make a big difference. If you give more info we might be able to help. Since you never earned enough to file 1040s, you have little to worry about as far as the IRS is concerned.

6. http://www.irs.gov/instructions/i8854/ar01.html says:

   Expatriation AfterJune 16, 2008

   The rules in this section apply to persons who are considered to have expatriated after June 16, 2008.

   …
   When To File

   If you expatriated after June 16, 2008, attach Form 8854 to your income tax return (Form 1040 or Form 1040NR) for the year that includes your expatriation date, and file your return by the due date of your tax return (including extensions). Also send a copy of your Form 8854, marked “Copy,” to the address under Where To File, later. If you are not required to file Form 1040NR or Form 1040, send your Form 8854 to the address under Where To File, later, by the date your Form 1040NR (or Form 1040) would have been due (including extensions) if you had been required to file. (See Resident Alien or Nonresident Alien in the Instructions for Form 1040NR.)
   …
   Where To File

   Send your original initial or annual Form 8854 to the address listed below.

   …

   Department of the Treasury
   Internal Revenue Service
   Philadelphia, PA 19255-0049

   Specific Instructions

   See Chart A to determine which Parts of Form 8854 you must complete.**

   …

   ** Most likely, for Testing, Parts I, IV, V.

7. Thanks folks for your posts in response to my queries. Pacifica777 has been quite helpful mostly offsite as has calgary411 here. I much appreciate the helpful spirit you all embody including RLee, readytogo, and Duke of Devon. Bravo.

   Actually, I got the information I needed except for this bit from my big post:

   The top of page 1 of form 8854 (2014 version) states:
   “For calendar year 2014 or other tax year beginning ______, 2014, and ending ________, 20__”
   Q. Should I just not fill in the blanks or WHAT DATES should I enter in these blanks?

8. This is why I thought one did not file 8854 until one had their CLN. Right at the beginning of the instructions for form 8854 it says:
   “Date of relinquishment of U.S. citizenship.

   You are considered to have relinquished your U.S. citizenship on the earliest of the following dates.

   The date you renounced your U.S. citizenship before a diplomatic or consular officer of the United States (provided that the voluntary renouncement was later confirmed by the issuance of a certificate of loss of nationality).

   The date you furnished to the State Department a signed statement of your voluntary relinquishment of U.S. nationality confirming the performance of an expatriating act (provided that the voluntary relinquishment was later confirmed by the issuance of a certificate of loss of nationality).

   The date the State Department issued a certificate of loss of nationality.”

9. @ Testing
   My husband’s last day as a U.S. citizen was Sept. xx, 2013 (i.e. expatriation date). For those dates at the top of form 8854 he filled in Jan. 01, 2013 to Sept. xx, 2013. He filed his final tax form and his 8854 in June of 2014, just days after his CLN arrived. He had applied for an extension on his 1040 so he didn’t have to worry about the June 15th deadline. I hope that helps.

10. Disregard everything AFTER *OR* (the rest does not pertain to you). There will not be an updated form for 2015 until the end of 2015 (for the 2015 tax year).

    This is the correct form for you — if you were filing a 1040 / 1040NR, you would be filing for the year 2014, the year in which you expatriated.

    Was yours a renunciation or your claim to a relinquishment (say by becoming a Canadian citizen, etc.)? If it was a renunciation and in the limited time you have (be sure to have receipts for actual date sending!!!), I would send that even though you don’t have your CLN (and you will then hopefully be able to fix anything that needs to be fixed after the date which you must not go over (or will be deemed a ‘covered expatriate’ no matter your level of wealth). The subject commenter says RECEIVED BY June 15, but *I think* it should be SENT BY June 15.

    See also: http://hodgen.com/chapter-4-are-you-a-covered-expatriate/ and the IRS page: http://www.irs.gov/Individuals/International-Taxpayers/U.S.-Citizens-and-Resident-Aliens-Abroad—Where-and-When-to-File-and-Pay.

11. Testing. You stated that you never had enough income to have to file tax returns. ‘utterly indigent’ was the term used. Why oh why are you bothering to worry about any of this? Covered expatriate? Big deal. So what?

    As ‘M’ posted 3 years ago If you live abroad and the IRS has no information about you, nor do you have assets in the US, you have zero exposure, therefore nothing to fear. and if Canada has said that it will not cooperate with the IRS on such matters, you have double protection: zero exposure, and protection from the Canadian govt. , and I think most of you overestimate what the IRS is and what it can do,

12. U.S tax questions: I’ve completed my U.S. tax return but may not be required to file after all. I’m inclined to just hang onto it.
    Is there any advantage to filing my U.S. tax return if my gross income is below the cut off for my status as “single over age 65”?
    Does anyone know if gross income for purposes of the cut off includes the non-taxable portion of pension payments? (If it does, I have to file.)

    I renounced in March, 2015. If I don’t have to file this year, I shouldn’t have to file anything but the 8854 next year as my monthly income did not increase for those first three months of 2015.

13. RLee,

    As usual, hard to comprehend in IRS instructions.

    In a comment at Sebrinski: http://forums.serbinski.com/viewtopic.php?p=38423&sid=c6779a77498b4c006d238ee937be7993

    It appears that there are multiple different approaches toward achieving the same end, when it comes to excluding CPP and OAS on the US tax returns of US Citizens residing in Canada.

    I had not seen the following one mentioned anywhere else before, but this is what the IRS Email Tax Law Assistance responded to me just recently – for what it’s worth – right or wrong – and I mention it for possible interest to add to the discussion above.

    Enter the full amount of CPP/OAS on Line 20a.
    Use the Social Security Worksheet in the Form 1040 Instructions (page 29 for 2014) or, if required (e.g. when using Form 2555/2555-EZ, etc.) use Worksheet 1 in Publication 915, to calculate the taxable amount (e.g. 85%).
    Enter the calculated taxable amount on Line 20b.
    Exclude the taxable amount on Line 21 with an appropriate note on the dotted line.

    No need to file Form 8833, apparently, with this method. Here is what the IRS ETLA wrote:

    QUOTE

    According to Article 18, Paragraph 5, Social Security Benefits are taxable in the country of your residence (Canada). However, as a US Citizen, you are required to report your worldwide income. Therefore, you should enter on Line 20a of Form 1040, your total Social Security Benefits (including any Canadian CPP or OAS benefits). On Line 20b of Form 1040, you should enter the taxable amount from the 18-line Social Security Benefits Worksheet found in the Form 1040 Instructions. Note: if Line 9 of the Social Security Benefits Worksheet advises you to stop, none of your Social Security Benefits or Canadian Social Security Benefits will be taxable. If this is the case, you should enter a zero (0) on Line 20b of Form 1040, and you will not have to disclose the treaty-based position mentioned next.

    If Line 20b is positive, you should invoke the treaty-based position on Line 21 (Other Income). On the dotted lines you should write “US/Canada income tax treaty position Article 18, Paragraph 5, Social Security Benefits excluded”. In the column for the dollar amounts, you should enter the taxable amount of Social Security Benefits from Line 20b and place parenthesis around this amount to indicate that the amount is a negative. This will effectively exclude (zero out) the Social Security Benefits from your return.

    You do not have to attach the Form 8833 (Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b)) to your Form 1040.

    END OF QUOTE

    Anyway, that’s just another interesting way to do this, and it too would work to achieve the purpose, as do the various other methods already employed. It’s kind of hard to write all of that long explanation on the dotted line next to Line 21 if you already have anything else to write there too for a Line 21 item or items, so then you would have to enclose a separate sheet of paper showing the sum of the Line 21 calculations and explanations.

    There is some controversy on the subject there.

    This is another opinion: http://gedeonlawcpa.com/do-i-pay-us-tax-on-my-cppoas-income/

    …If, on the other hand, you are a US citizen or green card holder who is a resident of Canada, then your benefits are taxable only in Canada. Nevertheless, you still need to report these benefits on your US return. In addition, it’s recommended that you file a Form 8833 treaty exemption with your US return to exempt the income from US taxation.

14. @calgary411 I report my CPP and OAS on line 20a with a taxable amount of zero on 20b and include the treaty exemption form. As my “social security” is clearly exempt from taxation in the U.S., I am not including it in gross income for the purpose of determining whether I have to file. (I was responsible for filing my mother’s tax returns for several years before her death and continued the arrangement she had with a U.S. accountant for her U.S. return and a Canadian accountant for her Canadian return. She was living in Canada and received both Social Security and CPP so I was familiar with the tax treaty situation before it was my turn).

    I am also drawing income from RIFs that originated as an RRSP and defined contribution pension funds. I report these on line l6a (full amount) and 16b (taxable amount). IF the amount that is not taxable is technically considered “exempt” then I don’t have to file. If it is not, then I do. I hate sending them anything I don’t have to.

15. It’s much easier not to report them at all. For Canadian residents CPP and OAS are only taxable in Canada. Leave it at that. The end result is the same so there will be no come back.

16. One thing that I haven’t seen mentioned is that because under the Canada/US tax treaty all government pensions (i.e. SS, CPP, OAS) are taxable ONLY in the country of actual residence they should not be included in gross income when determining whether or not a person meets the threshold for filing a US return.

    The IRS defines gross income as: “all income you receive in the form of money, goods, property, and services that is not exempt from tax”. For Canadian residents government pensions are exempt from US tax and are therefore must not be included in the calculation.

    Because of this the practical effect is that for a retiree living in Canada whose income is largely government pensions, they may well have NO US filing obligation whatsoever. Even for someone whose filing status is married filing separately they can currently receive up to $3950 over and above their government pensions and still have no filing obligation. The allowable amount is even greater for other filing statuses.

    Its my belief that because all government pensions are exempt from US taxation for Canadian residents they need not be mentioned even if you do have to file a US return. They are not taxable income in the eyes of the IRS. (Of course, one could go through all the rigamarole of declaring and then explaining and exempting them, but why bother?) The result is exactly the same. Not even the IRS cares about this crap.

17. LOL, what the Duke said!

18. My original question was about pension income not Social Security/Canada Pension Plan/Old Age Security. There is a worksheet for calculating an amount of pension income (including Canadian Registered Income Funds) that is not taxable. I’m trying to figure out if I may exclude the non-taxable portion when figuring gross income for the purpose of determining whether I have to file or not.

19. Over to someone else, RLee.

20. I could imagine even those who have very little would like to have some form of closure. So they file the papers. So its over. Then at least they dont have to fear crossing the boarder. I think that might be the motivation- even for those with very little. Closure.

21. The instructions for the pension and annuity income worksheet are only 41 pages of gobbledegook. The instructions for 1040 are 104 pages. The instructions for the simplified pension worksheet are impossible to understand ( you are supposed to be able to figure out your cost of each plan). Is it any wonder that ex-pats cannot file their tax returns without making an error?
    Here is a explanation from ‘About Money’

    Gather all your 1099-R statements from each bank, mutual fund, or retirement plan for the year. Form 1099-R statements report distributions from various retirement plans.
    Separate 1099-R statements into two piles: those received from your IRA, and those received from your pension or annuity plans.
    Report your IRA distributions on line 15. Report your pension and annuity distributions on line 16″
    If you contributed after–tax dollars to your pension or annuity, your pension payments are partially taxable. You will not pay tax on the part of the payment that represents a return of the after–tax amount you paid. This amount is your cost in the plan or investment, and includes the amounts your employer contributed that were taxable to you when contributed. Partly taxable pensions are taxed under either the General Rule or the Simplified Method.” (from IRS Tax Topic 410)

    Unless you can afford thousands for professional help and since a Canadian won’t receive any 1099-R statements and the IRS won’t receive any T slips, you can pretty much do whatever you want.

22. An very important note about the 8854 – regarding where/how to send it if one is OUTSIDE the US (probably most people filing!) and thus do NOT have the option of sending it via US domestic mail !!!

    Ludicrously and illogically (as is usual practice for all things the IRS/US does regarding those ‘abroad’), the 8854 mailing address appears to not have an equivalent for those outside the US using couriers or other private carriers (several other US filing forms do). As a person residing OUTSIDE the US, you will not have access to US mail (duh!) and being OUTSIDE the US, might want to expidite it in order to meet the filing deadline or to establish a firm date and signature of receipt when you are sending it from OUTSIDE the US – as an expat ‘abroad’ who is renouncing/relinquishing (which process must be done from OUTSIDE the US) would be doing.

    Because the IRS and US Treasury has NO interest whatsoever in assisting those outside the US, especially those relinquishing/renouncing, here is what Phil Hodgen answered to a question on the issue of using private commercial delivery to get the 8854 to the IRS. Carefully read the whole explanation:

    http://hodgen.com/you-cant-file-form-8854-via-fedex-or-ups/
    “….This Week’s Expatriation Question
    This week’s question is postal. It came in a comment to a blog post on the site.

    Hi, does anyone know the STREET address to file form 8854? The instructions only listed a generic US mail address. I need a street address for FEDEX to deliver it. Please advise.

    Quick Answer
    I do not know of any street address where the IRS has authorized you to deliver Form 8854 by FedEx (or other private courier service).

    You will have to mail in your Form 8854. Sorry……”………

    Read the whole explanation at the link.
    AND;
    Read also Phil Hodgen’s addendum (including an anecdotal story from someone who successfully got the Philadelphia copy delivered – with proof ) and his advice.

    He says:

    “…Action Plan

    Recommended (by me) action plan for people who need to file Form 8854 and want to be really sure that it arrives on time:

    File for an extension of time for your expatriation year returns. Don’t run up against the June 15 deadline. This is optional and unnecessary stress.
    If you have plenty of time, mail Form 8854 to Philadelphia from your home country, with whatever you possibly can buy to prove that it was mailed. Note that the IRS sometimes likes to say that the moment of importance is when your envelope is received by the U.S. Postal Service, not when it is received by your country’s postal service. Leave a buffer of weeks and weeks for things to arrive in Philadelphia. Note: this makes me nervous.
    If you can, FedEx (or DHL or whatever) your Form 8854 to some friendly person in the USA who can then mail it, certified mail, return receipt requested, etc. etc. to the IRS. This is the approved, official method for filing Form 8854.
    If you are in dire straits, do what my correspondent did, and risk the headbanging with the IRS later. Odds are there will be no head banging (the anecdote above is probably typical), and if there is head banging I would be pretty comfortable expecting the result to come out in your favor (after some time in which you marinate in stress).”
    From:
    http://hodgen.com/filing-form-8854-by-fedex-a-success-story/

    That info re using the US postal service only for the copy of the 8854 to the Philadelphia service center was something I didn’t have at the time I was exiting, and I sent my 8854 (both the copy with the return, and the other one) via FedEx because I did not trust that sending it via my home country mail corporation’s courier service (to be flung in amidst the general US mail at the US postal service’s end once it crossed into the US) would reliably get there on time or get me the proof of delivery I needed. Maybe I was just lucky, but I sent my 8854 with my final return by FedEx, and also the second copy that was to go to Philadelphia. I have heard nothing since. For my part, if they want to consider me a ‘covered expatriate’ solely because the second copy of the 8854 wasn’t delivered via the domestic US postal service, well, at this point, and with all the money and time and wellbeing and LCUs (Just Me’s “Life Credit Units”) I’ve wasted on the US, too damn bad.

    The IRS/US Treasury obviously does NOT want to make ‘compliance’ from people OUTSIDE THE US achievable – since they continue to throw up and maintain layer upon layer of ludicrous barriers to ‘compliance’ – even down to the last detail like how and where to send the 8854 from OUTSIDE the US.

    I feel so much happier and freer now that I no longer have the FBAR and CBT threat hanging above me. Poe may as well have been speaking of my experience of UStaxablecitizenshipservitude since my OMG moment in 2011;
    “……I could no longer doubt the doom prepared for me by monkish ingenuity in torture. My cognizance of the pit had become known to the inquisitorial agents — the pit whose horrors had been destined for so bold a recusant as myself — the pit, typical of hell, and regarded by rumor as the Ultima Thule of all their punishments. The plunge into this pit I had avoided by the merest of accidents, I knew that surprise, or entrapment into torment, formed an important portion of all the grotesquerie of these dungeon deaths. Having failed to fall, it was no part of the demon plan to hurl me into the abyss; and thus (there being no alternative) a different and a milder destruction awaited me. Milder! I half smiled in my agony as I thought of such application of such a term.

    What boots it to tell of the long, long hours of horror more than mortal, during which I counted the rushing vibrations of the steel! Inch by inch — line by line — with a descent only appreciable at intervals that seemed ages — down and still down it came! Days passed — it might have been that many days passed — ere it swept so closely over me as to fan me with its acrid breath…. “…
    http://poestories.com/read/pit

    May this info from Phil Hodgen and IBS save you too from the Pit of US extraterritorial taxablecitizenshippersonhood and the FBAR ‘n FATCA fundraiser.

23. My husband sent his 8854 and 8854 copy using Canada Xpresspost. He took a digital photo of the dated Xpresspost receipts and stored the jpegs in the computer. The packages were tracked and then he took screenshots of when the tracker said the packages were delivered and signed for and stored those in the computer too. Hardcopies of all are stored in our tax form box. As far as he’s concerned they are gone, they got them and he did his best to retain proof.

24. For anyone receiving U.S. Social Security residing in Canada or other countries with which the U.S. has a reciprocal agreement on social security: My mother was a dual citizen residing in Canada. Most of her income was from U.S. sources including U.S. Social Security. For a number of years after her U.S. accountant learned the rules (that the U.S. Social Security was only taxable in Canada) she did not report it on my mother’s 1040 but she did include a footnote page (not form 8833) explaining why it was not reported. One year as her power of attorney, I received a letter from the IRS noting they had an information slip that showed income that had not been reported and assessing tax plus interest and a penalty. The accountant straightened things out with a letter of explanation but if you don’t want to find yourself in that situation, I suggest reporting the Social Security on line 16a but not 16b and attaching form 8833.

25. Hi all you wonderful people!
    I am a total newbie to the subject of relinquishment of US citizenship and taxation, but find this blog the most informative that I have found so far. However, I’m totally overwhelmed by the amount of information and that it mostly concerns Canadians. Is there a good place to begin to find out if I’m going to end up in jail or impoverished due to my personal conditions?:
    US born.
    Moved to and remained in Germany as a child.
    Have always been employed in Germany.
    Have no Social Security number.
    Have never filed any tax returns or any other US forms.
    Was naturalized in Germany in the spring 2015.
    Am about to submit DS-4079 to determine loss of US Citizenship and DS-4081 Statement of Understanding (required by the consulate) through which I found out that I should have filed tax returns.
    The DS-4081 and so many of the posts you all have written have me scared even though I don’t understand most of what I’ve read.
    How would I systematically begin to understand what all I have to do to avoid getting stomped on, especially since I don’t have the resources for expensive lawyers? Can someone please point me in the right direction?

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