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
I don’t know of any risk of ending up in jail unless you’ve committed massive tax fraud or counselled others to do so. I also doubt you will need a lawyer based on what you’ve provided above. There have been a couple of newly minted Germans on here recently so you may be able to connect and share information.
You will need to file 5 years of tax returns and a form just for us renunciants called an 8854 by this time next year (an extension until October 15 is possible if you run into problems pulling it all together by then). It is possible to do it yourself at least I suffered through doing all my own forms as have my partner and daughters. It’s not fun but it can be done and many of us are far from convinced that a so-called expert would do any better for us. If you have investments it’s trickier than if you do not but not impossible though not everyone has the patience for it.
For the 8854 you need to do an estimate of your net worth the day before you committed your relinquishing act (taking German citizenship with the intention of relinquishing your U.S. citizenship). You’ll probably want to start pulling that information together now while it is still fresh. I started a file with things like a print out from my online banking accounts on the day before I renounced, a copy of the most recent assessment for tax purposes on our home etc. so I would have that information on hand when I need it next year. There are additional considerations of your net worth was over $2 million in U.S. dollar value on the day before you relinquished. I’m guessing yours was not given what you’ve said above.
@Nevada – I just realized I made an assumption that your gross income for each of past 5 years that would not have been not exempt from taxation by the U.S. was above the magic number that means you are required to file a tax form for that year. I just did my forms for my last full year having renounced in March, 2015 and then realized my income for 2014 was under the cut off. (I am retired and a substantial portion of my income is exempt from taxation in the U.S. by treaty).
@Nevada You may get some very different opinions about how to proceed from this group. It will help us help you if we know a few more details about your situation. I learned after quite a few months of anxiety and grief that some of the scariest advice offered about our situation elsewhere on the Internet only really applied to people who were much wealthier than I am. And in other situations some of the worst outcomes resulted from paying for expert advice and assistance.
My own experience is that I used the 2012 Streamlined procedure to bring my filings up to date and (so far) I’m glad I did. At that time I did not plan to renounce. If I were in your situation I would consider following the Streamlined Procedure but submitting 5 years instead of 3. Or adapting it to the circumstance of having all ready relinquished. Anyway as food for thought here is a link to information about the Streamlined Procedure. http://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures
Here is a link to the thresholds for being required to file for 2014 tax year. You would need to look up the average US/German exchange rate for 2014 and convert your income.
Nevada. Don’t rush into anything and don’t assume anything.
You are no longer a U.S. citizen because you naturalized in Germany with the intent to lose your US citizenship.
When you go to the consulate and fill out forms, make your intent clear. That way you are entitled to a CLN at no cost. After that you decide whether or not to file any tax returns. There is a large body of opinion here and elsewhere that there is no need. You are not on their radar and if you ever are in the future you will be a tiny tiny blip in a great big universe.
@ RLee Thank you so much for your splendid information which will take me some time to digest 🙂 and I’m feeling somewhat relieved that it’s manageable. I will download the form 8854 and see if I understand it. Is the “cut off” amount of my net worth the amount above which I would have to pay US taxes even though I pay German taxes? Is that the 2 million you mentioned? If so, I’m well under that.
Also, I understand that there’s a difference between “relinquishing” and “renouncing” and I gather that if the consulate/State Dept. doesn’t let me relinquish then I would have to renounce. That would make the tax returns more difficult – am I correct?
I would like to enter into discussions with other newly minted Germans, especially from Berlin, about their experiences – can I find them in this thread? I will go through it and see if I can find them.
@ Duke of Devon Thank you also for your cautioning and supportive comments. So I will first apply for the CLN and then wait to see if I am contacted by the IRS. Since I have to answer the question on the DS-4079 whether I’ve filed tax returns with “no” and my paperwork will be submitted to the IRS, among others, surely they will. In the meantime I’ll start gathering the financial information necessary for the tax form, just in case.
@ Nevada,
Re: Also, I understand that there’s a difference between “relinquishing” and “renouncing” …
There are some differences, although renouncing is actually a relinquishing act. Section 349(a) of the Immigration and Nationality Act provides 7 ways in which a person can relinquish their US citizenship.
Renunciation (349(a)(5)) is the only method which takes place at a US embassy/consulate. The act itself (renunciation oath) and notification of the act occur simultaneously. With the other six method of relinquishment, the person performs the act, and then notifies an embassy/consulate of having done so. (Relinquishing by naturalisation is s. 349(a)(1)).
Renunciation has a fee of $2350. There is no fee for relinquishing by the other six methods.
Re: … and I gather that if the consulate/State Dept. doesn’t let me relinquish then I would have to renounce. That would make the tax returns more difficult – am I correct?
The tax procedure is the same whether you renounce or relinquish.
Re: Since I have to answer the question on the DS-4079 whether I’ve filed tax returns with “no” and my paperwork will be submitted to the IRS, among others, surely they will.
No. Your paperwork will not be forwarded on to IRS. IRS plays no role in the issuance of CLNs. However, DoS forwards a copy of each CLN issued to the IRS. (7 FAM 1243(a)). DoS does not look at the person’s tax records, as a person’s tax status (compliant or not) has no bearing on the person’s loss of citizenship.
The person has to be tax compliant and file form 8854 with IRS by June 15th of the year following their expatriation to “log out” of IRS and avoid covered expatriate status with IRS. Whether they do this or not, the citizenship remains terminated and the CLN remains valid.
Nevada. I really really like your plan. 1). Get your CLN. They have no right to refuse you and no right to charge you. If you check the links at the top right under important info. how to renounce and also State Dep’t manuals, you will find that obtaining citizenship of another country with intent to lose US citizenship is a relinquishing act. You have already relinquished. The CLN merely confirms that fact.
2) ‘Wait and see if I am contacted by the IRS’
Brilliant way to go about it. My prediction- you won’t ever hear from them. If I’m wrong, it will be a form letter which by then you could ignore.
@Nevada
The IRS doesn’t care whether you pay taxes anywhere outside the USA. They see everything from inside the american bubble where only US rules count.
I’d also say definitely go for relinquishment. You naturalised in Germany with the explicit intention of relinquishing US citizenship. By the way, I’m somewhat surprised you were able to naturalise without renouncing/relinquishing US citizenship first, although I’ve heard that that may now be possible due to the exhorbitant US renunciation fee ($2350).
@ pacifica777
Renunciation (349(a)(5)) is the only method which takes place at a US embassy/consulate. The act itself (renunciation oath) and notification of the act occur simultaneously. With the other six method of relinquishment, the person performs the act, and then notifies an embassy/consulate of having done so. (Relinquishing by naturalisation is s. 349(a)(1)).
I have filled out the forms 4079 Part I and Part II and 4081 and have been asked by the consulate to send them signed as scans. Point 21 of the 4079 form states “…If you voluntarily performed an act stated above with the intent to relinquish United States citizenship, you may sign Part II of this statement before a Consular Officer at a U.S. Embassy or Consulate. The U.S. Consulate or Embassy will prepare the forms necessary to document your loss of U.S. Citizenship.”
Since I am sending scans, will I later be required to swear this Part II in person at the consulate when I hand in my passport and would this constitute a renunciation and result in having to pay $ 2350 after all?
@notamused
… I’m somewhat surprised you were able to naturalise without renouncing/relinquishing US citizenship first, although I’ve heard that that may now be possible due to the exhorbitant US renunciation fee ($2350).
Fortunately, I was made aware during the application process that I could receive German citizenship before relinquishing my US passport/citizenship because the German government considers the fee exorbitant. A few days ago I found a comment by Petros from March 4, 2015 in the thread Issues regarding US persons abroad explaining this fact.
@ Nevada,
Yes, they like to have the forms sent in in advance so the consul (or vice consul) can read them over before meeting with you. That way, if something is missing or they have any questions, they’ll let you know, either before your meeting date or at your meeting.
BTW, they rarely do have any questions – the forms pretty much speak for themselves – and though you might be a while in the waiting area, face time is usually about 10 minutes or so, mostly signing and pushing papers back and forth across the counter.
BTW, don’t know if you’ve looked at the Consulate Report Directory, people’s reports of their consulate meetings. That can give you a bit of a head’s up on what goes on at expatriation meetings – it varies a bit from place to place, but most of it is pretty similar everywhere.
Yes, you have to sign and swear or affirm your 4079 and 4081 in the presence of a consulate officer. But unless it’s a renunciation, there is no charge.
Yours is not a renunciation. That relinquishing act occurs when someone swears/affirms the oath of renunciation (4080) at the consulate, which you won’t be doing. Your relinquishment already occurred at the time you naturalised as a German citizen, voluntarily and with the intent to relinquish your US citizenship by so doing. Now, basically you’re notifying the US government of it and having it documented.
@Nevada:
An expat forum in Germany has discussed the high US cost of renunciation vis-a-vis German naturalization law at this link. Possibly of use to you:
http://www.toytowngermany.com/forum/topic/331751-renouncing-us-citizenship/?page=4
@Nevada
This is my post on the subject that others have seen on several occasions; it is geared to Canadians, but at least some of it should be applicable to your situation. I tend to lean to a more conservative, risk averse approach on these things (dot i’s and cross t’s), so it will differ from some of the other advice you are getting. Only you can decide what you’re comfortable with.
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If you are thinking of renouncing without filing:
There is no statute of limitations on those unfiled returns, because they’re unfiled. So that will hang over your head for the rest of your life.
By not filing returns, you have probably moved into the wilfully non-compliant category. I don’t know what the ramifications of that are, but I don’t see how it could be a good thing. FWIW, if you don’t file 8854, then you’re subject to a $10K penalty, and 8854 specifically asks about those 5 years of returns.
By not filing returns (or not submitting 8854), you have definitely become a covered expat. That means, among other things, that you are subject to the exit tax. You will be taxed on mark to market capital gains subject to a $663K (2013) exclusion. As well, you will be taxed on the total (not gain, total) amounts in any RRSPs and, I believe, pensions that you may have, and there is no exclusion. RRSPs/pensions are, I believe, taxed at the highest marginal rate. The RRSP/pension tax is a major issue for covered expats IMO.
There have been no known reports of people who have renounced without filing being hassled about their non-compliance when attempting to enter the US. However, given increasing inter-agency and inter-country data sharing, it does seem possible that at some point in the future US border people will be aware of all former USC’s tax status. Should that come to pass, unless you like to live dangerously, travel to the US is out – that would include plane connections though any of the major hubs. For some people, not a big deal; for others, a very big deal. And, you’d always be concerned when flying over the US to, say, Mexico if you’re a risk averse type of person, due to the (admittedly unlikely) possibility of the plane making an unscheduled landing in the US.
The US-Canada tax treaty will protect you (at least in Canada) from the IRS if you were Canadian at the time the liabilities were incurred. I don’t see how there is any guarantee that the treaty could not be changed for the worse in the future. And although it would clearly be unfair if the changes were retroactive, nobody has ever accused the IRS of being overly fair (and the FATCA fiasco has indicated how much we can expect the Canadian government to stand up for fairness).
So, IMO, you would have to have a really, really good reason to not file those returns and 8854. One concern people often have about filing those returns is the cost of getting someone to do it for them. A possible route is to DIY and just do the best you can. I’ll leave it to you to determine what “best you can” involves given that you’re almost certainly not a cross-border tax professional. At any rate, at worst you could be audited later and assessed some $$. If it’s a large amount of $$ that you are unable or unwilling to pay, you could then invoke your treaty right and not pay up; leaving you in more or less the same situation as having not filed. OTOH, at best you did a bang-up job on the returns that can withstand any amount of scrutiny, or, more likely, you can expect the IRS to not have the resources or inclination to worry about your piddly returns, leaving you home free (at least after the SOL runs out).
@Nevada
1) It doesn’t matter if your relinquishment is due to renunciation or naturalization as a German, the tax consequences are the same for you.
2) Due to #1, my blurb above that repeatedly talks about renouncing is applicable regardless of how the relinquishment came about.
You have a lot to digest. I found it initially overwhelming and took a while to process it. My advice is to do nothing until you thoroughly understand all of the ramifications of your various options (I think others have said this, but it can’t be said too many times IMO).
@Nevada – You asked a follow up question about thresholds. There are two different ones that I referenced. One is the gross income threshold for having to file a return in any given year. It’s in the range of $3000 – $12000 USD depending on your circumstances. You do not have to include any income that is exempt from U.S. tax for example by a treaty with your country of residence. You’ll see the details on how that applies to U.S. persons abroad in the info specifically for us. I think I sent you that link.
The other threshold (2 million USD net worth) is for the expatriate tax. This is somewhere you REALLY don’t want to end up if you can avoid it. There are a number of different ways you might end up subject to the expatriate tax. One is to have a a net worth that is over the threshold on the day before your relinquishing act. Another is coming to their attention as someone who has relinquished but not filed form 8854 WITHIN THE SPECIFIED TIME PERIOD which seems to be generally interpreted as by the date your tax form would be due (with any extensions) for the year in which you relinquished (so June 15, 2016 for you or October 15 if you apply for an extension on the proper form before June 15.)
In my humble opinion, there is no reason to assume that the first communication you would receive from the IRS would be a benign form letter requesting you file your back returns and pay any taxes due. Even if it were, you would automatically become subject to the expatriate tax and no longer be eligible for the Streamlined Procedure. What you would be risking is being treated like an intentional tax evader rather than a person who simply didn’t know of his obligation to a county he left as a child and whose citizenship rights he has never exercised.
How probable that risk would be realized is anybody’s guess. Not enough time has passed to base much on us not being aware of anyone in similar circumstances getting in trouble again IMHO. There is no doubt that right now the IRS is under funded and unable to even maintain fundamental services to resident taxpayers.
As part of your decision making process you might want to estimate how much if any tax you would owe to the U.S. after excluding* the first 99,200 USD of earned (wages, tips, commissions etc but not interest, capital gains, or dividends) income (figure is for 2014). And how difficult it would be for you to do your own tax forms. I am not an expert but if you would like to correspond with me directly, I give permission to the Admins to give you my email address.
First of all s. 349(a)(4) employment in a foreign state or political subdivision
I work for a First Nations-Indian government. We are federally regulated and dispense federal funds on federal government programs. I am also required to attend all governing council meetings for advising and providing information, though not a voting member. FBAR did already tell me the accounts qualify as government accounts ( though really not an issue for me as only council can have signing authority per band law) In addition, at least part of my salary is directly funded to the band by the Feds.
I think I see a relinquishment case as this is a “political subdivision” at least as I would see it.
Any thoughts on whether this should work for relinquishment?
I knew my father had lost his US citizenship when I was young but not why. I just learned today that it was because he voted and ran for Mayor when I was just a toddler. When He tried to return to the states the revoked his citizenship on those grounds based on earlier acts. He is deceased now but my mother remembers him voting before I was born. Since he was declared to not be a citizen based on voting could I be declared to never have been a US citizen at all?? Also, how do I get his information from the US government to make my case?
@ BSanford
Welcome to Brock. It appears you were born in Canada but can you tell us if you ever made any traceable claim to US citizenship (e.g. registered at birth, applied for SS number, obtained a US passport, sent in any US tax forms, voted in a US election, etc.). It seems to me that with a “born in Canada” branding and no traceable US connection that you would be very difficult to track down by either the banks or the IRS. Is there a particular reason why you feel the need to seek a relinquishment?
Yes, My dad did register me. I think it was just before they took his away. He thought he was doing us a favor but that backfired big time. So I am on the radar but want off so I do not need to live in fear of all the potential penalties etc from FBAR & FATCA if a tiny mistake is made
@Nevada
Without having read all the posts- please know that if you live in Germany, Germany does work hand in hand with America. Germany will extradite and possibly collect for the Americans. We haven’t seen it happen yet- but tax evasion is a crime in Germany as well as in America.
Unlike in Canada, where people have some protections because the Canadian government has refused to collect or extradite Canadian citizens. So for those expats in Canada- the situation is different than for those expats-say – in England.
BSanford. Please do not rush into anything. You do not have to do anything and you will be fine. Don’t join the crowd who feels they have to DO SOMETHING, ANYTHING. You don’t. Think it through. You may be on the radar but you are indistinguishable from a grain of sand.
Looking for input/feedback regarding relinquishment. I was born in California to parents who had become naturalized American citizens from Canada. I moved with my mother to Canada in 1967 as landed immigrants. I had never worked in the US, never had a SSN, never carried an American passport. In 1974, at the age of 18, I was adamant that I wanted to become Canadian and give up my American citizenship. So mother and I both became Canadian citizens, and were advised at that time that we would not longer be American citizens. I do remember swearing an oath of allegiance/loyalty to the crown, Queen and country of Canada at the time. I do remember being told several times, by both Canadian authorities and American authorities, that I would not have dual citizenship. Now I’m hearing horror stories of people who went through the same thing are being told that they are, in fact, dual citizens and are subject to the FATCA crap. If I can get verification from the Canadian gov’t that I took the oath of citizenship in 1974, what are my chances of being able to relinquish? Also, I worked for the Provincial government of Alberta from 1988 to 2011. Does that have an impact?? Obviously I’m hesitant to contact anyone in authority to ask these questions….feeling a bit paranoid!
SEE, See reply on the other thread. You can ask admin to remove your name.
BSanford, just because your father registered your birth abroad it doesn’t put you on the radar. You have a Canadian birthplace and a Canadian passport. The Americans have no way of matching those to any birth registration on file, even if they wanted to go to the effort of trying to do so. If you have no Social Security number (SSN), have never held a US passport, voted in an US election, etc, then as far as the US is concerned you don’t exist. Forget the whole American connection and get on with your Canadian life. Don’t worry about it because there’s nothing that ties you to the States except for a piece of paper buried in a file somewhere.
@ BSanford
Many here are hoping to slip through the cracks. You are fortunate that your crack is very wide. I think Duke of Devon and Medea Fleecestealer have given you good advice. (Always with the disclaimer that none of us are experts but even the experts lack the expertise to deal with US complexities re: taxation and citizenship.) Good luck with whatever decision you come to.
BSanford In answer to your question about your status — if your father was a U.S. citizen when you were born then they would consider you a U.S. citizen regardless of anything he did after that. Further there was a U.S.Supreme Court decision (in the late 1980s I believe) that changed the rules about dual citizenship retroactively so while running for office in Canada might still be considered to have caused your father to lose his citizenship, I don’t think merely voting in an election would.
I know less about being able to relinquish based on government employment. It may that if you were born as a dual citizen (under current interpretation retroactively applied to your situation) that it technically would not fit the requirements. Maybe someone else more familiar with the rules can jump in with an explanation or reference. There are many anecdotal reports on Brock about people requesting to relinquish based on government employment. You may want to read several of these first hand reports.
I fully understand the feeling of wanting some closure on the whole thing. What the process and final cost would be if you decide to go that route would depend very much on whether you have a case for relinquishment and if not whether you would have owed the U.S. any taxes and had you been filing timely forms and how complicated your tax reporting situation would be.
Again, depending on whether you would owe any taxes and how complicated your returns would be, there is also the option of coming into compliance through the Streamlined Procedure and then filing every year. My caveat there is that becomes more complex and more likely to attract double taxation when you retire.