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. @medea
   I agree with your sentiments but I don’t trust the banks. They are a law unto themselves and will do whatever they need to protect their business.

2. @heidi I agree, but remember the Swiss banks were being hammered in the US courts even before FATCA took hold so their reactions is more knee-jerk. The UK banks are unlikely to react in the same way.

3. Chris, If you are still with us; ( and others in a similar position).

   In Great Britain, tax evasion is a felony and Great Britain will extradite.

   Tax evasion may be a felony in Britain ( no surprise) Not filing a 8854 for a foreign country of which you are no longer a citizen isn’t. Britain won’t extradite for a phony $10,000 fine.

   Polly , Heidi and others have an exaggerated, fearful sense of what the IRS can do. They haven’t enough money or staff. They have outdated computers and they are overworked.
   We’re not talking Eduardo Saverin or Marc Rich or even Boris Johnson here.
   They computer match files by social security numbers. Otherwise they are stuck except in unusual circumstances where a lot of money is at stake.
   Medea and George are right. Read their letters again.
   Chris and others like him can rest easy.

4. If you read what I said, I am not saying that the IRS can/ will follow up on minnows. I am saying the banks if forced to take us persons who are resident in the UK (as they will be required to by law in 2016 ,) will ask for proof of compliance or could have a 30% withold.
   Chris has renounced and will have a cln so has the choice of doing nothing more. Others are not in such a good position

5. As of July 2014, Canada and the US share border crossing events for both citizens in both directions. Canada uses this to determine if a Canadian has been out of the country long enough to lose provincial health care coverage. The US uses this to see if Canadians are present in the US for longer than the max allowed and therefore required to file US taxes on world-wide income. So, with nothing more than a scan of your Canadian passport, the IRS knows who you are even if you’ve never been a US citizen or were not born in the USA. If your passport shows a US birthplace, now the IRS knows who you are. When you renew passports, you get a new passport number. Presumably there is continuity for an individual even across passport renewals.

   I imagine the same cooperation exists or will exist for other countries besides Canada.

   IMHO it’s not far-fetched for the IRS to know you and find you given that the DoS has sent them your CLN and who-knows what other information from your file.

   It both cases, it’s not difficult for the IRS to determine that you do not have a SS or ITIN number, and therefore deserve their attention. Much of this can be computer automated by a single programmer. It doesn’t take a lot of resources.

   Why set up all these systems of information sharing if they don’t intend to use the information to generation tax and penalty revenue? The information-sharing systems took a lot more resources to set up than the effort to process and act on the results (even if only to send auotmated letters).

   It’s not paranoia if they really are out to get you.

6. FBARs were the law for, what, 40 years before they started being enforced, and enforced with a vengeance. CBT was also the law for decades and, for all practical purposes, unenforced up until just a few years ago. Just because the IRS is currently in a weakened, overworked state now does not mean it will be like that in 10 years. And it does not mean that a renewed, reinvigorated IRS would have better things to do than go after renunciants, especially if a future idiotfest in Congress results in a overwhelming desire to go after “traitors” (who, of course, are all sipping mai tais on exotic beaches as we speak).

   Nobody can guarantee that the present situation with respect to enforcement will continue on unchanged into the foreseeable future.

7. Nobody can guarantee that the present situation with respect to enforcement will continue on unchanged into the foreseeable future

   given the fact that there MAY? be further enforcement in the future…..if we are not at the amerikan border or on amerikan soil what really is going to be done?

   besides sending a letter and requesting we fess up and then sending another letter and asking us to fess up and then sending yet another letter asking us to fess up what really can they do?

   I would like to believe that we are protected by “we will not collect against a Canadian citizen as long as said citizen was resident in Canada when such offence occurred….” or whatever the exact wording is.

   I have no intent to ever have need to be in such a situation where by I am either at the border or in the amerikan home land so I am not worried by such a letter appearing cause were one to appear it would end up at the bottom of the bird cage collecting exactly what it is……

   I am a Canadian citizen and expect to be protected by my government!!!!!

   if and when the day comes that the americkan brown shirted IRS thugs show up at my door and drag me south the would will then have certainly become a weird and dangerous place

8. Well, there is a lot of opposing information here. Personally, I don’t think a CLN will save people from debt to the IRS. If America can say the french bank BNP owes them billions for using the dollar to make business with Iran and Cuba – who is to say they cannot say Mr XYZ, a former US citizen, owes us money from 2006-2011? But who knows? Maybe I am wrong. It is all in an unseeable future landscape. If Bopp wins his case, there would be an injunction and FATCA would come to a full stop. But that hasn’t happened yet and it isn’t sure it will, although we are all hoping. And on the other hand we have America which threatens with brute force to get its goals met. I think they still have such clout ( and might keep it for the next 30 years) to enforce more if they chose to. Who says another country wont fold as they all have before? So it is living on shaky ground if things remain as they are as well. All America has to do is cry “Sanctions!” and countries comply. I too am wondering when they will say “Enough!” because their own treasuries are being robbed by all the money being sent to America.

9. @Mettleman
   Yes- alone due to the fact that there are over a million “US persons” in Canada- I agree that Canada wont allow it. I wonder that Canada can even afford it with only about 35 million population in all. One million people being taxed by America as we’ll will take a huge chunk of money out of the canadian treasury.
   But the person who asked here lives in England. And England is a big buddy of America and has far less US persons living there to protect.

10. @ Polly

    fair enough about the OP being from the UK…..I am just in a cranky mood today and should not be reading here cause it only gets my BP higher

    I try to do my best to ignore the bully to the south but sometimes I still feel the need to lash out and vent…..I certainly hope that the law suits bring some relief to all of us in this situation not of our doing………..

11. I am now second-guessing my previous comment (yesterday, http://isaacbrocksociety.ca/renunciation/comment-page-189/#comment-6297581) in reply to tdott.

    Note: this has nothing to do with anything anyone currently advises on doing nothing, which I agree is an absolutely OK decision — but not for all.

    I don’t want to add confusion (for any others here than I — and my comment is only for persons who have decided they want to do everything correctly in order to be able to sleep well for the remainder of their days) to the subject of SSN or ITIN requirement for filing back tax returns, but can someone with more understanding than me weigh in — especially on the IRS advice that Roy Berg cites below and thinks is incorrect:

     

    ITIN’s / SSN’s / IRS advice that Notice 2009-85 addresses who is a covered expat and indicates all three tests must be met at the time of expatriation.
    http://hodgen.com/the-time-gap-between-renunciation-and-cln/ says:

    IRS

    The final source of potential delay for you–if you’re waiting for a Certificate of Loss of Nationality–is the IRS. You’re a nonresident. You may need to take action on some tax matters.

    I don’t worry about this at all. We go ahead and file stuff with the IRS. If the Service wants proof of status (and they never do) by the time we get a letter the Certificate of Loss of Nationality will be in hand.

    The only potential hiccup here is applying for an ITIN. We have an increasing number of people expatriating who have never received a Social Security Number. This, of course, means that they have never filed a U.S. tax return. Renouncing citizenship for them means that they are covered expatriates. They fail the Certification Test. (See Form 8854, at the bottom of page 3–the last question at the bottom of the page).

    Despite this, they want to accelerate their renunciation. They are willing to tolerate covered expatriate status and deal with the implications, just to get out of the U.S. tax system.

    In order to prepare and file a final year income tax return and Form 8854, they need an identification number. They have renounced citizenship, so they are no longer eligible to get a Social Security Number. They must get an Individual Taxpayer Identification Number (ITIN). Form W-7 is used.

    The primary impediment to getting an ITIN issued is the fact that you need to either give your original passport to the IRS (heh! good luck!) or provide a certified copy along with your Form W-7.

    Getting a certified copy of your passport means going to a U.S. Embassy to get the proper rubber stamps and signatures on a piece of paper. If you go back to the same Embassy where you renounced, this should be easy enough. But if you go somewhere else, it may be difficult to get your foreign passport (with a U.S. birthplace) properly authenticated.

    Again, this is a more theoretical than actual problem. There is usually enough time for the Certificate of Loss of Nationality to arrive. In addition, the Embassies have tended to be helpful and cooperative in authenticating photocopies of passports.

    http://federaltaxcrimes.blogspot.ca/2014/08/tidbits-on-new-streamlined-procedures.html#comment-1551810048 says

    Jack,

    Re filing 5 years of returns under Streamlined to avoid covered expat status: the answer we received from a senior IRS official in LB&I is very different from the answer given above. According to this individual (email reproduced below) the 3 tests for covered expat status (net worth, tax liability, and compliance certification) must be met ON THE DATE OF EXPATRIATION.

    Therefore, filing 5 years of tax returns via Streamlined would not avoid covered expat status

    if the individual had renounced US citizenship.

    I think this position is incorrect,

    though there is a sentence in Notice 2009-85 that supports the IRS’s conclusion (though tenuously).

    The reason the position is incorrect is that the compliance certification test CANT be met on the date of expatriation… unless one were to sign the 8854 at the Consulate’s office concurrently with taking the oath of renunciation. Further, the 8854 is due on the due date (including extensions) of the 1040, which would be in the year following renunciation.

    Dangerous stuff here.

    The following is the email we received from IRS in this regard:

    Notice 2009-85 addresses who is a covered expat and it indicates all three
    tests must be met at the time of expatriation. Thus, taxpayers
    can come in to streamline to get matters resolved (we will accept the 5 years)
    but if they do it after they expatriate they will be a covered expat and should
    file the 8854 reflecting such. However, if they have not yet expatriated
    they can file 5 years under streamlined and then expatriate and be able to
    certify they are compliant so timing is an issue.

    The IRS FAQ’s say: http://www.irs.gov/Individuals/International-Taxpayers/Frequently-Asked-Questions-About-International-Individual-Tax-Matters

    Application for IRS Individual Tax Identification Number (ITIN) – Form W-7
    1. Who needs to apply for an Individual Taxpayer Identification Number (ITIN)?

    You need an ITIN if you are not eligible to get a social security number but must provide a taxpayer identification number on a U.S. tax return or information return. Examples include the following:

    A nonresident alien individual eligible to get the benefit of reduced withholding under an income tax treaty (see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities).
    A nonresident alien individual not eligible for an SSN who is required to file a U.S. tax return or who is filing a U.S. tax return only to claim a refund.
    A nonresident alien individual not eligible for an SSN who elects to file a joint U.S. tax return with a spouse who is a U.S. citizen or resident alien.
    A U.S. resident alien (based on the substantial presence test) who files a U.S. tax return but who is not eligible for an SSN. For information about the substantial presence test, see Publication 519, U.S. Tax Guide for Aliens.
    An alien spouse who is claimed as an exemption on a U.S. tax return but who is not eligible to get an SSN.
    An alien individual who is eligible to be claimed as a dependent on a U.S. tax return but who is not eligible to get an SSN. To determine if an alien individual is eligible to be claimed as a dependent on a U.S. tax return, see Publication 501, Exemptions, Standard Deduction, and Filing Information, and Publication 519.
    A nonresident alien student, professor, or researcher who is required to file a U.S. tax return but who is not eligible for an SSN, or who is claiming an exception to the tax return filing requirement.
    A dependent/spouse of a nonresident alien U.S. visa holder, who is not eligible for an SSN.
    ITINs are for federal tax reporting only and are not intended to serve any other purpose. The IRS issues ITINs to help individuals comply with the U.S. tax laws and to provide a means to efficiently process and account for tax returns and payments for those not eligible for Social Security Numbers (SSNs).

    An ITIN does not provide authorization to work in the United States or provide eligibility for Social Security benefits or the Earned Income Tax Credit.

    …although Berg is not referring to getting the TIN after renouncing as Hodgen is (per IRS FAQ’s, one must have a SSN if eligible – and the person would be eligible for the SSN for the time period of the tax returns).

    [In fact now I need to put this into context of my renunciation date and filing of 8854 with the 1040 – which was done in the year after my renunciation, though not in the *streamlined* option. In fact, the 8854 form is updated toward the end of each year and an earlier version should not / cannot be used as I understand it.

12. @mettleman
    You understand the ramifications and the risks and have taken a position you’re fine with. I respect that. However, I do have a quibble when someone says to a newbie in a definitive manner “don’t bother doing XYZ, you’ll be fine”. Said newbie needs to know the ramifications and the risks associated with each possible course of action given his/her particular situation, and weigh that against what will allow him/her to sleep soundly at night. There is no one size fits all solution so we shouldn’t make it seem like there is.

13. Sounds like a) the IRS doesn’t know what it’s talking about regarding doing all 3 things together or b) this is a new ploy to make everyone a covered expat so they can slap fines/penalties on them. According to this I’m a covered expat as I too didn’t file the 8854 until over a year after my renunciation. Does this mean I can sue my US tax preparer who didn’t tell me otherwise? Because if I’m going to be a covered expat I could have saved myself several thousand francs and not bothered to file anyway, seeing as I only had FBARs to do.

    The 8854 instructions make it clear that it should be filed by the due date for your last 1040/NR – extensions included!

    “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.)”

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

    This also makes it sound as if you must be US tax compliant before you renounce/relinquish which as we all know isn’t the case. It also raises the spectre of embassy/consulate staff having to check that a person is compliant before they’d be allowed to take the Oath of Renunciation. This is VERY dangerous ground.

14. Re calgary411’s post

    I suspect the sentence in Notice 2009-85 that is the cause for some concern is this:

    The determination as to whether an individual is a covered expatriate
    is made as of the expatriation date.

    which could be taken to mean that all 3 tests are evaluated on the day one renounces.

    So, if you’re not compliant on the day you renounce, you’re automatically a covered expat. This would be moronic if true as it would serve no real purpose (really, what practical difference does it make if you’re compliant when you file 8854 or when you renounce?), but that’s what it may be saying.

15. @tdott, which is true in that your 8854 figures are calculated for the day before you lose your US citizenship.

    Still, it doesn’t address the due filing date instruction nor the fact that as calgary411 pointed out the “current” form isn’t available until the following year usually.

16. Isn’t it mind blowing- such convoluted complicated labyrinthine rules and regulations. Not even the pros are in unison and contradict each other as to what is right or wrong. My GOD am I relieved that I don`t have to worry about all these forms and papers and rules anymore! My CLN is the most important document I own ( besides my new liberating passport).

    @Mettleman
    Yes- what rage. Hard to deal with. I think we all have that here.

    @tdott
    Quite simply- I agree with you.

17. @tdott
    I agree with you too. You are the voice of reason.

18. @tdott re You understand the ramifications and the risks and have taken a position you’re fine with. I respect that. However, I do have a quibble when someone says to a newbie in a definitive manner “don’t bother doing XYZ, you’ll be fine”.

    could not agree with you more with that statement…….I have been in this fight since November 2012 and have certainly made peace with myself and my choice of how to deal with this hand we are dealt.

    I in now way meant to suggest a one size fits all solution as each and every one of us has a slightly different set of circumsatnces and we each individually have to make peace with our decision

    I am a “self renouncer” and am very comfortable sleeping at nite. the person to the left of my may not be compliant at all in any way shape or form and the person to the right of me may be 100% compliant and both of them sleep well at nite because it was their decision and their decision alone.

    to the OP read here often and then read here some more. then and only then make the decision as to what is right for you and no body else!

19. Hi,
    Firstly, a big thanks to all who have taken the time to give advice and thoughts on my earlier post. I have been moving home, so just catching up with it all.

    Out of interest, if the US decided to freeze bank accounts of someone, would it also apply to the accounts of that person’s spouse, even if that spouse was never anything to do with the US? I can imagine the US government going for my wife’s earnings too…

    As per a few commenters, my worry is mostly that the IRS is a big unchecked juggernaut, that seems to do whatever it wants, then shrugs it’s shoulders at the damage and says ‘Hey, I’m American.’ … because that is all the explanation that is needed. Whilst this destruction is a bit chaotic and hit or miss at the moment, it could become much more incisive in future as the digital age opens everything up.

    Though, I think that on balance, it seems the worst case is (if this ever comes up again) that I would be a covered expat from the day of renunciation. At which point I had neither the earnings to ever be taxed, nor the assets to exceed the ‘covered amount’. So at the point of my renunciation, I was in no way in debt to the IRS, I simply had not filed, as I didn’t know that I had to. And I will be able to honestly say that I went in to the Embassy and was told not to act by the IRS. The idea of swearing this in front of a lawyer is a good one, which I had been considering.

    I hope for the sake of so many people, that they scrap this law. But it’s hard to see that they will, imagine the law suits from the thousands who they have stepped on. They have gone to a place where admitting a mistake would potentially cost them a lot.

    As I understand, Obama was born to a Kenyan father… I wonder how he would react to Kenya deciding to tax him, fine him and force him to file back taxes… his earnings could probably prop up the whole country :). Perhaps we should suggest it to the Kenyan president.

    Thanks again all,
    Chris

20. @Chris, it’s not the US that freezes accounts – not unless they have positive proof they could hand over to a foreign government to implement. It’s the banks themselves that may do this for fear of being hit with massive penalties/fines by the IRS for helping you conceal your tax evasion. It has happened here in Swtizerland, though now that FATCA is actually up and running things seem to have calmed down on that front. If your bank did do this then it should only be on accounts in your name and/or ones you have signatory rights to. So if you share an account with your spouse, i.e. joint, then yes it would get frozen as well.

    You know your options and now the main thing is not to rush into any decision. Take your time to research them all thoroughly and then go with the one that you’re most comfortable with. After all, you’re going to have to live with that decision for the rest of your life.

    If you’ve more questions you know where to come.

21. @Chris

    FWIW, my understanding is that RRSPs and pensions (including defined benefit pensions) cannot make use of the covered expat exclusion amount of $680,000. So, the entire RRSP and/or pension (present value if it’s a DBP) would be taxable (as income, I believe). Something to keep in mind if you have either.

    Your description of the IRS seems about right.

22. As for the RRSP one should be able to substract the original principle from the gains within the plan, since they were taxable going in.

23. After a life time of working and saving, I cannot afford to renounce and my relinquishing act in 2004 was deemed to be non willful and was therefore denied by the US Consulate . I have not filed US taxes since I left the US in 1970 and I have been in financial hiding for several years now. My three grown children want to and need to get rid of their US citizenship. If they do so, will it endanger me? Thanks for any thoughts you may have on this.

24. @NoName

    Where were your children born? If they were NOT born in the US, I would question why they feel the need to rid themselves of US citizenship.

25. Born outside of the US in the 80’s, all were reported as citizens born abroad and were automatically issued SSNs.

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