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
@Daniel, may I ask why you’re even worrying about this? Do you plan to travel to the States often/at all? Is your local bank hassling you over your US birthplace? If not, then forget about it. The IRS can’t come after you, you’re not even in their system as you don’t have an SSN. Why are you worrying about this?
Daniel, for 76 yrs. you have believed you were not American. (The passport was given to you in error ). Why change anything? Do you need to go there? Do you need to open a new financial account?
In the Canadian IGA , a reasonable explanation as to why someone doesn’t have a CLN is supposed to be accepted by the banks. The fact that IGAs were unheard of years ago is a reasonable explanation.
Hodgen’s teenage entrepreneur also renounced when under 18 1/2 so the net worth test does not apply to him. So if anything he should be less likely to have to fill out Part V than Erin. Yet, Hodgen’s is advising that he do exactly that (with reasoning provided).
And, I really don’t understand how anyone can *definitively* say that one would be fine if one does not fill out Part V. AFAICT, there is no place in the 8854 instructions or form that says that Part V is not required for non-covered expats. Additionally, cross border professionals say to fill the section out.
I’m sorry, but saying that there is 100% certainty that all will be fine when not filling out the section is just bad advice, given the lack of clarity in the form and instructions, and the position taken by tax professionals.
Let’s put it another way. The cost to fill out Part V is at most a one-time cost of a number of hours of labour digging up old financial information and coming up with estimates for other things. The cost to not filling out Part V, if it results in one becoming a covered expat, can be bank breaking as it will result in pensions and RRSPs being immediately taxed, among other things. Given this, why should a person who has a sizable pension or RRSP built up choose to assume such risk just to save some hours of labour? We pay for house insurance not because we expect our house to one day burn to the ground, but because there is a tiny, but non-zero possibility that it can happen at some time in the future.
Finally, the way the IRS treated benign actors in the OVDP shows that it can’t be trusted to act in a reasonable manner when it’s under the gun to produce results. So why take the chance that those guns won’t at some point be aimed at “traitorous” renunciants?
Hi Medea Fleecestealer,Duke of Devon,
I don´t need to go to the US. I could think of eventually going for tourism but definitely not a must.
I don´t need to open a finantial account as I already have for many years. However local Banks are trying to comply and eventually this dual situation could arise …that is my worry although I find the situation akin to slavery….I wonder what the IRS could do in a foreign country ?
@ david
I think you would be a great test case for Allison Christians’ suggestion of having someone present the paper work for a past relinquishment (or a renunciation) at a consulate but refuse to pay the fee. Then sue the State Dept. if the consulate refuses to accept your paper work without payment. At the very least you would be able to inform your FI that you “relinquished/renounced on [date], refused to pay fee for documentary proof”. I applaud your moral stand on refusing to feed the treasury of a nation which instigates and supports terror around the world. You’ve obviously disconnected from the USA — intentionally — and it’s absurd that you or anyone else should have to pay $2350 for a piece of paper which says the State Dept. acknowledges what you already know. You are NOT a US citizen anymore.
http://isaacbrocksociety.ca/2015/10/06/u-s-now-charging-2350-not-just-for-renunciation-but-reliquishment-as-well/comment-page-1/#comment-6660026
Allison Christians doesn’t know how to sue the State Dept. (at this point) in order to challenge the “R” fee but maybe this is an avenue worth exploring. Maybe this is something angry past and potentially future “R” fee payers would be willing to crowd fund. Lots of maybes but to extort money from anyone seeking their freedom from US citizenship truly conjures up the abhorrent practice of slavery in the not too distant and ugly past.
Daniel , Except in Switzerland there isn’t much they can do especially since they don’t know you exist.
Thanks to everyone that has taken the time to respond to my previous questions. I was kind of concern that leaving too many blanks on Part V of Form 8854 would somehow make the IRS suspicious of my financial situation. I was under the impression that the IRS requires an answer to every single line in every column in Part V and leaving any of them empty would somehow indicate incompliance or incomplete disclosure/statement. Meanwhile, filling them with too many zeroes (or “N/A”) seems to also make the statement look dubious at a glance. Hopefully the instruction that comes next year with the 2015 version of Form 8854 is clearer compared to the current one.
@tdott, @RLee, @pacifica777 Your comments on June 18, 2015
Thank you very much for your detailed comments! This is still practically too much to digest, but I have some updates on new developments in Germany:
About a month ago when I asked again for an appointment, they wrote me that no appointments would be available for about eight weeks and sent me this paper:
Thank you for your inquiry regarding the renunciation of your U.S. citizenship.
Please review and complete the Statement of Understanding http://www.state.gov/documents/organization/81607.pdf and Oath of Renunciation http://www.state.gov/documents/organization/81606.pdf which are used in connection with renunciation of U.S. citizenship and send these back to us via e-mail. The original documents will have to be signed before an American consular officer at the time of your renunciation.
After you have formally renounced your U.S. citizenship, you will also be required to file IRS form 8854 directly with the Internal Revenue Service, 11511 Roosevelt Boulevard, Drop Point S607-F8854, Philadelphia, PA 19154. For additional details and to download the form, please see the IRS website at http://www.irs.gov.
In order for us to schedule your appointment we also need the following from you:
A copy of the data page of your current U.S. passport;
SSN;
A copy of your U.S. naturalization certificate, if applicable
Current address;
Last known U.S. address;
Other nationality, if applicable;
Date when you acquired other nationality;
Manner in which you acquired other nationality (e.g. by birth, application, etc.);
Please list all periods of time that you have resided in the U.S., from birth until present time;
A copy of your German Einbürgerungszusicherung (if applicable) or a copy of your foreign passport.
In addition, you may choose to submit a separate written explanation of your reasons for renunciation at your appointment. At this time you must also turn in your current U.S. passport and show proof of any other nationality.
The renunciation fee is $2350 or the equivalent in EURO which must be paid in cash or by credit card on the day of the official renunciation.
We hope this information will be of assistance.
Kind Regards,
U.S. Citizen Services
Then they recently offered this:
“In accordance with U.S. Department of State regulations, we are required to schedule an initial telephone interview for you with a consular officer, and to provide you with information concerning the relinquishment of U.S. citizenship ”
“If you are not available […], we will have to determine a later date for the initial telephone interview. If you prefer to appear in person for your initial interview, please let us know so that we may select an appropriate date; however, this will only be an initial interview and you will be required to return to our office at a later date for your second interview.”
“Prior to the initial interview, please review the information at the links below:
1. http://travel.state.gov/content/travel/en/legal-considerations/us-citizenship-laws-policies/renunciation-of-citizenship.html
2. http://travel.state.gov/content/travel/en/legal-considerations/us-citizenship-laws-policies/renunciation-of-citizenship-right-of-residence.html
3. http://travel.state.gov/content/travel/en/legal-considerations/us-citizenship-laws-policies/citizenship-and-dual-nationality.html “
I am reluctant to do a telephone interview or any interview at all because of this newest development:
U.S. now charging $2,350 not just for renunciation, but RELINQUISHMENT as well
Posted on October 6, 2015 by Eido INOUE Posted in Featured, Issues regarding US persons abroad, Relinquishment
I have heard that, in certain cases, the German government does not require a Certificate of Loss of Nationality based on a positive assessment that the 2,350$-fee is immoral in my case. I don’t have this in writing yet but will try to get it.
I am wondering if I can somehow avoid the fee, i.e. hand in my US Passport and refuse to pay the fee?
However, whether or not I am released from my US citizenship, this doesn’t change anything in respect to the tax questions which I find even more immoral than the fee. Is this tax subject supposed to go into another part of the forum?
Request for advice, please.
My son, late 20s, was born to a US parent, in Canada. I applied for a Consular Report of Birth Abroad in 2002 when he was 15, which states he “has an official claim to US citizenship at birth”. He has a current US passport (which he uses on travel there) and voted (once). He has filed US tax for 2014, so is in the system.
He recently married a Canadian, and now wishes to renounce. I’m not worried about submitting his returns and the 8854 (he has hardly any assets), but his main concern is,
Would he be able to apply for a green card, if one day he is offered a job in the US? Or would he be permanently disqualified?
(I realize there is a proposal to allow persons like him to apply to renounce without the tax filing requirements, but it is not law yet, and may not be.)
He’s perfectly entitled to get a Green Card just as any other alien is – at the moment. Whether that will ever change in the future or whether the Reed Amendment which bares renunciants from ever returning to the States will ever become enforceable in some way no one can say.
https://en.wikipedia.org/wiki/Reed_Amendment_(immigration)
Questions re renunciation and inheritance:
What are the US tax implications on inheritance in these scenarios:
1. Decedent is US and Canadian citizen, heir (child) is Canadian citizen only
2. Decedent is Canadian citizen, heir (child) is Canadian and US citizen (who has never resided in US.)
The estate would not include any US-based assets.
(I know about the US estate exemption if both decedent and heir are US citizens.)
Your answers could save me a hefty bill for legal advice, so I’m really grateful. May I joke about this? My spouse and I are keenly hoping for a specific scenario re who checks outta here first.
@ Duchesse – I cannot answer your questions about the legal technicalities. However, as a parent of adult children who were born abroad, I’d like to raise some questions to your son: At age “late-20s” do you know where your life will take you in 10 or 15 years? It sounds like you might want to work in the US. Do you have a permanent home (not just a rental) in your country of residence? Do you have children and other ties that could lead you to make a decision that you will not move to the US for work?
If your life-situation is not as FULLY SETTLED/DECIDED as someone, say, in their late 30s or 40s, and you may still be thinking about other opportunities that may include work in the US, it may be better to hold back on any permanent action and see how life unfolds. Yes, it is a pain to do the annual filing, and it is disgusting to have your Canadian wife’s private financial information (possibly) going to the IRS (this latter issue can be avoided with appropriate organizaiton of your / your wife’s accounts), but this option may be better for the next 3-5-8 years until you have a better idea what you want to do with your life and your professional involvements. Even if it is now possible to get a GreenCard after renunciation of US citizenship, this too could change (the legislators there do have a punitive streak in relation to past-US-Citizens and anyone else “foreign”). Loss of any citizenship is a major life step; think very carefully if you are absolutely sure that this is what you want for your entire unfolding adult life.
@LM: I’m, the parent who is presently US-Cdn, am getting old (had him late); 15 yrs brings me into the end of my actuarial life expectancy. And, since my car accident last year, I learned things can change from one day to the next. So I am not as “wait and see” as you. As for other ties, he will soon have a child born here (not US citizen as my son never lived in US). And you are right, he (and his wife) are young.
I read somewhere that if I renounce and he, as a US citizen, is my heir, the US will tax the inheritance at 40% since foreign bequests do not qualify for the exemption. Since there would •also• be a 20% death tax in Canada, that’s a huge bite, even if I can’t leave him much.
@Duchesse and @LM Just my two cents for what it is worth… I confirmed relinquishment of my loss of US citizenship and my children, aged 18 and 20 just renounced their US citizenship. I gave my children the option of keeping citizenship in a “wait and see” mode in case they wanted to work in the US, but the more I researched and the more we talked, the more unpalatable US citizenship became. It may seem that for a young person the wait and see attitude is worth it, but consider that as long as you are a US citizen, forget about saving any money for your future: TFSAs are out and so are non-registered investments, as they all come with a hefty accounting fee every year as they considered practically illegal accounts. The fee for 3 different forms for each FUND (not account) obliterates any savings accrued many times over. Ready to use that RESP for university? It just became a taxable account leaching Canadian tax money to the US. Working that low paying cashiering job to help you through school? If you make more than $3700 a year, you have to file and pay an accountant to figure out the hell of US tax forms. The US has shown again and again they care little for the “little guy” and routinely and retroactively create punitive and illogical requirements for those who try to play by their rules. No thanks and good riddance. If needed, they can apply for a green card (and drop it like a hot potato when it no longer serves). If that doesn’t work, there is an entire planet to choose from… oops… hope I don’t sound too jaded or resentful!
@ Duchesse – Yes, the inheritance tax issue you raise is a big factor & real concern that I, and many of us here, fully understand – – the wrenching heartache of weighing the options, of making such double sword-edged decisions. As Medea Fleecestealer said, the current situation allows him to apply for (and probably get) a Green Card post US-renunciation; he (and you and his new family) just need to be prepared to face the possibility that this option painfully may not be open in the future. It’s a lousy poker game but decisions (either way) may have more serious consequences now than they used to. Wish we all could see the future – – would any of us have imagined the harshness of FATCA legislation 7 years ago? No one, especially a young adult, wants to think that a decision made now could be irreversible and life-determining / will potentially permanently effect their future choices if there is a change of mind. But just as we are seeing with the refugees from Syria, it seems that this could be becoming the case for anyone with “US taint”……..
@ readytogo – you make good points. I would just add that while the US seems to be getting more and more unpalatable, and I have already voted for “good riddance”, neither of us can say what this late-20s young husband/almost father will strongly wish to do with his career in 5-10 years time. Renunciation is no problem as long as he understands the potential consequences of maybe, in the future, not being able to get a Green Card if more punitive laws are passed in the ‘good ole USA’
A TFSA and mutual funds are not the only savings/investment options (thought the TFSA is a good one) and a RESP can be put in his totally non-US wife’s name. Further, some people do do their own US tax form filling and submissions without the costly tax accountant. The potential inheritance-related-taxes is a serious matter which will take serious consideration. Life seems to be presenting more door-closing risks – not what we all wanted for the 21st century…..
@LM: Son has found a young accountant who does US/Cdn returns reasonably. He will keep his house in order asset-accumulation wise, which does involve a very high level of trust in his wife, but I feel secure in her character.
Renunciation is a much heavier consideration for this grad student than his sibling, who is in a trade. That sib says, “Why would I want to be a citizen of a country who treats my parents this way?”
@LM Point well taken and all things we considered. I have children going into fields which would very much involve US work if they wanted. I will dispute something though… You say there are other savings/investment options. I assume you are talking RRSPs, which is the only option (unless you want to invest directly in US stock, which comes with it’s own issues) as far as I can see unless you want to focus on next to nil interest of GICs. A young person earning little has almost no RRSP room. As for RESPs, my point was that for a young US citizen (granted Duchesse’s son will not have a US citizen child) the RESPs (and any scholarship money I understand) becomes taxable. For a young person looking to the future, to work hard and save and create something, it is a bum deal. Being a US citizen only works if you decide to always be poor, or if you become so rich that paying Uncle Sam won’t matter. For the rest of us the stakes become very high very quickly.
Having ranted all that, I absolutely respect everyone’s individual decisions, but always encourage people to look at ALL the ramifications — the good, the bad, and the ugly. For us, the ugly won 🙁
@Nevada, there is a thread here http://isaacbrocksociety.ca/2015/03/04/relinquishing-your-us-citizenship-in-germany-renunciation-fees-in-excess-of-1280-e-us-1421-deemed-excessive-and-exhorbitant/ that touches on the subject of your comment; “…in certain cases, the German government does not require a Certificate of Loss of Nationality based on a positive assessment that the 2,350$-fee is immoral in my case. I don’t have this in writing yet but will try to get it…”.
I do not consider RESPs a safe investment for US citizen’s abroad. Whether you do your forms yourself or pay an “expert” there’s significant risk they will not have been done correctly. It’s one of those situations (of which there are many in regard to expat tax filing requirements) where if you ask 4 experts how to report an RESP you may get 5 opinions. You could probably find as many opinions here on Brock. If there is a single citizenship Canadian parent or grandparent, I would definitely put the RESP in their name.
Duchesse. US estates are taxed in the hands of the estate. If there are no US assets there isn’t much they can do. 1) Dual decedent. Canadian heir. No US assets
Estate is taxed by the US. There is a $5 million exemption. Why bother? Find a lawyer/accountant with no US ties. Not a big 5 accounting firm or trust co.
2) decedent is Canadian only. There are no US tax implications unless the decedent was a covered expatriate.
@PortlandPLC
Duchesse seems to be asking the following:
“I read somewhere that if I renounce and he, as a US citizen, is my heir, the US will tax the inheritance at 40% since foreign bequests do not qualify for the exemption. Since there would •also• be a 20% death tax in Canada, that’s a huge bite, even if I can’t leave him much.” In other words, sounds like Duchesse is thinking of renouncing.
If Duchesse stays a US citizen, then you are right about the $5 million exemption and no problem with son/heir being either a US or only a Canadian citizen. But I strongly disagree with your suggestion that the lawyer should have “no US ties”. Much better to deal with someone who has full knowledge of the inheritance legalities on both the sides of the border; the Will needs to cover or account for ALL details important in BOTH country’s estate-tax systems, plus, that lawyer probably will be involved with the probate and all filing after death – – you dont want to make any minor but potentially costly mistakes.
If Duchesse does renounce then, as he/she points out, the citizenship of the heir DOES matter – – a US heir will have to pay taxes on that inheritance no matter where the assets were located and no matter whether the renounced person was a covered expat or not a covered expat. If this is not the case, someone please correct me, but that is definitely my understanding.
@ readytogo
RE “You say there are other savings/investment options…..”
Yes, there are other ways to invest that are neither mutual funds nor GICs; prudent investment via individual stocks where you don’t pay taxes until you sell and, at that point, any capital gain is taxed in Canada and you get an off-set tax deduction in the US for this gain. No one is required to purchase US stock in one’s investment plan.
In regard to the RESP, such accounts are not taxable for a US parent if the child’s RESP is registered under the name of the non-US parent.
But you are totally right in that it is all a bum deal! An outrageous bum deal!
Duchesse.
I believe LM is incorrect. If you were to renounce and be compliant (file your returns and the permission to leave the system form 8854 ) you might or not be a covered expatriate.
Assuming you were not a covered expatriate, the 40% does not apply. In the US estates are taxed the heirs are not- except in the case of covered expatriates. In fact, there would be no requirement for your estate to file anything with the US. That’s what I tried to say earlier.
I stand by my earlier statement especially if the decedent was not in the system. Dual decedent, Canadian heir. No US assets. No need to involve the IRS. If you have a cross border accountant or big 5 trustco., they will cover their butts.
Your choice
@ Duchesse @LM
Portland is correct,
See this simplified chart from the ‘renounce citizenship guide’ at the bottom of the site.
http://renunciationguide.com/expatriation-and-tax-details-of-current-law/residents-non-resident-citizens-and-non-citizens/
The % has not been updated, I believe the rate is now 40%