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
@ChrisM, if they’re a “former” bank then they should not be reporting you. Only current clients should come under their perview imho. If you’re feeling like a fight then find a lawyer who knows the US-UK IGA agreement and get them to send a letter threatening legal action if they do so.
Otherwise, do as Innocente says – contact them and tell them the date you renounced and that you have a receipt from the US embassy to prove it. Follow up on the confirmation letter if they still don’t want to listen.
@ChrisM, take a look at your insurance for buildings/contents as you might have some small amount of legal cover.
This is the perfect item for that and they will get you a solicitor to send a letter.
Hey,
Unfortunately I read online that even if you close the account, they are still compelled to report it. Also, unfortunately, it’s a moot point now as I only received the letter yesterday that was sent almost two weeks ago, so am sure they have already done something (whatever that is).
But beyond that, whilst I feel that the USA approach to global taxation will change in future, I also believe that their ability and ruthlessness at persecuting people will only get stronger as they struggle to keep a grip on the world and leverage technology to do so. As there is no limitations on their time to chase ‘non-conformants’, is it advisable to make an attempt at the streamlined approach even if I get it slightly wrong?
I am a very low worth individual (at least in financial terms :)).
I really just want to get this cloud that’s hanging over away for good.
Chris
@Medea Fleecestealer
“if they’re a “former” bank then they should not be reporting you.”
Unfortunately not the case. Any reportable accounts which were closed are generally reportable for that year with the account closing balance. Otherwise it would be easy for everyone to evade FATCA reporting just by closing their accounts.
However, it is possible to reduce the account balance to a small amount first and subsequently close the account. Depending on whether the bank only reports on accounts with a balance > $XXX, the account may or may not be reported.
Chris, you are a very high worth person by helping discuss here your and others’ loss of rights under US CBT and the IGA’s our countries have signed with the US. Thanks.
@ChrisM
Your questions were also answered yesterday when you posted on the FATCA thread.
Hey,
@Heidi, my questions were actually a little different, though maybe I wasn’t clear, so apologies.
On this thread, I was asking specifically about the Streamlined process, and whether in my position attempting to file back information having already renounced is the correct approach.
On the other, I was asking about the possible consequences of ignoring FATCA and deciding that I don’t want to comply with outrageous laws from a deranged government of a land I have nothing to do with :).
Thanks
@ChrisM
If you don’t backfile, you will definitely be a covered expat, and you will be (willfully?) non-compliant. Neither of these are particularly good .Below is my standard blurb aimed at Canadians. Others will have different opinions/takes. Educate yourself on the ramifications of your different options and make a decision that works for you.
============================================
If you renounce without becoming compliant, 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 willfully 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).
ChrisM You are getting way ahead of yourself.
You renounced- you are no longer a US citizen, Start there.
As far as the bank is concerned, they are required under the UK-US intergovernmental agreement to accept a reasonable explanation as to why you don’t yet have a CLN. Your explanation is perfectly reasonable- there is a 3-12 month gap between renouncing and receipt. Demand that your bank accept that. Also , as mentioned, $2000 accounts are exempt from reporting.
OK now for streamlined. Streamlined is for those US citizens who desire to come back into the compliance fold and , presumably, stay there. That’s not you.
Streamlined is complicated. It might very well cost time and money for help.
As I said on the other thread, you will not be audited, you will not be fined, you will not be jailed and you will not be extradited.
The IRS can only go after 2 groups- wealthy Americans living in the US who deliberately hid money offshore and those foolish enough to jump up and say ‘ here I am, come and get me’
They have no resources to bother anyone else. I repeat- you have done nothing wrong, you are no longer a US citizen, and you can forget all about this nonsense.
tdott sounds entirely reasonable. However I disagree with him . He ascribes magical powers to the IRS which they don’t possess.
Hey again,
Thanks for the thoughts everyone. A big part of me would love to go with what @Portland is saying, but generally I would rather not risk things, especially if coming forward has only the chief drawback of having to waste a day writing out tax returns? @Portland, if the UK wouldn’t do any of the things you mention to me for being non-compliant, then I can only hope they would equally not do them if I made an effort to be compliant as nobody could argue that is any worse? tdott – I am British, not Canadian. Not sure if that changes anything of your advice, but I suspect not.
I have been looking at the streamlined process further. One thing that stands out is that it seems to suggest that the streamlined process is usually done before renunciation. Does anyone know if it is a no-go after renunciation? Can’t find anything on that. There was mention that if doing streamlined in order to renounce, then you must file five years worth of data… I understand it all goes into a machine rather than a person anyway, so I guess in reality can be filed any time before I file an 8854 (assuming I do so)?
And I can’t file an 8854 until I get my CLN. So I guess I could still go streamlined and file 5 years with an ITIN number ASAP? Is there then any confirmation of acceptance that I would have to wait for? I have no idea how the American tax system works.
Thanks again all.
Chris
@ChrisM, no Streamlined isn’t a non-goer just because you’ve renounced already. I did my renunciation first and then did the tax side using Streamlined. Although Streamlined can be used after renunciation it’s main aim is to bring those outside the US tax system into compliance so they can then go forward with their future filings.
No, no confirmation whatsoever, unless you happen to owe them tax – then you’ll hear from them, but not otherwise. Send the forms off registered/recorded delivery post so you have a tracking number and make sure it’s delivered. That’ll be your only proof that you’ve done your bit. I tracked all mine through both Swiss Post (I live in Switzerland) and United States Postal Services and made paper copies of each of their recorded deliveries.
However, before you dismiss Portland’s suggestion have a look at what is required to file US returns.
https://www.irs.gov/Individuals/International-Taxpayers/U.S.-Citizens-and-Resident-Aliens-Abroad—Filing-Requirements
Depending on your finances it may take more than a day. And as you said, you have no SSN so you are not in the IRS’s system. They have NO record of you so why bother to give them one? Yes, if you don’t file an 8854 form you’ll become a “covered expat”. So what? You don’t go back to the States and don’t intend to in future so how can that affect you? It can’t. As Portland says, the IRS are overstretched and overwhelmed with all the paperwork this fiasco of FATCA has generated. They are NOT going to be chasing someone whom they don’t even know whether they owe the US anything or if you even have the financial means to pay up if they did. It would cost them too much money with no guarantee of success on their part.
You have renounced, the IRS rep has told you you need do nothing else. That’s the end of the matter.
@ChrisM
Like I said, others will have different opinions/takes. 🙂
A couple of additional comments:
Streamlined is not just for people who want to get compliant and stay compliant. It’s also for people who want to get compliant in order to leave the US tax system *cleanly* when renouncing; that’s how I used it. Note that you’d then file 5 years of returns, instead of 3, and this is indeed allowed. Also note that 6 years of FBARs are required by Streamlined (but not, apparently, by 8854).
There is no official confirmation from the IRS on Streamlined returns (or any returns, for that matter – it’s a stupid system). You can call the international tax number (*not* toll free, big surprise there) and ask about whether they’ve been processed and are OK. If you call, calling close to closing time (11pm EST) apparently results in short waits. Norman Diamond also mentioned form 4506-T to find out about your returns.
Yes, you would need a ITIN to file. On the plus side, they give these out like candy, unlike SSNs which are like pulling teeth to get if you’ve lived out of the US for decades. It *may* (I repeat, *may*) be possible to apply for the ITIN when filing – does anyone know?
I once asked Phil Hodgen about filing 8854 without first receiving a CLN. His advice was to do it as not doing so would likely cause a bigger problem.
There probably are some differences between Canada and the UK w.r.t. this mess. Unfortunately, I don’t know what they are – sorry.
As Medea mentioned, depending on your finances, it may (probably?) very well take more than a day to fill out 5 returns (plus 6 years of FBARs), the first one being the hardest and the rest then straightforward if no material change in your financial situation.
However, a naive tax filer who can’t afford expensive cross border professionals, would probably fill out the returns themselves like so:
1) not knowing about foreign trusts
2) not knowing about PFICs
3) possibly not differentiating between earned and unearned income.
Basically, anything not in the infamous Publication 54 would be ignored (however, #3 is mentioned).
So, a naive tax filer would likely just take the FEIE using form 2555-EZ (this is a dead simple form), or maybe form 2555, and apply it to all their income, owe $0 tax, and be done (along with a 1040 (or 1040EZ, if possible)). A more knowledgeable filer might differentiate between earned and unearned income. Anyone with significant assets and/or a sizable income would probably have the financial ability and desire to spring for a cross border professional.
@ChrisM
One last thing: if you do decide to do nothing, as the London IRS office advised due to lack of a SSN (this sounds wrong, but whatever), you may want to get it in writing if you don’t already have it. May come in handy one day.
@ChrisM You are getting a lot of different takes on what to do or not do, and how concerned to be. You must do what feels right to you. I will just say that I tend to agree with tdott.
I researched diligently to make the best choice for me and my family, and in the end I realized I just could not live with the uncertainty of looking over my shoulder for the rest of my life. I do not trust the IRS. I do not trust the US government. It seems to me they make arbitrary and complicated rules (often retroactively) with no concern for who ends up as collateral damage. There is no political will in the US to right this wrong. We relinquished/renounced. I did the streamlined (5 years) in order to EXIT the system, not to stay in it. I spent money on an Enrolled Agent accountant — not the $50,000 I was quoted by a big firm, but under $5,000 because I did a lot of the work myself. I felt I had to spend this money because of the complicated rules around PFICs, etc. We are not wealthy, but we had some savings in mutual funds, and government registered accounts that are not recognized as legitimate vehicles in the US. Each fund requires several forms to be completed (for 5 years worth!). I was warned that an incomplete/incorrect return can stay open beyond the statute of limitations. Is this true? I don’t know, and hiring someone is not a guarantee that it is filled out correctly given the ridiculous system that even so called experts do not understand, but I decided some pain in the wallet now would ensure a more peaceful sleep.
I am happy to report I have my CLN now, and will file form 8854 this coming year to close out my last tax year as a US citizen and wash my hands of the whole debacle. (And I second what tdott mentioned: file form 8854 ON TIME even without the CLN to avoid problems). I feel I can breathe with the decisions I made.
So my suggestion is do what will make YOU breathe easier and bring YOU peace of mind, whatever that is. Good luck. And remember once you renounce, you have until June of the next year to file the 5 years and final 8854, if you so choose.
I did the streamlined procedure when it was first introduced before I decided to renounce. I did hear back from them twice. Once to say I needed to word something differently– well they didn’t say it quite that clearly but I figured out what they meant. And the second time to say they had processed everything and decided I qualified for streamlined and they were not going to anything else and i didn’t need to do anything else. Naturally it was a very stilted letter that included caveats about them reserving the right to screw me later but it was a great relief to have it anyway. They may not even do that much any more. I don’t know. I did all the returns myself (at a great cost to my mental health) and yes it took days to do it. But at the time I simply could not have afforded to pay a professional and I’m not sure it would have given me any more peace of mind.
@Duke of Devon I took as position as a RN with Alberta Health Services.
Question now, I know I have to fill out form 8854, do I also have to file taxes for 2015 to finish this all up?
Empty. Whether or not you need to file 8854 depends on when you started your job with Alberta Health Services.
That’s the day you relinquished. If it was before June 2004 there is a large body of opinion that you don’t need to.
If you do file 8854, it, together with a partial year tax return for 2015 are due by the 2016 deadline.
@ChrisM, readytogo is right. Ultimately you need to make a decision based on what you feel is best for you. We all have different views on this, but you’re the one who has to live with the decision you make. So take a bit of time, research your options and then go forward after you’ve decided what’s best for your particular set of circumstances.
Again, thanks all for your thoughts on this.
Thanks for the link for filing as a foreigner @Medea, very useful.
A couple of last questions if anyone can help:
1) Where can I get old copies of 1040s for past years? The only one I found on IRS is for 2014?
2) There is options to use variable tax years I think, does that mean that I can report on the UK tax year?
3) For filing FBARs, if in the past years I had no accounts over $10k (as was the case for three of the past five) would I still need to report them given I am doing this as part of a streamlined process and renunciation?
@tdott, thanks for long and thought out reply, as I understand, I would need to attach a TIN application to the streamlined submission.
Thanks,
Chris
@ChrisM, look on ebay or amazon for old copies of personal tax software brands include taxcut and turbotax.
Go ahead and work your returns for each of the applicable years. The software will check your return so that it is “correct adminstratively.” What that means is that the US will not kick it back out for missing a line or doing the sums wrong.
You need to ensure that you report all income because most tax free income in your home country will be taxed by the USA. This could include job searcher benefit and alike.
Once you see what your returns might look like, then you decide where you go next.
Renouncing was the MAIN important step and it is done, you are free.
Everything else is extra.
But always, OBEY the law in your home country!!!!
@ChrisM
I think it makes a WHOLE lot of difference that you are british and not a Canadian. The Canadians are protected to a certain ( actually large) extent by their treaty with America. They will not collect and they will not extradite. Great Britain on the other hand has no such agreements with America and are very good and close friends! So you are in a much more vulnerable position along with people in Germany, for example, another great ally of America and with no protective agreements for expats in their tax treaties. Switzerland on the other hand will not extradite or collect (for now) as well. So choices really might depend on where you live.
@Polly and Chris
I believe the UK only will extradite if the crime is also recognized as a crime in the UK.
Chris is up to date with his UK tax filings and a UK citizen to boot. He should have nothing to worry about.
The Swiss do extradite to the US, remember Roman Polanski was nabbed when he was on a visit to Switzerland. He was a French & Polish citizen living in France, (who do not have an extradition treaty with the USA.). Eventually he managed to avoid the extradition with clever lawyers. Also the FIFA crowd were arrested in Switzerland to answer to the USA.
The Swiss gov have not agreed to collect taxes for the US but the banks seem to be doing that for them with a 30% withhold on all US person accounts unless one can prove compliance, past fbars etc.
Chris, you need to list all bank accounts on your fbars if any time the aggregate (total of them all) during the year was over $10,000. This means you will have to find the average exchange rate for each year.
@Chris On the IRS website you can search for forms and download different years of the forms. We did this.
@Heidi
Exactly- only if it is a crime within Switzerland which deserves jail time will there be extradition. But I believe in England, tax evasion is a crime whereas in Switzerland only tax fraud is a crime deserving jail time.
Polanski was being sought for a totally different crime: rape.
At any rate- Canada has promised its dual citizens some sort of protection under the FATCA which England has not. So many here give information with the understanding that one lives in Canada and is caught within the same situation. That is not the case for different countries as in some respects different rules apply.
@ChrisM, I respectfully disagree with Polly concerning the ability of the USA to collect any deemed tax penalties in the UK.
The US/UK Tax Treaty does NOT provide for such collection only five countries on earth have such a provision. Canada IS one of those five countries and solely because they DID sign that provision in their treaty did they add an opt out for their citizens.
The standard template for the tax treaties is not reciprocol collection unless you in one of the five other countries.
The US did sign the OECD Mutual Assistance Traety on tax collection but they opted OUT of the collection provision. The US Congress is on record as of last year that because the US opted out of the treaty they would not be able to collect in other countries and other countries could not collect in the USA.
What does the future hold? Who knows, but as of 10-17-205 the USA is unable to collect so called penalties on UK Citizens resident in the UK. The ONLY thing the USA can do is make use of Royal Mail per the collection treaty and mail you a nasty letter.