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
@Tortured,
Yes, as I understand it, unfortunately, as a US citizen, a US SSN number is required to back file tax returns. You could be subject by US taxation after renouncing and obtaining your CLN if you are determined by the US to be a “covered expatriate.” However, as it stands right now, the US IRS would not be able to collect this obligation from you as you have been also a Canadian citizen from your birth. If you STAY IN CANADA, as it stands right now, Canada per the US Canada Tax Treaty will not collect from you on behalf of the IRS.
bubblebustin,
Just so I understand ….is there an advantage and what advantage is it to “effective date of citizenship ” being your date of birth
Tks
@Tortured, a SSN is not necessary to exercise your right to relinquish or renounce your US citizenship. Did you hear that? You have a RIGHT to relinquish. But as a Canadian citizen in Canada with no assets in the United States, the IRS has no power to collect an exit tax, even if they were to assess one to you. But with no current SSN, you are not a part of their system. My advice: Stay out of their system. If you decide to renounce to get the Canadian banks off your back, do so. But don’t sign for or send anything to the IRS. Remember, if you feel the urge to send something to the IRS to call your sponsor who will talk you out of it.
Tortured. Pay strict attention to Petros. You do not need a SSN to renounce. You do not need to file anything after you renounce unless you want a world of pain. There is nothing in Canadian law that says otherwise. The IRS is a giant bureaucracy with serious problems to deal with and no staff. They will not bother you since they don’t know you exist.
If you choose not to listen to us, the advantage of being born a dual citizen is that you would not be subject to the exit tax. According to their rules however you would still be supposed to file 5 yrs. of tax returns. – listen to Petros; he’s been there.
@Tortured
As I have recently received an updated citizenship certificate showing my “effective date of citizenship” as being my date of birth, I’ll chirp in on this.
If you are a dual from birth, then you do not have to be concerned with the “net worth test” or the “income tax test” in order to not be considered a “covered expatriate”. You DO, however, still have to be able to certify 5 years of tax compliance. So the advantage is only for those with assets greater than $2 million or who had high incomes (and thus taxes).
If you are a “covered expat”, then you are subject to the “exit tax”. Basically you pay a tax of 30% on the gain on the deemed sale of your assets that exceed an exclusion of $627,000 (not sure if that’s an up to date number). Depending on what your assets are, this may or may not be an issue.
See: http://www.irs.gov/Individuals/International-Taxpayers/Expatriation-Tax
Taken from http://www.hklaw.com/files/Publication/454a4da6-d692-41b8-b9dd-367f9f8846c3/Presentation/PublicationAttachment/edb41a72-92bb-419c-bf9a-3de0351be763/Packman-March2010.pdf:
Sigh – my attempt at decent formatting in the previous post wasn’t too effective. Hopefully, it’s still legible.
@tdott, knowing the circumstances of Tortured, it doesn’t matter if she becomes a covered expatriate. She is a Canadian since birth, lives in Canada for many decades and has never paid taxes in the US and doesn’t have a SSN. She does not have to comply. She shouldn’t have to renounce to get service at in a Canadian bank, but her charter rights are being violated. If she wants a CLN she can just go and renounce and get one, and just forget about the IRS. NO FIVE YEARS OF COMPLIANCE IS NECESSARY. That is a myth that is perpetuated on this website by numerous commentors.
It is wrong to suggest that a Canadian in such circumstances must comply with the IRS. A myth.
Tortured is Canadian living in Canada subject to the laws of Canada compliant with Canadian law, not living in the US and not under the jurisdiction of the United States.
Not sure if this
has been answered or not but does one have to have a SSN to renounce.
To file five years taxes & the 8854 after renouncing, which I understand is required in the following year, one would need a SSN to file these.
Further to that you could still be taxed after renouncing & obtaining your CLN….. Is that correct?
@ Tortured,
No, you do not need an SSN to renounce. There is no request for SSN on the forms you fill out. The forms (DS-4079 questionnaire) do ask for your US passport number, but if you never had one, you never had one, and it’s no big deal (it’s no problem at all).
Some people were asked for their SSN at Toronto. I’ve no clue why they were asked, as they didn’t ask me, and, as I said, it is not required by Dept of State. I do know that the Toronto staff are quite understanding of the situation Accidental Americans and long-ago relinquishers are in. So, I suspect if you never had one, they don’t make a fuss about it.
Yes, if a person is going file taxes, they need an SSN or equivalent (I think it’s called a ITIN?) to do that.
If a person renounces, their tax obligations end the day before they renounce (exit tax, if applicable,is based on the day they renounce) and they can incur no new tax obligations. Unless if they have US income after that date, their US income is taxable, but that’s the same for any person who is not a US citizen.
Tortured. Do yourself a favour. Forget about SSNs. Forget about filing tax returns. There is no need.
In your case, because of the bank, you may desire a CLN. That doesn’t mean that you need to file anything with the IRS.
@Tortured, you do not need an SSN to renounce or relinquish, it’s simply not required. However, the questionnaire I received from the US embassy in Bern did have a place to put your SSN – IF YOU HAVE ONE. I couldn’t remember if I did so I put that on the form and when I went to renounce the lady at the counter said they’d actually dug it out from a previous passport application I’d made. She even kindly gave me a note of the number on a post-it slip.
You don’t need one, you don’t need to file taxes so why would you need an SSN? As Petros says, stay out of the US tax system. Relinquish if you can, otherwise renounce and celebrate your freedom. Forget the IRS even exists.
IRS… sounds familiar. Isn’t that Irish Rheumatology Society?
@ Tortured,
MedeaFleecestealer said:
“Forget the IRS even exists.”
And IRS doesn’t know you exist.
@Petros and all,
I do not understand why some here consider it a myth that Tortured is not required to file 5 years of tax returns after renunciation. I am in the exact same boat as Tortured, so would definitely like to be convinced that her situation is as simple as just paying 450 bucks for a CLN.
From Moody’s tax advisors: Form 8854 is filed with a renounced individual’s final year return. On “Form 8854, the renouncing individual must affirm under penalties of perjury, that he is compliant with U.S. tax and filing obligations for the period of five years preceding expatriation. ”
So, if I am understanding Petros, and others, as long as Tortured does not file 8854, then she will not have perjured herself, and since the renunciation process is separate from the filing process (and thus renunciation does not involve filling out form 8854), she can renounce, get her CLN, and not bother with 8854 at all.
There must be a catch! It sounds too easy.
@WhiteKat
On the actual 8854 form, it’s a Yes/No question. So one can answer “No” without perjuring oneself.
FWIW, I read somewhere today that there’s a $10,000 fine for not filing 8854 after renouncing. (why am I not surprised)
So from what I can gather, in theory, a person could renounce, NOT be tax compliant for 5 years, fill in and send in a truthful 8854.
As long as the person is comfortable with being a “covered expat”, and what that entails, that is an option.
@whitecat, Hi, I said it was a myth that a Canadian in such circumstance would have to comply with 5 years, FBARs, etc. The myth is created by the IRS and the tax compliance industry. Here are my assumptions regarding Tortured: is a Candian since birth; was born in the US to Canadian parents and moved back to Canada many decades ago; has a US passport; has no assets in the United States; has no relatives in the United States; has never entered the US tax system.
Here are the questions you need to ask: What are the consequences for not complying after renunciation? Answer, the IRS can apply a $10,000 fine for failure to file 8854. They will name you a “covered expatriate”. They can also assess an assumed tax liability. They can assess a stiff tax liability to anyone who inherits from a covered expatriate (if that person is living within the jurisdiction of the United States. But here is the thing: Tortured is a Canadian since birth and the CRA will not collect for the IRS taxes (or fines) from a Canadian citizen. Thus, the IRS has no collection mechanism. Tortured will not likely leave anything in her will to a US resident, so there are literally no consequences for not entering the US tax system, in her case. The IRS has no means of collecting from her because their only way to collect from a resident of Canada who has no assets in the United States is by seizing or withholding US based investments or dividends, because the CRA will never collect US taxes from a Canadian citizen.
Secondly, it is a myth because a US person has the RIGHT to expatriate, and there is no prerequisite of tax compliance. So she can do a relinquishing act like taking up arms against the United Stats or doing an act of treason against the United States (with the intention of relinquishing her US citizenship), and inform the Consulate of this act, and then receive a CLN, no tax compliance required. Not five years, not two years, not even a single 1040 or 8854. Once she renounces or commits another relinquishing act, she is entitled to a CLN and the State Department is supposed to issue it.
@ White Kat,
I feel there’s no definitive answer. By law, a person must file the 8854 and the five previous years to avoid being a covered expatriate and a $10,000 fine. In reality, IRS does not have the resources to pursue minnows who are not “in the system” and have no assets in the US. So, it comes down to an individual decision, some people are comfortable not filing, some are not.
@WhiteKat and Tortured,
I, myself, would not be doing that if I had plans to go back and forth across the border as my Canadian passport shows that I was born in the US. All comes with calculated risk for whatever our decisions. That’s why we must all do our individual homework and know exactly all possible consequences of our decisions.
You both have Canadian passports that do not show a US place of birth — your luck of the draw.I see I’m off track on that — you were both born in the US as I was. It is my son who had the luck of the draw to be born in Canada so his Canadian passport shows Calgary as his place of birth. I guess your luck is that you were not registered with the US and do not have a US SSN. Should you decide to renounce, you will have a CLN to prove to your bank, should you be asked, that you are not a US citizen. In the process of renunciation, you will be advised, verbally or in your documentation that you are to contact the IRS. It is not, at this point anyway, part of the renunciation / CLN process. Really, you are Canadian, both born here.Will your future put you into any jeopardy for crossing the border?
Your risk is less than for any of us born in the US.Don’t cross that border; don’t hold any US securities; don’t cross-border shop; don’t be a snowbird; don’t contribute to the US economy in any way — you don’t plan to live there or to work in the US; there are lots of other countries in which you can vacation, even planning your itinerary to never to fly OVER the US in case that’s a problem. Many of us have family in the US and the only reason for many of us to ever again cross the border again is if one of them is sick or on a death bed. Will a negotiated IGA with the US change all of that — we don’t know. My bet would be no. We just ain’t that big a catch.In the end, there are no guarantees but there are risks some of us may be able to live with given knowing the possible consequences. I know how I will handle my son’s situation. I know my FBARs identify him and the RDSP account I hold for him. I feel he could safely cross the US border with anyone who is not a US citizen or shows a US place of birth on a passport. I’ve planned the course of action I’ll take in the unlikely event his registered Canadian bank accounts become an issue. I have the word of my US tax lawyer that he will represent my son pro bono should the US ever be so stupid to make his crossing the border an issue. I’ve done all I can do or will do if necessary in my family’s case. I need the peace of mind I’m done with it all as much as I can be. I have better use for the rest of my life as a Canadian.
In the meantime, I will continue to communicate with my Canadian government that we do not want Canada to throw Canadian US Person citizens and residents under the bus as collateral damage for the blackmail of the US to Canadian financial institutions. There have to be better solutions for finding US tax evaders, who not very likely reside in Canada — most will actually reside in the good old USA.
http://immigration.about.com/od/immigrationbasics/a/ITIN.htm
You do not need a SS number to renounce, but are required to use a SS number to file taxes while still a US citizen. After you renounce you need a taxpayer identification number, you can seen in the application for this number with you tax forms attached (if you wish).
Tortured, since you have a US birthplace, and if you plan to ever leave Canada for any reason, you should probably get a few legal opinions on the whole compliance thing but you can renounce prior to making your decision.
Petros’s point, and it’s a valid one, is that right now, the USG and the IRS have no idea that you exist. They really aren’t combing through birth records and matching them up to suspected USC’s in Canada. FATCA is actually one of the many ways they are implementing to try and data mine of other countries for possible USP’s to tax, subjugate or whatever. At the moment, you are invisible. Renouncing puts you on the radar via the State Department but for now, it’s not really clear just how well they are matching up their records. For all the talk about surveillance of citizens, my guess is that gathering data is one thing but sorting and cross-matching and then putting it to use by the various entities that make up the behemoth that is the USG is another matter completely.
However, just because they aren’t hunting us down one by one doesn’t mean it won’t ever happen, maybe, at some future point.
So it comes down to risk and what you can tolerate. The CRA is not acting on the behalf of the IRS and as of now, there is nothing in our tax treaties with the US that would ever make this a possibility.
You can renounce without being compliant and decide what to do after. Even without a SS, once you are a non-citizen, you should be able to get a ITIN for filing purposes. The IRS wants you to file, so I would consider it unlikely that they would say no to a ITIN request from a former citizen who never had a SSN.
You could also adopt a wait and see. As a dual from birth, you aren’t overly likely to be covered and probably don’t owe any tax in the last five years. You could just sit tight for a bit. See how things play out and then decide.
@Petros, Calgary411, Pacific777, Tdott,
Thanks for your comments.
New post from Phil – addressing one of the questions that comes up here a lot in one form or the other:
‘Deliberately Choosing Covered Expatriate Status’
http://hodgen.com/deliberately-choosing-covered-expatriate-status/