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
@Medea, thanks for the thought. I was thinking to put everything in one as you say, but I fully expect it to be flung back at me directing to different departments at different times.
@iota, a trip to Amsterdam definitely sounds preferable than dealing with the Embassy here in the UK. I have not found them to be too friendly. Though in fairness it seems like a miserable place to work, I would probably be grumpy too.
Oddly enough the IRS person based in the London embassy (before the office closed in September), had told me not to do anything in regards of my renouncing, in his words ‘the IRS doesn’t care about you.’…
Morally and logically, I am indeed strongly inclined to just do nothing now, my worry is that the USA are not really moral or logical on these things, and that they love to fine and tax people. Unfortunately, as mentioned before, it is not really viable for me to decide not to go back to the USA at any time under any circumstances…
I have all the documents pretty much filled out in a way that I think is accurate, and I am a ‘small fry’. Just really worried that the US will look for and find some small flaw, or that there will be things I didn’t know about, and that they will latch on to them and persecute as soon as I put myself onto their system. Really just a decision I have to make and be prepared to face any unjust consequences for.
Chris: iota has it right. You are invisible to the IRS. You are completely covered by an in penetrable force shield.
By not filing a 8854 or 5 yrs. of taxes or both you become a covered expat.
This means almost nothing to you “it means a lot if you had been in the system, had been wealthy, and had moved offshore to avoid US taxes.
As far as travel is concerned, before you could be stopped there would have to be a final determination that you owed 50K in US taxes. Not much chance of that. Homeland security will stop you if had recently been to Iran but that’s about it. Good luck.
Chris Go to the sidebar and read Mona LIsa’s posts. She worried and fretted for 2 years and spent a small fortune and upset her husband all to try and do every thing perfectly. She filed reams of pages about pfics. She now realizes she was taken to the cleaners by the accountant. She could have done nothing or next to nothing and been much better off.
“As far as travel is concerned, before you could be stopped there would have to be a final determination that you owed 50K in US taxes. Not much chance of that. Homeland security will stop you if had recently been to Iran but that’s about it. Good luck.”
There is the chance of being refused a visa, however. There doesn’t seem much that can be done to guard against this possibility. Even with a clean exit (all back-years and 8854 correctly filed) you can still be denied a visa, if I understand correctly.
@Chris – I agree you can’t trust them an inch, but the upside is that it’s not easy for them to enforce collection outside the US, so it has to be worth their while for them to spend the time and money to try. You’ll probably never hear from them once you’ve completed the filing.
Regarding the TIN number application – for what it’s worth, there is a page of the IRS Manual which says:
If a Streamline return is received without a TIN, search the package for a valid TIN. If no TIN is found, route the package to Entity Control for an IRSN.
Note:
An IRSN must be assigned before the package can be routed to Statute.”
https://www.irs.gov/irm/part3/irm_03-021-003r.html
Entity Control, doncha just love it? That page may or may not be applicable, I have no idea, but if it does apply, it seems consistent with Medea Fleecestealer’s suggestion about putting the TIN application in with the forms in the Streamlined packet. Perhaps including a note of explanation.
@Chris, there’s also info on the ITIN here:
https://www.irs.gov/Individuals/International-Taxpayers/Obtaining-an-ITIN-from-Abroad
I’d still go with bunging it all in together and sending it to the IRS. This stupid law has caused you heartache, worry and money so no reason not to at least help overload the system.
It’s actually stated in the Streamlined instructions, I just discovered:
“If you are not eligible to have a Social Security Number and do not already have an ITIN, submit an application for an ITIN along with the required tax returns, information returns, and other documents filed under these streamlined procedures. See the ITIN page on http://www.irs.gov for more information.”
But note the Streamlined instructions also say:
“Submit payment of all tax due as reflected on the tax returns and all applicable statutory interest with respect to each of the late payment amounts. Your taxpayer identification number must be included on your check.“
Probably advisable to write identifying information on the back of the cheque lest it go astray.
Thanks iota and Portland. Glad there are people here to bounce things off!
@Portland, I have been doing yet more research. My concern about not filing an 8854 of any kind is that there is a statement in the 8854 instructions, that says:
Until you file Form 8854 and
notify the Department of State
or the Department of Homeland
Security of your expatriating act, your
expatriation for immigration purposes
does not relieve you of your obligation to
file U.S. tax returns and report your
worldwide income as a citizen or
resident of the United States.
So my biggest worry (more so than a possible $10k fine) is if this is interpreted as meaning I am still obligated to US taxes until an 8854 is filed, then in twenty years time, they could turn me up and ask for twenty years worth of cash (including from home sales etc). Does anyone know anything about this filing of the 8854 and whether not filing means you remain tax obligated?
You can definitely apply for a TIN as part of Streamlined process, sent to same address as for Streamlined. I am not sure if you can file an 8854 at the same time though.
Technically it seems that you should file the 8854 with the 1040 for the year in which you expatriate, and send a copy to the IRS Department of Treasury, so that would logically imply to put the 8854 in with the Streamlined, but then the Streamlined office address is a very different department to the ones that usually process 1040s…
@iota, it’s a sad indictment that I would (begrudgingly) file this without too many concerns/questions asked if I thought the US government could be trusted to act in a reasonable and cooperative way. As it is, to be safe we all have to operate as if the US Government has no moral standards and is trying to screw us.
“@iota, it’s a sad indictment that I would (begrudgingly) file this without too many concerns/questions asked if I thought the US government could be trusted to act in a reasonable and cooperative way. As it is, to be safe we all have to operate as if the US Government has no moral standards and is trying to screw us.”
The IRS may not have moral standards but it does have a budget – a very strained budget. They’re trying to screw people it’s profitable to screw – the ones who qualify as covered expatriates because they are rich and very taxable. They can’t afford to go after you and me.
As for demanding taxes after twenty years, remember they don’t know your income details, your bank details, or even your address unless you tell them by filing. Twenty years from now you’ll still be as invisible as you are today.
However, I don’t want to sound like I’m advising you not to file. I’m just saying – if I had no number and was unknown to the IRS, I wouldn’t file. Unfortunately, I do have a number and they know my banks, so I will complete the filing. But that’s the only reason.
Chris,
Phil Hodgen has a lot regarding the 8854 at his blog if you want some further reading on the subject.
Here is a good introduction from 2012: http://hodgen.com/why-people-expatriate/
In http://hodgen.com/chapter-4-are-you-a-covered-expatriate/, he says:
Discussion on what may happen if 8854 filed late: http://hodgen.com/form-8854-help-for-a-possibly-late-filing-expatriate/
And, discussion for some deciding to purposely be deemed a Covered Expatriate: http://hodgen.com/deliberately-choosing-covered-expatriate-status/
All 8854-related posts at Phil Hodgen’s blog: http://hodgen.com/?s=8854
Hodgens comments are all well and good. Don’t forget he earns his living filling in the forms for others. His bias is always to fill in every line of every form.
When it comes to 8854, I agree with Phil Hodgen. If filing the form at all, best to provide correct, defendable answers to every question, even if the answer has to be a zero. It’s a pain in the neck but it also is part of your defence, should there be further retroactive tax laws.
@Chris
As you can see, there are a number of options that different people have chosen, but in the end, only you can take the right choice of action for you. That choice will depend on things like your income, assets, how risk-averse you are, and whether future travel to the US is a nice-to-have or a must-have. I’d say the most important thing is to fully understand the ramifications of your choice.
W.R.T. Streamlined: AFAIK there have been no reports of anyone getting negative or unexpected results from it. It appears to genuinely be a mechanism for getting into compliance, in order to carry on filing indefinitely into the future or cleanly exit the silly system via renunciation (relinquishment) and 8854. FWIW, I did Streamlined in order to be able to renounce – no regrets.
I’d add that if you do want to get compliant, and are unwilling or unable to pay a professional, and either cannot or will not attempt to file 100% correctly, then I’d say think about what others have suggested re fling 1040-EZ, 2555-EZ (income permitting), and ignoring PFICs, foreign trusts, etc.
Lastly here is my standard blurb that I post on this. It’s somewhat aimed at Canadians, but also has non-Canadian specific stuff. FWIW, I am biased towards making a clean exit in order to have maximum flexibility and minimum worry in the future, reasonable people have different biases.
=======================================================
If you are considering renouncing without filing those 5 previous years of returns, note that 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. Note that the IRS is supposed to get a copy of your CLN from the State Department.
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 pensions and RRSPs 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. [Note: because a RRSP is neither a real pension, nor a traditional investment vehicle, it is not entirely clear to me if it’s taxed on gain or total]
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 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).
Chrs@: “Does anyone know anything about this filing of the 8854 and whether not filing means you remain tax obligated?”
I’ll defuse this one for you — the answer is no, you don’t remain ‘tax obligated’ in future either way. If you look closely at where you found the warning passage you quoted from the form 8854 instructions you’ll see that it’s in the section that only applies to expatriations between Jun 04 to Jun 08. Because you expatriated after that your own future annual US tax obligations expire as of the date you expatriated at the embassy. For you, filing 8854 later is just tying up the ribbons and bows. Hope that helps.
Does anyone think that waiting seven months+ is a long time for a CLN? In other words, is the backlog from CA basically impacting the world’s cases of relinquishment/renunciations?
Thanks
I received the best Christmas present ever today – my CLN! I relinquished on September 25, 2015 in Montreal and received the package today, December 29, 2015. The documents were signed by the State Department on November 15, 2015.
My case is a documentation of a relinquishment which took place in September 1974 when I became a Canadian. I had a letter from the then US Consul General stating that I would automatically loose my US citizenship as soon as I became a Canadian. I finally decided to apply for my CLN in case the bank or my investment advisor asked. While I had to go to Montreal, I got an appointment within two months. Turned out my appointment was in the nick of time – no fees involved.
A big thanks to everyone at IBS for all your support. I will file an update on the Consulate Report Directory once I calm down. I’ll also get multiple copies notarized and put the original away in my safety deposit box.
Congratulations! Wow, that was fast. It gives me hope. I became a Canadian citizen in 1974 as well. I attended the Calgary consular office in October of this year to formalize and get my CLN. I’m hopeful that the process is as seamless and quick for me as it appears to have been for you. Again,….congratulations on your freedom!
Congratulations on your relinquishment with no fees! And, fast receipt of your CLN. Good luck on your next steps — and thanks for letting us all know. Your report will be encouraging to many others.
@Proud Canadian, what a lovely slightly late Christmas present to get. Congratulations! Great way to start 2016.
Does a CLN have to be picked up from the embassy in person, or can you have it mailed to you?
@ amer1can
My husband gave the consulate a self-addressed, pre-paid, Xpresspost envelope and they used that to mail him his CLN. However, if you want to pick it up I’m sure they would oblige.
@amer1can
My CLN was mailed from the U.S. Department of State to my home address. I think this is standard procedure.
@Proud Canadian
Congratulations. You are so lucky to get a relinquishment free of charge before the deadline! Sounds like a good idea to get notarized copies. I’ll do this as well with my CLN.
Yes, in the instructions, the US consulate will ask you to provide a self addressed, pre-paid, express post envelope to receive the CLN from State Department.
I didn’t give em anything and they just mailed the CLN to me by registered mail at their expense. I would think this should be standard procedure in view of the ridiculously high fees they are now charging. Probably should pay your return air fare to the consulate too!
The kind assistant I worked with in the US Embassy in Eastern Europe I renounced in said the certified mailing/recorded delivery of the CLN (as well as your cancelled passport) was all part and parcel of the $2,350 fee.