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. Thank you, Calgary. I have been a nervous wreck ever since I found out about these matters concerning U.S. citizens abroad. Now I am no longer a U.S. citizen – just a broad.

2. I am confused now. I had filed my returns regularly, and sent in the FBARs, and I have now renounced. I need now to file 2013 1040NR with 1040 as a schedule attached to it, and 8854. Because I have US income, I will declare that on the 1040NR, for every year of the rest of my life. Is that correct? I have Social Security, which is covered by a ‘totalisation’ agreement and only taxable in the UK where I am resident; and I have a Civil Service Retirement annuity, gained through a divorce settlement, but treated as if it were mine from work. So far so good. As for the 8854, I just figure the value of my assets if sold on the day before I expatriated, fill it in, and that’s done? How is that different from what I would have to report as a covered expat? I still have to bare my soul, even if I am not liable for the exit tax, either because of my paltry net worth or because of compliance. Or do I not have to complete sections 4 and 5 of the 8854? There’s no advice anywhere for ‘uncovered’ expats that makes a distinction, so I must have misunderstood something.
   Incidentally, I found a procedure for filing late that is more lenient than what has been threatened previously. If only FBARs, just file them with a letter explaining why you didn’t and citing this procedure which promises no penalties. Streamlined filing for those (only those) who have not filed tax returns or FBARs. Two other categories for other situations. (I searched on the IRS site, I think.) I have not had any response yet, but the SOL is long. Maybe they haven’t got to my post yet.
   I’d appreciate your collective wisdom on the 8854 question, though. My tax man in Idaho doesn’t want to do this, because he hasn’t had enough experience, and suggests we work with a tax attorney. I don’t really want to pay for that, if I don’t have to.

3. Rev Susi,

   I believe you will report your US Social Security income on your UK tax returns. The Civil Service Retirement Annuity — UK or US?

   Your reporting as a “covered expatriate” does not end with the 8854 and may subject you (not in your case!) to the Exit Tax. You will be deemed a “covered expatriate” if you do not file the, yes, dreaded 8854. Your renunciation was this year, correct? You will not file your last 1040 / 1040NR until June of next year.

   Here is some information I sent to someone regarding 8854 issues, which you may or may not find useful.

   As I understand it, one does not have to have filed all required tax returns before renunciation. But, after renunciation, in order to complete everything, all tax returns “must” be done, as you complete one more form, IRS 8854 – to determine whether or not you will be a “Covered Expatriate”.

   [ For you: 1) Get CA Citizenship; 2) Relinquish (When you relinquish, you are essentially applying for that Certificate of Loss of Nationality. It is sent from the Consulate at which you relinquish to Washington, DC for determination. Some have gotten their CLN in a few months; others up to a year; 3)File 8854 by June 15 of the year following (as attachment to the last return for the partial year in which you relinquished (see some Phil Hodgen comment on Covered Expatriate definition; 8854 below. Note: The important thing is you don’t have to be in tax compliance for 5 years at the moment you relinquish, nor at the moment you file your expatriation forms at the consulate. You only have to certify you’re in 5 years compliance when you send in your 8854 by June 15th of following year.

   Q: If one relinquishes, I have heard that you would have to pay an exit tax….is that correct?
   A: Depends. See below for discussion on how to make yourself an “Covered Expatriate” and become eligible for the Exit Tax. You do not want to become part of that club if at all possible. ]

   Your son, I believe, having been born in Canada, never having lived in the US will not be a “Covered Expatriate” even if he exceeds $2 million of “Net Worth” with Form 8854. He must, though, complete requisite number of back US tax returns, certifying that he is up to date on his tax responsibilities. See reference to Dual Citizen from Birth below

   You can refer to the link just below regarding more on the Exit Tax, 8854, etc. There is also discussion after my comment at http://isaacbrocksociety.ca/2012/01/13/ask-your-questions-about-renunciation-and-relinquishment-of-united-states-citizenship-discussion-thread/

   calgary411
   December 11, 2012 at 10:22 pm
   @Lord Jim,
   You may want to have a look at this: http://www.stepjournal.org/journal_archive/2011/tqr_september_2011/advising_us_citizens_and.aspx

   This article sets forth the questions practitioners should ask their clients who have an interest in expatriating. These questions will allow the practitioner to elicit information necessary to advise clients properly regarding their exposure to the US exit tax.

   Phil Hodgen’s is emailing chapters to a draft version of his Exit Tax book, and information related to it. His email address is phil@hodgen.com if you want to try to ask him that specific question. (I couldn’t find the answer to that specific question there.)

   He also has a discussion on Exit Tax here: http://hodgen.com/exit-tax-is-a-one-time-tax/

   @commenter,
   I believe Lord Jim is trying to guesstimate if he will be a deemed a Covered Expatriate by determining formula to get the PRESENT VALUE of his Defined Benefit Pension and then determine if that amount added to other assets puts him over the $US 2 million threshold. There is very little useful information I’ve found to answer this question from what I’ve tried to find.

   And here is a comment I posted a year ago on the usefulness of help from the IRS:

   Thought I would pass this along: I just got this message from the IRS EMail Tax Law Assistance…
   There should be someone in the IRS U.S. expats are able to get “expert” answers from in making life-impacting decisions. To be safe, at least for the questions I ask, I need to hire professional help. This is cost-prohibitive for many / most.

   From: TaxHelp@hal1.ausc.irs.gov
   Sent: Tuesday, October 18, 2011 8:18 AM
   Subject: IRS Email Tax Law Assistance

   NOTE: Thank you for your inquiry. Our response to your tax law question appears below. I hope this information has been helpful. If you have a follow-up question or another general tax law question, please return to our web site at: Internal Revenue Service.

   Please do not use your “reply” button to respond to this message. More helpful information is provided at the end of this message.

   Your Question Was:
   In determining if I DO NOT meet the qualifications for the EXIT TAX if I renounce my U.S. citizenship, how are the following valued?

   1)The value of my home (gain since purchase?)

   2)The value of my Canadian Defined Benefit Company Pension (present value or a value in the future?)

   Thanks very much for this needed information.

   The Answer To Your Question Is:
   Thank you for your inquiry of October 13, 2011.

   Unfortunately, your question regarding the valuation of assets for the purposes of determining your responsibilities regarding expatriation is beyond the scope of the service we intend to provide, due to its highly complex nature. The Internal Revenue Service’s tax law service is intended to work in partnership with the professional tax preparation community. Thus, we refer taxpayers to that resource when their questions involve complex issues and situations. You may want to seek the services of a tax attorney, certified public accountant or other tax professional. You may also find assistance in Publication 519, U.S. Tax Guide For Aliens, and in the instructions for Form 8854, Initial and Annual Expatriation Statement. We’re sorry for the inconvenience. You can find all U.S. forms and publications on our website Internal Revenue Service. If you need further clarification of these questions or you would like to ask additional questions you can submit another email or you can call the international help line Monday through Friday, at 267-941-1000 from 6:00 am to 11:00 pm EDT. This is a toll call. From inside the U.S. you can call 1-800-829-1040.

   We hope this answer is helpful to you. Thank you for using our service.

   We are interested in your opinion and providing the best possible service to you. Please take a moment to answer our survey at: Customer Satisfaction Survey

   This answer is based on our understanding of the facts you presented in your question. Omission of facts may affect the answer given.

   Here’s a tip for navigating the IRS web site. Use the “search” button at the right side of the web page. Enter key words or phrases for your topic in the entry box.

   Our basic Electronic Tax Law Assistance service is designed to assist the general public in complying with their Federal tax obligations by helping them with questions they have about the tax law and procedural issues. Our goal is to provide complete and accurate responses to as many taxpayers as possible.

   If you have additional questions, you may contact us either by phone at 1-800-829-1040 or by email through our web site Internal Revenue Service.

   EMPLOYEE ID: 1000198461 Mr. Cahill Tel.:English–(267) 941-1000 Spanish–(800)-829-1040 msg#: 1860903

   Much more useful than the IRS Help persons:

   The Exit Tax (Draft) – Chapter 4

   I have written an ebook about the exit tax. You are getting this because you wanted an early copy. This is a beta version. (That’s 21st Century language for “it’s a draft, not the final manuscript”.) Please tell me about stuff that should be fixed.

   Chapter 4. Are You a Covered Expatriate?

   A Covered Expatriate is an Expatriate who is too wealthy, paid too much in Federal income tax, or failed the paperwork requirements in some way.

   Section 1. Certification Test
   You will become a Covered Expatriate if:

   You are not up to date with all of your Federal tax obligations; or
   You are late filing Form 8854 after your expatriation event; or
   You tell somewhat less than the truth on your tax returns or Form 8854.

   Certification
   Specifically, you will be a Covered Expatriate if you:

   “[fail] to certify, under penalties of perjury, compliance with all U.S. Federal tax obligations for the five taxable years preceding the taxable year that includes the expatriation date, including, but not limited to, obligations to file income tax, employment tax, gift tax, and information returns, if applicable, and obligations to pay all relevant tax liabilities, interest, and penalties (the “certification test”). This certification must be made on Form 8854 and must be filed by the due date of the taxpayer’s Federal income tax return for the taxable year that includes the day before the expatriation date.”

   Prior Five Years
   The IRS wants to know that you have tax returns on file and you have paid all of your taxes (all types) for the five years before the year of expatriation. If you do not have tax returns on file, your first job is to get that done, even if you had no requirement to file, because (for instance) you had zero income.

   File Form 8854 On Time
   The certification must be made on a timely-filed Form 8854.

   Form 8854 is filed as an attachment to your expatriation year tax return.

   For people living outside the United States, the filing deadline for a U.S. income tax return is usually (but not always) June 15. You can also get a six month extension to file your tax returns. This means if you have a June 15 filing deadline, you can have as late as December 15 to file a timely income tax return.

   Absolutely file on time. If you do not, you automatically become a Covered Expatriate.

   Someone who is “too poor” to be a Covered Expatriate—even someone who paid no income tax and has a zero net worth—will nevertheless be a “Covered Expatriate” if Form 8854 is filed late.

   Certifying What?
   The certification requirement applies to all Federal tax obligations, including information returns. Conceptually, then, this means all Title 26 (Internal Revenue Code) obligations are included in the certification.

   What about obligations such as Form TD F 90-22.1, reporting signature control or a financial interest in foreign financial accounts? These are obligations under Title 31, and thus arguably someone out of compliance for filing these forms would nevertheless be able to certify compliance with his or her Title 26 obligations. This is an area of speculation and caution is urged until additional guidance is issued by the Internal Revenue Service. My suggestion is that you don’t get clever and attempt to skate past anything. You are trying to make a clean break with the United States.

   Section 2. Net Worth Test
   The most common way to become a Covered Expatriate is by having a net worth of more than $2,000,000. This is the “net worth” test.

   The $2,000,000 figure is not adjusted for inflation.

   The method for determining net worth is described in Notice 97-19 issued by the IRS.

   What You Include

   Assets
   The assets that you look at are “any interests in property” that would be taxable as a gift if you gave them away the moment before you expatriated. Look at the gift tax rules to see if you would trigger a gift tax by giving the assets away.

   An “interest in property” is a carefully defined term. It does not matter whether the property produces income or not. It includes the right to use property, as well as ownership.

   For purposes of your analysis, you treat the assets you can give away as part of your balance sheet. However, gift tax exemptions and deductions are ignored in calculating net worth. These include the annual exclusion, transfers to certain minor’s trusts, transfers for certain medical and education expenses, the exemption for certain waivers of pension rights, and the exclusion of certain loans of artwork. In addition, the gift splitting, gift tax charitable deduction, gift tax marital deduction, and limitation on deduction rules are ignored for the net worth test in determining Covered Expatriate status.

   Liabilities
   Since it is a balance sheet test, you include debts as an offset to calculate your net worth. If you have a $1,000,000 house with a $600,000 mortgage, your net worth is $400,000.

   How to calculate value
   The method of establishing value is established by Section 2512 and regulations issued under that Section. These are the gift tax rules.

   If you are thinking of using valuation discounts to reduce the value of the assets you own, too bad. You cannot invoke prohibitions or restrictions as a method for creating discounted value.

   You may use good faith estimates of value. Formal appraisals are not required when you are determining whether you meet the $2,000,000 net worth test.

   Beneficial interests in trusts
   If you are a beneficiary of a trust, you must calculate the value of that beneficial interest to determine whether you reach the $2,000,000 threshold for being a Covered Expatriate.

   The process of establishing the value for a beneficial interest in a trust requires an allocation of assets among all beneficiaries, followed by a valuation of the would-be expatriate’s beneficial interest.

   Allocation among beneficiaries
   First you will go through an allocation process.

   Look at all the assets in the trust and allocate them among all the beneficiaries or potential beneficiaries of the trust. This is a “facts and circumstances” process. Look at the terms of the trust document. If there is a letter of wishes (or similar document), consider that, too. Look at the way trust distributions have been made in the past.

   You are also instructed to consider the “functions performed by a trust protector or similar advisor.” To say this is unclear would be an understatement.

   If, after looking at the documents, prior distributions, and the trust protector’s powers, you cannot determine the identity of the beneficiaries to whom the trust assets should belong, there is a default method for allocating ownership. You use the principles of intestate succession (use the trust settlor’s death as the starting point) as contained in the Uniform Probate Code. Whatever percentage you would inherit under the Uniform Probate Code is the percentage of trust assets you are deemed to own for the exit tax calculations.

   Valuation after allocation
   Once you have decided the identities of the beneficiaries who are deemed to own the trust assets, apply the valuation methodologies of Section 2512 (and the regulations under that Code Section), without regard to prohibitions or restrictions on the interest in the property.

   Section 3. Net Tax Liability Test
   A Covered Expatriate is someone who is sufficiently rich for the IRS to care about. (That’s a joke, not a statement of tax law.) Someone who pays a lot of income tax must be rich, at least according to the IRS.

   $151,000 or more
   Look at the five years of income tax returns you filed before the year of expatriation. How much Federal income tax did you pay each year? Add the five years’ amounts together, and divide by five. That is your number.

   If the amount exceeds $151,000 (this is the current threshold) you will be a Covered Expatriate under the net tax liability test.

   The $151,000 amount is indexed annually for inflation.

   It is not simple
   If only it were as easy as looking at a line on the last five years of Form 1040, doing a quick addition and dividing the result by five. Unfortunately, unnecessary complexity raises its head here.

   “Net Tax Liability” Redefined
   The rule to apply here is from Notice 97-19, Section III, 1997-1 C.B. 394. Even though this Notice applies to the prior expatriation tax regime under Section 877, it explicitly is applied to the current rules under Section 877A as well.

   For purposes of the tax liability test, an individual’s net U.S. income tax is determined under section 38(c)(1). This means you will need to look at your tax returns for the five years before expatriation and make the adjustments required.

   Married Filing Jointly
   An individual who files a joint income tax return must take into account the net income tax that is reflected on the joint income tax return for purposes of the tax liability test.

   This is not fair, but rules are rules. Let’s say you (but not your spouse) will expatriate. If you and your spouse filed joint tax returns and paid $200,000 per year of Federal income tax, you would think the logical (and fair) thing to do would be divide by two, and treat you as if you paid $100,000 of Federal tax per year. You would be wrong.

   Part of the planning I do with people who plan to expatriate is to get them started with filing “Married Filing Separately.” That $200,000 of tax liability is then unambiguously a $100,000 per person net tax payment each year.

   Section 4. Exceptions
   If you fail the Certification Test to become a Covered Expatriate, there is no way out of that status. You are a Covered Expatriate. You are subject to the full brunt of the exit tax rules.

   But if you become a Covered Expatriate because you have a net worth above $2,000,000 or you paid more than $151,000 of income tax on average over the prior five years? There are two exceptions. One might work for you. Satisfy one of them and you will be a mere Expatriate with a paperwork problem. You will not be a Covered Expatriate with a tax bill to pay.

   Dual citizen from birth
   Regardless of your financial status, you are not a “Covered Expatriate” if you satisfy all the following items:

   You became a U.S. citizen at birth; and
   You also became a citizen of another country at birth; and
   On your expatriation date you “continue” to be a citizen of that country; and
   On your expatriation date you “continue” to be taxed as a resident of that country; and
   On your expatriation date you were not a U.S. resident for 10 of the 15 tax years that end with the year that you expatriated.
   Note, however, that you will still have to certify that you are up to date with all U.S. tax requirements. Failure to do so will render you a Covered Expatriate even if you satisfy all the dual citizenship requirements.

   Relinquishes citizenship before 18 1/2
   The second way that you can cease to be a Covered Expatriate is by relinquishing your U.S. citizenship before age 18 1/2.

   The specific requirements you must satisfy in this situation are:

   You relinquish your U.S. citizenship before age 18 1/2; and
   You were not a U.S. resident for more than 10 taxable years before the date of relinquishment.
   By relinquishing citizenship before age 18 1/2 you will avoid the impact of the net worth or net tax liability tests. But you will still be required to certify full compliance with all U.S. tax requirements, and failure to do so will render you a Covered Expatriate.

   Copyright © 2012 HodgenLaw PC, All rights reserved.
   You are receiving this email because you opted in at our website http://hodgen.com. We send you information about giving up U.S. citizenship and green card status only on this list. We never use it for anything else, and we never give your email address to anyone else.
   Our mailing address is:

   HodgenLaw PC
   140 South Lake Avenue, Suite 248
   Pasadena, California 91101

4. …and a darn fine Canadian broad at that!! May you have a restful sleep tonight — you’re freer than you’ve been for some time now.

5. Good advice to WhatAmI and others to hold tight. Many will await the results of your Calgary “test case.” Thanks for joining us by commenting — very interesting and very important what you’ve presented. Thank you, Benedict Arnold be me.

6. @Benedict Arnold be me

   Do you believe they will back-date your CLN?
   If they had firmly rejected your case, and you then decided to do nothing and ignore the US, do you think your visit to the consulate would have exposed you to the IRS as a US citizen? That’s a fear I have.

   Looking forward to more details when you’re ready.

   If you swayed them partly with the argument that Stanford University told you that you weren’t a US citizen, then surely my history of being told by the US consul in Calgary must count.

   Both my parents are Canadian. I was born in the US and registered as a Canadian born abroad. So, dual citizenship since birth although it didn’t actually exist.

   Hey, I still maintain that I am not s USC because they told me so. I’m not going to do anything until and unless a bank asks for a CLN, which won’t be until next year. Even if I don’t hear from the bank and FATCA, I may try to get my back-dated CLN so I can do the Snowbird thing if I want. THat’s where I have the fear and question of the visit to the US consul exposing me to the IRS.

7. @banany,
   Congratulations – the long awaited CLN. Out of curiosity – how long did you have to wait for the CLN and what consulate did you use?

   I ask as I have been waiting approximately 10 weeks – I used the Vancouver consulate

8. All I can Add is I went in on April 10th (not may 10th) to relinquish…

   had a few arguments over interpretations…they suggested I renounce..I held firm = relinquish as of 1978

   The lady said she would analyze my argument (took her 40 minutes)

   Then she called me over to the Notary and gave me a thumbs up…

   The notary wouldn’t confirm as to the dating…though it should be my 21st birthdate in Sept 1978..(before that October 10, 1978 revision I quoted earlier)

   I will tell all once I see it to believe it…that’s all I can add at the moment…I believe it is up to interpretation and timing…so I wait for the results

9. @WhatAmI & Benedict Arnold

   WhatAmI – my history is almost the same as yours. Born in the US to Canadian parents who came back to Canada when I was a child. Never had a SSN, Never thought of myself as American. Hadn’t even visited the US in decades. I found out about all this stuff over a year ago. I did end up getting a SSN & I filed 3 years of taxes. 2012 is behind me now too. So 4 years down – I will renounce in January, & file my 2013 year to make it 5 full years. If I had been told personally years ago by a US consulate as you were that I was not American I’m not sure I would have gone that route.

   I am very interested Benedict in your experience. Even though many did not have specific direct contact from US sources telling them they were not US, certainly those types of things happening contributed to influence basic public understanding of US citizenship.

10. Benedict,

    It is your good fate that you claimed relinquishment at the Calgary US consulate rather than the Vancouver one. Good for you in not backing down and into renunciation instead. Good for Calgary for really analyzing your claim and finally giving a thumbs up. The differences in those two consulates seem, to me, vast — which really shouldn’t be so. Your claim will likely have a more than rubber stamp review in Washington, DC.

11. @Benedict Arnold be me

    Ahhh, it’s _really_ hard not to ask you a ton of questions! Just one more for now: did you have anything from 1979 in writing from Standford or the Vancouver consulate, or just your verbal statements?

12. I’ll be interested to see the results of this, as well. As I’ve mentioned previously, the Toronto consulate told me my relinquishment would not be accepted in Washington, so I renounced. Same situation, dual, Canadian parents, left as an infant, told by same consulate in the early 90s I was not a US citizen because voting in Canada meant I gave up US citizenship.

    @Whatami, I believe we’ve been conversing on a thread on another website. I have a different username, and I’m rebellious.

13. Rev Susi

    It’s not nearly as difficult as you think or as calgary411 makes it out to be.

    Firstly, with respect to the 8854.

    Fill in Part I and Part IV SECTION A

    Fill in line 1, 2, 3,4, 5, and 6. of section A

    Note carefully N. B. N.B. You do not need to provide details as to how you arrived at your net worth. All you have to do is certify ‘under penalties of perjury” (they love that phrase even tho’ it’s meaningless) that you have complied with your obligations for the 5 years ending in the year before you renounce and that you are worth less than 2 million.

    IT CLEARLY STATES AT THE TOP OF Part IV Section B

    “DO NOT COMPLETE Section B if your US taxes were less than 151,000 for each of the 5 yrs. and your net worth was less than 2 Mill. ”

    That’s it! Bob’s your uncle. They don’t have the time or interest in minnows who live outside the US.

    Secondly. If your only US source income is social security, there may be a tax treaty item between the US and the UK that states that social security benefits are only taxable in your home country. That is certainly true between Canada and the US. In that case you are free from 1040 after this yr.

14. Further to Calgary411’s post to RevSusi, an updated link to the STEP article “Advising US citizens and long-term residents on expatriating” from Sept 2011 is:

    http://www.step.org/advising-us-citizens-and-long-term-residents-expatriating

15. @Innocente @Calgary411
    Thanks to you both. My question, and my tax man’s reluctance, have to do with Part V. Clearly that applies to covered expats. But where does it say that those who claim to be non-covered expats (too poor, but compliant) don’t complete Section V? If that’s true, Bob’s my uncle, as you say. If that’s what I claim, I presume with a net worth under $100k, they won’t look further. And I did tell the truth on my FBARs, not to mention my returns. But my reading of the instructions does indicate that everybody does Section V. I hope this is just a case of bad drafting of the instructions.
    Second question re the continued reporting on 1040NR of US annuities. Social Security is clearly UK taxable, not US, and I can make a treaty case for the CSR (US) being only taxable in the UK. Once I do that (on next year’s return) is that done forever? Or do I have to reiterate it year after year? I can’t be the only one, but there’s no guidance on this. I’d like another Bob’s your uncle response, but I don’t want to trigger any interest in pursuit down the line a couple of years. Not possible for the tax I’d owe, but they could jack up the penalties as punishment, even if there’s a successful court case on 8th amendment grounds. Hark at me! Six months ago I wouldn’t have known what any of this meant, and I was happy in my ignorance. Not any more.

16. @Tiger Thank you, Tiger. It took 7 months and 13 days for the CLN. Toronto was the consulate I used even though I live in Ottawa.I was freaking out because the consulate told me it would arrive between 3 and 6 months. Now I am free to freak out over less important things. Frankly though, it feels weird, in a relieved kind of way. Yours will come too. All things come to those who wait – must be a State Department figure of speech.

17. @Banany
    Deja vu!! Mine also took over 6 months and i also was freaking out till it arrived.
    So you just reminded me of my exact experience:)

18. @WhatAmI

    No I did not have anything in writing as I actually went to Stanford Admissions in person in 1979…
    I was told I was not eligible as I was no longer considered a US Citizen…(would have to apply as a foreigner)
    I then called the US Consulate in Vancouver upon my return to confirm and get a second opinion…
    It was also verbal…
    Thus my life course was set…I was clearly Canadian…no requirement to file taxes
    Dual citizenship did not exist…

    However, it is now clear that changes to Dual Citizenship acceptance worldwide started to occur in the 1990`s.
    I refer you to the October 10th, 1978 changes where it says that loss of US citizenship was NOT automatically reinstated due to the new rules not being RETROACTIVE.
    As should be any changes, since people make life decisions with regard to rules in place at the time…

    I knew this would attract a lot of questions, so I will defer further commentary until I see the results of my CLN..

19. Rev Susi –

    For what it’s worth:

    – I filed five years’ worth of FBARs in 2011. The only response from Detroit was to ask for a reasonable-cause letter, which I sent them, and never heard from them again. They also tried to get me to file electronically, which at the time was optional. I had the feeling they were overwhelmed, FWIW.

    – I filed a 1040 for the whole of the renunciation year, because I’m busy with the real world and wanted to make things as simple as possible.

    – 8854: I’m an uncovered expatriate on multiple grounds, but listed my assets anyway – they’re below the magic $640K or whatever it is, and I want to make myself obvious to the IRS as not being the droid they’re looking for. I just added up my assets, translated it into USD and put it on the form. I had the sense they wanted to make it a lot more complicated than that, but it’s nowhere explained in the instructions, so to hell with it. (Frex. I have the impression that they want me to calculate the appreciation on specific investments, but what am I supposed to do about a retirement account that I’ve made biweekly contributions to for years? Jane Jacobs said something wise about how it’s absurd to make your life absurd in response to absurd governments.) I just made it as simple as possible, and if they have questions, they know how to reach me.

    – 8854 (2) If you *don’t* file the 8854 you’re automatically a covered expatriate. Which may not have any real-world financial consequences, especially if you’re below the threshold, but it’s worth being aware of the possibility that some version of the Reed Amendment may be implemented at some point in the future, which means that renunciants deemed to have renounced in order to avoid taxation can be barred from entering the United States. The starting point for deciding who renounced in order to avoid taxation is – whether or not you’re a covered expatriate. So it seemed well worth filing a simple 8854 that established that I’m not a covered expatriate.

20. @broken man
    Yes, thanks for that. I got out my copy of the 8854 (helpfully provided by the Embassy with my renunciation forms, just in case) and looked at what I’d have to include. If I don’t take things to an absurd level, I can figure out the net worth page (Section V) myself. And you’re right: I am clearly of no interest to the IRS. So they have that proof that tax avoidance wasn’t my motivation. The figures on the form will agree with the 1040 and the FBAR, so it’s a neat little package. And that will be that, unless they come looking for me. But they certainly have better things to do with their staff time.
    Incidentally, for those in Canada waiting for appointments and letters, here in the UK the appointment was about 4 weeks after I received the info from the Embassy, so very quick; and they promised that I would receive the CLN in about 8 weeks. If that’s so, it’s faster than what is happening in Canada. They seem to be making an effort to expedite the process here, perhaps because numbers are putting a strain on staff time?

21. Rev Susi’ OK I see what you’re saying.

    Part IV section A says you can use the balance sheet (part V) to calculate your net worth

    You do not complete Par IV Section B or C.

    On Part V You need only complete column (a) to arrive at your net worth for the purposes of part IV section A

    poorly written as it was meant to be used under the outdated 10 year rules as well. -that’s why it’s called initial and annual statement. Fortunately you only do it once.
    make your best effort as to values. If you are way under the 2 mill. mark no one will bother you. Cheers.

22. I’ve already done my spreadsheet and made screenshots of accounts the night before my embassy appointment just in case. I had US adjusted tax basis for a few items but I’m not going to spend hours/days trying to go through monthly wage statements to find pension contributions and then convert them to USD at the rate on the day. Besides, as I understand it, US Adjusted Tax Basis is only really relevant if you’re a covered expat. You might as well put zero for everything that’s not a deposit account and let them think you’re a genius investor.

    One question I never really was able to find an answer to was whether I needed to assess the value of personal property like household goods.

23. @Edelweiss, don’t forget to include the value of your brain. I hear that it has a market value of $37 trillion. You’ll have to sell it to pay the 30%. 🙂

24. @KalC et al
    Yes, ok, this is great! I can easily do this now you’ve explained it to me. Then all that remains is figuring the 1040 normally for the first half of the year (till expat date) and the 1040NR for the rest of the year, showing my SS and CSR annuities, with the tax eliminated by treaty or tax credits. And I get my life back! I’ve been lucky compared to some of you, and I’m so grateful for your generous spirit and help when needed! Thanks.
    I’ll report when I get my letter, so you know how things are going in the UK. And if any problems crop up…

25. @Edelweiss: “One question I never really was able to find an answer to was whether I needed to assess the value of personal property like household goods.”

    I plan to declare a value for my “Household” as a line item on Form 8854 and currently plan to use the insured value, which is a reasonable and supportable estimate, if not overstated. Also, I plan to declare a market value for the family vehicle separately. The jar of coins and the bills in my wallet, if any, will likely be ignored.

Comments are closed.