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
I am now free, CLN in-hand. It only took ten months or so of nail-biting, but it’s done. I’m going to get a few AU certified copies made just to play it safe. I’m in the process of writing up a time-line, because my experience with the Perth embassy was so strange.
Now, I’m in the same boat as most– what to file? I wish there were a consensus on this. 1040/1040r, + 8854 or only 8854? I have less than 100,000 to my name, earn less than a taxable wage, and am up-to-date with my taxes. What should I be filing? Help???
I’m a tad concerned I get it right because the supposedly-good & recommended by the US Embassy site tax guy I’ve been using replied to my query about final filing with, “are you sure you need five years tax compliance, I thought the statute only required three”? Good grief! I just want OUT!
You are up to date and are well below any conceivable threshold.
If you want to be completely free, file a 1040 for 2015 up to the date of your renouncing. The deadline would be June 15 I think.
There is no agreement as to whether or not you need to file a 1040NR for the rest of 2015. Since you are a minnow, it won’t matter if you do or not.
As to the 8854, you can do it yourself. Just fill it in as best you can. You do not need official valuations of your assets. Since you are well below the $2 million threshold I wouldn’t bother with the capital gains calculations. In other words just fill in the first column of the balance sheet.
This is an earlier post…which is why I wish there were a more cohesive & definite set of instructions. It’s disturbing that a USA/AU tax guy is out of the loop, too…good grief.
“…you’ll need to file your final returns: a 1040NR, attaching a 1040 for the part-year period from Jan1 2016 through the day before your renunciation oath. You’ll also need to file Form 8854, to exit the US tax system cleanly.”
http://isaacbrocksociety.ca/renunciation/comment-page-226/#comment-7154070
@Emty and Jane, congratulations to you both!
@Medea, thanks for that…
After waiting for sooo long, and with the embassy saying that I’d know “when they knew” …there it was, just laying in the letterbox one day with my usual junk mail!
I’m trying to flesh out the entire experience on paper, but have been ill, swamped w/work, & planning daughter off to Japan w/her school Japanese class this next week. But I’ve got my story started, at any rate.
Thanks again!
Congrats Jane and Emty!
Jane — if you file the 8854 with 1040 and 1040NR as described, that will probably be overkill, but you’ll be out of the system cleanly and you’ll be able to relax. If you’re below the filing threshold, 1040/1040NR may not be required, but there’s no penalty for filing more forms than required. Given the level of assets and income you describe, the IRS probably won’t even look at it. Their budget is stretched and they will be spending more of their audit time on people just under the $2m threshold.
@Jane
Congrats on getting your CLN!!!!
According to the IRS website, “you may need to file Form 1040NR if you
– were a nonresident alien engaged in a trade or business in the United States,
– represented a deceased person who would have had to file Form 1040NR, or
– represented an estate or trust that had to file Form 1040NR.”
Since none of the above applies to me, I personally will only be filing the 1040/8854 next year (my final year of filing as I renounced in 2016). Since I expatriated so early in the year, I will definitely be under the threshold for needing to file a 1040 for 2016 but I’m going to err on the side of caution and submit one anyway.
Here’s more information on when to file a 1040NR, with a bit more detail and written more clearly.
https://www.irs.com/articles/what-is-tax-form-1040nr
Apparently, the correct way to file the final return is as a 1040NR with a 1040 attachment. This is how tax professionals will do it AFAICT. And it’s how it was done by tax professionals in the few cases I’m personally aware of.
The rationale is because you were a NRA at the end of the year, and it’s your year end status that counts in determining how you file.
From http://hodgen.com/chapter-3-paperwork-for-expatriates-and-covered-expatriates/
Also see: http://hodgen.com/step-by-step-tax-filings-for-a-noncovered-expatriate/
Having said that, it’s not obvious to me that there are any over-the-top penalties attached with just filing a 1040 that only covers the time you were a USC, should the IRS decide to take issue with this shortcut. AFAICT it shouldn’t affect your non-covered expat status, which is what is important to most.
NB: IANAL. Don’t believe random people spouting words. Do your own due diligence.
@Karen and Jane
There is a reason to file when even below the filing threshold. It starts the statute of limitations clock ticking and means that, at least in theory, the IRS can’t come back to you in, say, 15 years or more and demand that you prove your position with paperwork that you may no longer have. I have no idea what the odds are of that happening (on the surface, it would seem unlikely), but best to be aware that there is a at least a possibility.
Oh, don’t you worry– I’m not leaving those dogs ANYTHING to come back to me about- good-bye & good riddance!
I’ll start working on this in the upcoming week. Hopefully, I can get together everything on my end before handing it over to my regular “Embassy, sort-of-approved” tax guy.
I still see no reason in the world for the embassy to devote website space to promote accountants who, in the header of the page, basically states, “we have no idea if they’re any good or not”? Why even have the page, at all?
@Jane – the tax advisors presumably pay to be listed on the Embassy page. The disclaimer on the London Embassy page says:
So the only thing that’s guaranteed is that advisors listed on that page will be recovering the listing charge from their clients. 🙁
@ iota,
So, why is it even there? It isn’t as if the embassy sites need to host ads?
I find it odd.
@Jane – I expect such a charge would be seen as recovering the cost of providing the service. Rather like the $2350 fee for issuing a CLN.
To be fair to the DoS, I don’t know for a fact that they charge tax advisors a listing fee. I may be doing them an injustice.
Just stumbled over this article & thought those here would be interested?
http://www.commondreams.org/views/2016/03/25/what-ex-pat-primary-tells-us-about-bernie-blackout
Mods, please place wherever you see fit to get it noticed.
Cheers 🙂
I was born in the US but became a Canadian citizen in 1989. At that time the US did not recognize dual citizenship so I assumed that by becoming a Canadian citizen, I would lose my U.S. citizenship. At some point later (I don’t remember how or when), I was told that in order to lose US citizenship I would have to formally renounce it. I am in the process now of filling out Form DS-4079. Question 18b asks about intent: I did not really intend to relinquish US citizenship but assumed I would do so. Thus I am unsure how to answer this question. Question 19 would seem to require a yes answer. What are the implications of my answers to these questions?
Hi Marlene – I renounced, rather than relinquishing, so I didn’t have to do Form 4079. However, as I understand it, if you didn’t intend to lose your US citizenship when you became Canadian (i.e., if you thought you were acquiring dual nationality), your relinquishment won’t be approved. So your answers on 4079 should aim to show that you did want and intend to lose your US nationality when you became Canadian.
If you’ve used your US passport, or voted in any US elections since becoming Canadian, that might make relinquishing difficult – but you’d still be able to renounce.
Someone who’s knowledgeable about relinquishment will probably be along soon.
@Marlene
I believe that if you did relinquish US citizenship in 1989 then it likely means you’re subject to the old rules and do not have to go thru the 5 years tax compliance rigmarole in order to make a clean exit from the US tax system. For some (many?) people that is a *very* *big* *deal*.
I’m saying this because I don’t know if you know the ramifications of a present-day renunciation vs getting a previous relinquishment (1989 in your case) documented. If you do, then never mind. If you don’t, now is the time to find out *before* sending in DS-4079, etc. And it’s the time to determine whether you performed any actions that are consistent with still being a US citizenship (as iota mentions above), which would possibly not allow you to claim you relinquished in 1989.
BTW, if you have in fact effectively relinquished in 1989, but were told that you still need to renounce, you would be far from the first person to be told that incorrect information. Tax professionals are especially well known for getting this incorrect, as are border agents.
And you should be prepared to strongly make that case at the consulate appointment. IIRC, one Brocker was given a tough time by the consulate official on this. I can’t remember exactly how it went, but *I think* the official was trying to say that the Brocker couldn’t have had intent to lose US citizenship because said Brocker did not know about FAM XXXX (can’t recall the FAM #, sorry) at the time. A bogus argument, but there it was.
Marlene. I’m going to repeat what tdott said but with emphasis on the advantages of having relinquished US personhood in 1989 instead of renouncing this year.
If you can claim relinquishment in 1989, you have NO tax filing obligations. If you renounce this year, you are supposed to file 5 years of tax returns and form 8854 at considerable expense.
To claim relinquishment depends on intent. They are supposed to divine your intent from subsequent actions. If you traveled on a Canadian passport, didn’t vote in the US and didn’t file US taxes, didn’t work there and don’t have many other ties then your intent is taken as proven. After 1989 did you hold yourself out to be American or Canadian. It is to your advantage to be considered only Canadian.
So find out more before you decide and be careful filling out 4079.
It may help to know the thinking behind DS4079. Originally it was used for those who thought they had lost US citizenship but because of a series of Supreme Court decisions, were given the chance to reclaim citizenship.
Now, to confuse the issue, it is also used for the opposite purpose.
There is a group of us who believe it is not always necessary to do any of this BS. You can tell your bank you are only Canadian. In 1989 you were not obliged to tell the State dep’t you had relinquished or to obtain a CLN. All that came later.
Whether or not you obtain a CLN is up to you. Just have all the options before you decide. Good luck.
Now that the fee for relinquishing is the same as renouncing, is one better than the other?
@ Japan T,
The one advantage I can think of is with renouncing you perform the relinquishing act right in from of a DoS official, who attests to that fact – and your declaration that you are doing it intentionally is contemporaneous with the act — so this basically precludes any doubt that you voluntarily and intentionally performed a relinquishing act. It’s not likely you’d have a problem if you go for relinquishing-by-naturalisation, but relinquishing-by-renunciation is as unambiguous as it gets.
I preferred to go with relinquishing-by-naturalisation because I felt that reflected the reality of my life (and would do so had my relinquishing occurred today for the same reason).
But it’s definitely each individual’s choice and from a practical standpoint, with a current day relinquishment/renunciation, it doesn’t really matter as both have the same fee and same expatriation date for tax purposes.
Every time I look at IRS tax forms, I end up totally exhausted & defeated…I’m trying to work out the 8854. Even the simplest of questions is phrased in such odd ways! I have to say, a lot of what they think is “explained” in their instructions are Greek to me? Why is it so hard to use understandable language?
Assets: I have a used car & all used appliances/electronics (with few exceptions, our goods come from garage sales & 2nd-hand shops). I’d say $10k total value at best (AUD). I then have my bank accounts which total well under $50k. That’s it.
However, in trying to figure out their terminology, I suddenly thought, “I have a super fund”! I hadn’t even remembered it because I never paid into it– it was just something my past employer had paid into on my behalf. My place of business closed down years ago & I was never in a position to pay into it privately. I just figured the maintenance would eat the tiny bit up in a few years (it was only paid into for about 3 years from a tiny percentage of a small paycheck).
It sits at about 8k. Now what do I do? Omg…just shoot me. I don’t even know now if the accountant ever put it on my tax form (or would it even go on it if I wasn’t doing anything with it???).
Prior to my life here in AU, my US tax experience was the 1040EZ. All of this is both brain-numbing & gut-stirring…
Does that stupid super fund go on the 8854? Does anyone know?
@Jane – the rules for determining net worth for Form 8854 are hidden away in IRS Notice 97-19 Section III. You can see it at http://www.unclefed.com/Tax-Bulls/1997/Not97-19.pdf
The Notice says, in part:
I interpreted this to mean that anything that can’t be given away (such as my State Pension), can’t be subject to the gift tax and should not be included in the Net Worth computation.
Another consideration is the FMV. I decided my goods and chattels would have a FMV pretty near zero, as no one would probably want to buy them, So I left them off.
In the end I listed cash (i.e. total in accounts), and property (my equity in my home).
I don’t think you need to lose much sleep over it, if you’re not within spitting distance of £2m.
Jane. Nobody knows.