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
Jane. I posted the answer too quickly. You probably meant “does anybody know the answer to my question”
I meant “nobody knows you have a superfund so why bother about it”
AD203. No The process will not be influenced by your tax non compliance. They are not linked. The only connection is that after State issues a CLN, they forward your name and SS number to the IRS. What the IRS does with the info. Is anybody’s guess.
AD203 – No. A lot of people renounce before tackling the compliance requirements. I did, and got my CLN without a problem. The CLN doesn’t depend on your tax status.
@AD203
Your renunciation is completely independent of your tax filing requirements and you should not be denied your freedom for not filing.
However, to completely free yourself of any tax liabilities and successfully check out of the US tax system you are required to file the 8854 form in June the year following your renunciation. It is a test of your net worth to ascertain if your total assets are above $2,000.000 and if so an exit tax will be levied on any ‘unrealized’ gains.(you are allowed a gain of approx. $690,000 before a 15% tax is levied) You also have to certify that you have filed 5 full years of tax returns and (one partial year for the yr you renounced) and 6 yrs of Fbars.
Many here have back filed with a statement that they were not aware of the requirement to file.
Others have ignored the filing .
Here is a link to from Phil Hodgen’s blog with some well balanced considerations.
http://hodgen.com/will-your-future-self-hate-you/
Others will chip in, but it’s your call. Good luck
Jane,
Technically I believe a super account goes on the 8854. If it’s an accumulation account (as opposed to defined benefit) I think it goes on FBAR too. If you haven’t made contributions during the 5 years you filed tax returns for, it probably wouldn’t have generated taxable income.
The IRS has no clue you have a super account. Superannuation is not reportable under FATCA. And, when you tick the box on form 8854 that you’re compliant for the past 5 years, that’s about income tax, not FBAR.
You’re well below the $2m threshold. If you put the super account on the foreign pension line of 8854, the IRS has no idea whether it represents an account that should gave been reported on FBAR. They’re going to look at your net worth and decide there’s no profit in asking any questions.
Bottom line – if it were me, I probably wouldn’t worry about the prior tax returns or FBARs and would include the super on 8854. However, I’m not a tax professional, and I don’t know all of the facts.
@AD203
As Duke and iota have already said, the tax issue is separate from renunciating, so there is no need to worry about your renunciation being denied. But, I am curious about your statement, that you will first acquire the German citizenship after providing the CLN which could first arrive in 6-9 months. I renunciated in Frankfurt just short of one year ago, but as I understood my German case worker, it would suffice to first bring back the receipt for the $2350 paid at the consulate for renouncing (and later, of course show the original CLN). Perhaps you also received 2 letters from the consulate, one in English and one in German, confirming your appointment to renounce at the consulate. My understanding was, that with this letter/receipt the German citizenship could already be processed and therefore you are not without an ID for much longer than 6-8 weeks. Of course, things may have changed since last April when I went through this, it could also be a case worker issue, but check with them again. You have neither US, or German identification for the time being and considering how long it is taking the DOS to produce CLN, that could be a long time. Last year we were told it the CLNs were taking, on average, 4 months to return…. we are still waiting. So check again with your Auslaenderamt, it can’t hurt.
@AD203
I myself ended up relinquishing and my dual daughters renounced with me on the same day, April 24, 2015. Mind you however, I wasn’t aware that relinquishing would be an option for me until I had my last visit with my German case worker at the beginning of February. It turned out, that my case worker inquired higher up about an update regarding the increased cost of renouncing for US citizens. This confirmation came at the end of January, only days before my appointment to finish up my paperwork to apply for German citizenship.
Being a stay at home mom, I had little income and less than half of my husband’s income could be counted towards me as “support”. Therefore, I was able to be considered a financial hardship case and acquired the German citizenship without having to renounce first. However, this gave me the ability to relinquish which I successfully have. I received my CLN after 5 months. My dual daughters, on the other hand, had no other choice but to renounce and are still waiting for theirs. We have contacted the consulate twice, but we’re told in October, that it would take 2 more months, likewise In January of this year, two more months… Still no word.
I remember distinctly though, that my case worker said the consulate receipt from renouncing would do for her to send off the citizenship application. My naturalization application returned approved within 3 weeks and I had my German passport and ID 2 week’s later. I have to say though, that my German case worker was very helpful. I have heard from several people that their attempts to go my route with the financial hardship clause were not successful. Good luck
@Jane – with regard to your Superannuation account – kept thinking I had seen somewhere a Phil Hodgen blog piece on Australian superannuation – found it:
http://hodgen.com/noncovered-expatriates-and-superannuations/
@ AD203: I renounced in October 2015 and, just a few days shy of 6 months, have still not received my CLN.
Did you send a copy of the German version of the letter you received after renouncing to the German authorities? I did so just to let them know I was doing everything I was supposed to be doing. To my surprise they sent me a notice I could come in, take the oath and receive my naturalisation papers. I thought I would have to wait for the CLN. I was “stateless” for only one week. There is no guarantee that your “Sachbearbeiter” will make the same decision but it is certainly worth a try.
Hope you’re successful
AD203:
Isn’t it dreadful how we treat one another? Or I should say, how those born into wealth manipulate other people?
I’m pulling for you. Stay strong, take vitamins, and try to get through the day. I KNOW how awful it is- to be in that limbo— assume the best, because it likely will be.
J
@Schlampazius
Mine took 10 months– don’t worry.
It will come. Just be sure your address is correct!
J
@Schlampazius
I had given similar advice to AD203 on 20.02.2016 on this thread as well. I guess he just likes to make things difficult for himself. 😉
@iota…
http://hodgen.com/noncovered-expatriates-and-superannuations/
Again, as clear as thick, soupy mud!
I love the “magic 8 ball” getting pulled out & dusted off just for this special occasion…omg.
Jane … Yep — the IRS doesn’t really know what to do with super. So you make your best guess based on your understanding of the tax code.
The answer may depend on what type of super account you have. The Hodgen post you linked was about an SMSF, which is more likely to be a grantor trust. Most industry and retail funds are likely to be non-grantor trusts unless you have made significant non-concessional contributions. (But if you have a defined benefit plan, the rules are different again).
As for PFICs inside the super fund — the proposed regs are not law. The IRS has left these as proposed since 1992 — there must be a reason they haven’t finalized them. There are a few places in the proposed regs where it seems the IRS has gone beyond what is written in the tax code. I don’t see anything in the tax code (sections 1291 and 1297) that says that becoming a NRA is a deemed disposition of PFIC stock (someone let me know if I’m missing anything here).
One comforting thought is that the IRS flunky who processes your return will probably know less than you do about super and how the tax code applies to it. Unless you have a huge balance in your super, any reasonable treatment is not likely to be challenged.
Still clear as mud? I’ve just been grappling with super for my streamlined filing — so if you want to discuss it in more detail than is appropriate on a public forum, ask the admins for my email address.
@Karen & @Mods- yes please, on the email. I would like to try to gain a spec of confidence by chatting in a bit more detail.
Cheers
Jane, I’ve sent your email address to Karen.
Thanks, Karen!
just a quick question, i am starting to get my ducks in a row for renouncing (am Canadian born and only got a passport as a teenager as my mom is American). Problem is they are asking for a copy of passport or certificate of US citizenship. The passport is long gone and I never got the latter when getting the passport. what should I do? the fellow i spoke with said i would need to reapply for a certificate but that doesnt make sense if I never had one and seems to defeat the purpose of this whole exercise! thanks for your advice.
James. Why bother ?
@James
Do you remember what proof you had to present to get your US passport? I’m guessing you had to present a long-form version of your birth certificate (one that lists the full name of your mother) as well as whatever evidence your mother had that she was a) American and b) had lived in the US long enough to pass along citizenship to you. I would check with your local consulate to see if that’s good enough. One of the things that drives me crazy about bureaucracy is when the rules make no sense and result in needless paperwork or expense, but I’m afraid that’s par for the course.
I think you’re smart to be proactive about this, even if you end up having to shell out to get a new passport before being able to apply for renunciation. I renounced earlier this year — fortunately, my net worth is well below the threshold for the exit tax — and it’s taken such a boatload of stress off my shoulders! Best money I ever spent, and I’m not being sarcastic. (The usual disclaimer: It’s horrifically unfair, etc. However, it’s like that old Mastercard commercial — never mind the dollar figure, freedom is truly priceless.)
@james. Huh? You say you are having great difficulty proving you are a US citizen which they say you must do before you will be allowed to renounce that citizenship? You’re right, that doesn’t make any sense at all.
Duke’s got it right; just forget about the whole futile exercise and continue living your entirely Canadian life. If you can’t prove you are a US citizen, neither can anyone else. It is even possible the US passport that you had a long time ago was issued in error because the transmission of US citizenship by a US citizen parent to a child not born in the US is governed by very complicated rules that even US officials often don’t understand properly. Let sleeping dogs lie.
@James, if you keep a written account of how you discovered that you aren’t able to get a US passport due to lack of proof of US citizenship, and get the account notarized, you can show that to your bank(s) should you ever receive a FATCA letter.
You’ve saved US$2350 – congratulations! 🙂
Hello friends. You may remember me from a year or two ago when I had an OMG moment on behalf of my hubby “Nate.”
At the time, we had decided to just try and fly under the radar because he is a dual-from-birth (born in Canada, birth registered abroad by his ‘Merkin daddy) and no US indicia to our knowledge.
With a looming mortgage renewal (renewal date is March 2018), Nate does not feel comfortable lying to our FI if they ask him about being a US citizen; he views this as fraud. Given this information, he feels (based on the options that I have presented) that the best action to take at this time would be to relinquish in order to obtain a CLN (he works for the province as a teacher –> school board –> Ministry of Education, and has worked for our city as a camp counselor and for the province at Niagara Parks). We believe his father would be willing to pay the relinquishment fee as he really feels that he has burdened his children with these issues 🙁 I feel for my father-in-law, because at the time, I know he didn’t mean any harm and was just trying to be compliant with his own obligations as a US citizen.
He has also determined that if he were to get caught, being blocked from entering the US for whatever reason is not acceptable to him.
I suppose my questions are:
– If we were to try to set up an appointment, do we have knowledge on any consulate that has lower wait times than others? We are in Ottawa, but can travel if required.
– Hubs is not yet tax-compliant as we were hoping to fly under the radar. Is it still kosher to apply for the CLN and then file our five years of back taxes to enter the system and then leave?
– What about the FBARs? I feel like I remember reading that when we certify that we are tax compliant, that does not include the FBARs, and out of all of the things that he’d be required to do, the FBARs are what scare me the most due to the insane penalties. If it matters, the only year the sum of his reportable accounts would have exceeded $10k was in 2013, when we took possession of our house and we got money from our mortgage lender to fix our septic tank. Other than that, most of the other accounts are in my name (it was just a matter of circumstance at the time but THANK THE GOOD LORD FOR THAT) so I don’t think they would be reportable. The only ones that would be would be reportable are our joint chequing account and his TFSA – which has $66 in it and we haven’t contributed to since we opened it!
– If he contributes to his employer’s pension plan as an Occasional Teacher, how does that work?
– How would we fill out the status section? I’m really not jazzed about providing my info to Uncle Sam. He’s not Single, but I’m not sure that Married filing separately is appropriate either because they ask for my name and SIN (which they ain’t ever gonna get because I can’t get one, hehe)
I’m sure I will have many more questions as we progress through this, and I appreciate you guys for all of the help you have provided both to me and to the many people that come here.
Thanks!
Sorry, not sure where to ask this question:
Why are they asking for the birthplace of parents on a Canadian marriage licence application? Is this new? (Of course I’m paranoid).
Fraud!!!???. Fraud is the premier of Iceland. Fraud is Barrick Gold screwing Tanzania out of 40 million. Fraud is Bernie Madoff. Fraud is Goldman Sacks and Lehman Brothers and Standard and Poors Fraud is the Donald.
Nate saying he ain’t ‘Mercain isn’t fraud-it’s survival.
There is a new procedure for appointments. You go to the embassy website CanadaCLNinquiries@state.gov and follow the instructions. One option is to ask for the soonest appointment in Canada. That could be Halifax.
It’s OK to file your 5 years after he renounces. Note I said renounce because they may or may not accept relinquishment based on work as a teacher. They are supposed to but….
FBARS are under a separate section of the US Code. That’s why some don’t file them after renouncing- Petros for example..
Forget about the pension plan- it isn’t possible to figure it’s value. Nate is a minnow they won’t bother him. They haven’t the time or personnel. Seems a shame to me that Nate is swimming into a world of trouble when he doesn’t have to. As you can see, I believe your original plan was the only sensible one.
Thanks for your input, Duke.
Had it not been for the mortgage thing, we probably could have successfully stayed incognito.
But it’s his decision to take – not mine.
It will be nice to just get rid of the uncertainty, and if we have to enter the system to exit cleanly, that seems to be the way Nate wants to go. I’m just the information gatherer and facilitator.