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.
Participants will need to provide their e-mail address (real or fake) and an alias. The only written rule is that participants must use a same alias each time they post (and not “anonymous” or derivatives thereof).
Bear in mind that any responses that you get from participants is peer-to-peer help, and it is not intended as a replacement for professional advice. Also, the Isaac Brock Society provides this disclaimer: neither the Society nor any of its members are professionals. We offer our advice here only in friendship and we recommend that our readers seek professional advice if they need it.
If you wish to receive an e-mail notification of comments, check the box to that effect when making your first comment.
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 did my final year’s filing in 2015 and I did 1040NR with 1040 as an attachment plus a part year FBAR covering up until my renunciation. I’m a DIY filer, so I didn’t have an accountant’s advice. I did read what Hodgens had to say on the matter and everything I could find on Brock. At the end of the day, this stuff is so complicated (and the advice can be conflicting) that no one can definitively say they’ve got it right. You have to take an educated guess at what you think is right and go with it.
@Verity
So, did you file the 1040nr with all zeros as others have stated?
It’s all getting murkier by the minute…I just cannot believe that with the possible repercussions for mistakes made, that there’s no actual written/final, understandable directions for us?!
@Jane
“I just cannot believe that with the possible repercussions for mistakes made, that there’s no actual written/final, understandable directions for us?!”
It’s not by accident.
@Jane
Re the murkiness of the final year return – IANAL, but I think for practical purposes, it doesn’t matter much how you file it. The 5 year certification test does not include the final year return, so doing it incorrectly should not suddenly make you a covered expat (if you’re one of the people for whom this would make a difference). So, “only” “normal” penalties would apply. And, assuming you owe nothing, well any percent of zero is zero. Just make sure any required forms like 3250 and 3250A are filed and it should be fine.
I will say, however, I don’t think the 1040NR should be all zeroes unless you made nothing during the time your were still a USC and had no US sourced income when you were not. As I understand it. the 1040NR covers the full year. The attached 1040 covers the time up to renunciation and its numbers are used in the 1040NR. The idea of the 1040 is to be able to show where those numbers on the 1040NR came from, I think. In fact, I don’t think (don’t hold me to this), you even have to sign the 1040, as it’s merely an attachment and not the “real” return.
Once again, note: *IANAL*; just a regular person trying to understand this crap like everyone else.
I don’t think anyone needs to get overly worried that they don’t really understand this stuff because no one at the IRS understands it, either. As far as I can tell you can file nothing, or every shred of paper you have in the house, or somewhere in between and the result will be the same. You will never hear from the IRS again (assuming you ever heard from them in the first place). Phil Hodgen (who IS a lawyer) is the most knowledgeable guy on this subject I have come across and even he admits he can’t be sure.
I was so burnt out and sick to death of the whole thing by the time I got to this point that I just said f–k it and didn’t file anything. That was a number of years ago and I haven’t heard jack from the IRS. I suppose that makes me a covered expat, but so what?
I filed 6 years of 1040s, form 8854 and no FBARS. All the forms I sent to the IRS were hand written on the paper forms and snail mailed with signature required. Never heard a thing from the IRS or FINCEN. Just in case, I kept copies of everything. Before FATCA went into effect, my funds went from the big banks into FATCA exempt credit unions.
As long as there is no obvious paper trail indicating discrepancies, I don’t believe the IRS has the resources to bother with us “tax cheats”.
@Karen says:
“But my understanding is that you file a dual status return in the final year with a 1040NR (filled with zeroes if you have no US source income post-renunciation) and a 1040 as an attachment (covering up to the day before you renounce). I don’t think the IRS will reject a filing with just the 1040 for the part year, and I’m sure there are plenty of people who have filed that way (because how would a mere mortal know to do the convoluted 1040NR filing).”
@tdott says:
“I don’t think the 1040NR should be all zeroes unless you made nothing during the time your were still a USC and had no US sourced income when you were not. As I understand it. the 1040NR covers the full year. The attached 1040 covers the time up to renunciation and its numbers are used in the 1040NR. The idea of the 1040 is to be able to show where those numbers on the 1040NR came from, I think. In fact, I don’t think (don’t hold me to this), you even have to sign the 1040, as it’s merely an attachment and not the “real” return.”
Which sounds 180 degrees…”1040 covers the time up to renunciation and its numbers are used in the 1040NR”
I looked at the 1040nr & I don’t see where/what line the 1040 amount is entered? I’ve also lost faith in the tax guy as he never mentioned the 8854 “other” copy posting to a different address & other missing info I had to point out! This, is why I’m asking the questions here. And yes, I do know that of ALL of the more knowing people (Allison Christians, Phil Hodgen, John Richardson) even they aren’t 100% sure of it all…and that causes me to worry & to try to at least find the most corroboration.
Jane. Again; you are overthinking this and needlessly stressing yourself.
There is considerable disagreement about what you need to file and no one including me can give you a definitive answer. The key point is that IT DOESN’T MATTER
You will never here from them. I agree with your accountant. File 1040 up to the day you renounced. That’s it! You’re done! Free! Repeat after me ” I will never hear from them. “
@DofD
You will never hear from then until you need to contact them because your bank has closed your account until you get clearance from the IRS to have it.
Nonsense.
I would agree with you except for the fact of all that has transpired to get us here.
@Japan T, nonsense – not unless the Japanese banks are doing something really weird. There’s absolutely nothing in any IGA I’ve looked at to say that banks need the okay from the IRS to keep an account open.
i’m not talking about banks in any specific country, but in general.
You have not read anything about US persons having to either provide proof of compliance with US tax law or provide a CLN to their bank?
Here is how I see it.
If these are true,
1. Persons who relinquished USC under the rules in place at the time of their expatriation have found themselves once again USC due to a court case in what was at the time a foreign nation to them and,
2. These persons then had to expatriate a second time under the rules of that time.
then the following must also be true,
Persons relinquishing under today’s rules may have to do so again under new rules devised sometime in the future.
Did anyone who relinquised years ago need to provide a CLN to their bank years ago? No they did not.
Do any of these people need to today? If yes, then it follows that meeting today’s requirements does not protect one from tomorrow’s requirements being retroactively applied to one’s actions today.
I am NOT trying to talk people out of relinquishing. I am trying to warn them that they must remain vigilant and continue to prod their respective governments to protect them against the US even after expatriating.
I am also trying to dispell the false sense of security found in the fact the IRS does not have the resources to chase you. FATCA is not about the IRS chasing you. It’s about the IRS doing other things as your bank turns you over to them, having been coerced by the IRS to do so.
@Japan T, yes I’ve experienced it myself here in Switzerland. But that is the bank’s doing, not the IRS. They didn’t request that the banks threaten to close the account, only under the IGA that they gather the info with either a W-9 or W-8BEN form. Any request for proof of tax compliance is down to the bank, not the IRS. Believe me there were plenty of Americans suffering from account closures here before FATCA ever came into effect. I was lucky that I renounced just a few days before UBS sent me the documentation. When I explained that I had just renounced they extended the time for returning the forms to them from end of March (I’d renounced on the 4th March) until July to give the CLN a chance to arrive – which it did in mid-April. I sent a copy to UBS, they sent me the W-8BEN form which I filled in, signed and sent back and I haven’t heard a thing from them since.
With PostFinance I forgot to tell them about the CLN so in the December I got a letter from them suggesting that I enter an OVDP to become compliant. There was no threat to close the account if I didn’t, it wasn’t even mentioned. I wrote back to say I’d renounced, sent copies of my CLN and passport and told them I’d entered Streamlined. They then sent me a W-8BEN and that was that. None of this was done at the instigation of the IRS with threats to close the account, this was purely PostFinance’s way of handling things.
I read reports on the English Forum that Credit Suisse at that time (2012/13) was asking for 5 years of US tax returns to show compliance, but again that was that particular bank’s way of dealing with the situation. The IRS knew nothing about it.
Would my accounts have been closed if I didn’t provide the info? Quite likely. But yet again, that would be the banks’ decisions, not because the IRS said they had to.
My point is, it doesn’t matter that banks requiring CLNs is not written into the FATCA law. The problem is that FATCA exists and that banks, like everone else react to legislation, any legislation, in which ever way is convient for them and not in the way that legislatures and bureaucrats think they will. That does not remove the fact the prime mover in FATCA related account closures is FATCA.
Banks have closed accounts for those who do not have a CLN even if they had long since ceased being US citizens. What is to prevent the same happening to you. You have a CLN, all that is required today. What prevents the US deciding next year that everyone who expatriated during the Obama administration needs to provide recertification of loss of nationality (RCLN) and banks worried about being fined for this, close accounts of those who can not provide a RCLN?
If it has happened once, it can and is likely to happen again.
To me, the difference in what has already happened and the hypothetical I offer above are a few acrynyms.
Let my try this again.
The law is not what matters.
All that matters is the reality caused by the law.
The reality caused by the FATCA law is that banks are responding to it by closing accounts. Any argument that FATCA does not legislate the closing of bank accounts does nothing to change that fact that banks are closing accounts due to FATCA.
It is a false sense of security for anyone to feel safe because they have met the legal requirements of a law while knowing that banks are reacting in ways that are not required by the law.
@Japan T, if you live your life by what ifs and maybes you’ll never leave the house. Yes, obviously it makes sense to keep an eye out in case things change, but I’m not going to lose any sleep over it.
If these were just possible abuses, then they would be “ifs and maybes”. But they have happened and are happening. Otherwise, what would all the fuss be over?
I don’t believe these are true. The people mentioned in #1 are still not USCs. What some of them are now doing is not expatriating a 2nd time, but rather getting their past expatriation officially documented with a CLN. That’s why the CLN is backdated (sometimes several decades) to the time of their 1 and only expatriation.
AFAIK, nobody who has expatriated in the past (e.g. via naturalization as a citizen of another country), *and* has thereafter lived his/her life as a non-USC, has had US citizenship foisted back on them. There are cases of the State Department telling someone that they did not in fact expatriate (e.g. because State does not consider the CBC to be a government body, so employment there doesn’t count) but that’s a different story.
@Jane
Yes, my 1040NR was full of zeroes because I had no US source income after renunciation.
As you say, it’s murky and there are no understandable instructions. I took the view that I would do the best I could and that would have to be good enough.
We finally have an appointment to renounce at the Sydney consulate – 16 June will be our independence day. We are looking forward to being able to plan for our financial future just like any other Australian.
@tdott
We are describing the same thing but with different words.
Persons who expatriated under the rules of the date of their expatriation had to undergo a second process at a later date to document the fact under new rules. Failure to redocument resulted in their being treated as a USC, and thus in reality once again a USC until they went through this second process. Back dating the CLN does not erase the fact that the needed to go through this second process or be treated as a USC by their banks and the USG.
They now have their CLNs as do many who have recently relinquished. If the US has the power to force expatriated citizens to redocument their previous loss of citizenship and obtain a CLN, then the US has the power to force those who currently have a CLN to once again redocument their loss of citizenship through a new, future set of rules.
So, I’ll edit my previous statements to,
1. Persons who relinquished USC under the rules in place at the time of their expatriation have found themselves forced to redocument their loss of USC to the USG due to a court case in what was at the time a foreign nation to them and,
2. These persons then had to undergo a second process under the rules of THAT time to redocument their previous loss of USC or be treated as USC again.
These changes in wording do not change the fact the USG has forced former USCS to comply with various US laws while no longer USC nor even resident in the US.
Thus the USG can continue to force former USC to comply with future changes in US law. The fact that the USG has extorted third parties in to actions that compel former USCs to make themselves known to the USG so that they can hope to carry on normal lives and the US impose more rules does not change the fact that it is US law that is driving this and the failure of local governments to protect their citizens that allow it.
By expatriating under the current rules and then thinking we are free, we are treating only the symptoms and not the disease. As long as the disease is allowed to grow, future complications will arise.
As it would be wrong for a doctor to tell a patient that all that is needed is to treat the fever then all will be well while not telling them of the need to treat the disease, I feel very strongly that it is also wrong to tell expatriating USCs that all they need to do is treat the symptom.
Three things MUST happen for us to be truely free and clear.
1. The US must repeal FATCA.
2. The US must end CBT.
3. The governments of our chosen lands must protect all their citizens, including those with the taint of US personhood.
Until these happen, we are always able to be forced to dance to Washington’s fiddle. As the USG has done and is doing this, this is not theory, it is fact.
Congrats, Karen!!!
I hope it flows smoothly & that you get the feeling it’s all been done, “proper” (whatever THAT is).
🙂
@Japan T
“The governments of our chosen lands must protect all their citizens, including those with the taint of US personhood.”
The only MUST. But to do so, requires all other world nations to stand against this blatant extortion.
To me, it’s already been “agreed to”— GATCA.