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
@CEB
This article may be of help
http://web.archive.org/web/20121023090722/http://renunciationguide.com/Exit-Tax-on-Renunciants.html#TaxOnDeferredCompensation
@CB
http://hodgen.com/?s=deferred+compensation
Thanks Heidi for the citation, but both those articles were written in the mode of:
1. Scan the official publications
2. Come up with a phrase or two describing the ‘gist’ of it all according to your perspective without having a case in front of you.
3. Move on to the next document.
Such people don’t even fully digest the crux of the documents. I’m beginning to wonder if a fair assessment might be that no-one has even thought this through yet, and doing something that reflects the spirit of the law (as I recommended) would be accepted if adequately justified.
I’ve so far not been impressed with the quality of the tax advisors I’ve seen on this. Before this person came to me, s/he had gone to a couple of professionals who had given basically the advice “Report it all and take a huge hit.” at an impressive chargeout rate. I don’t think they thought it through either.
Tax professionals are really the only ones that profit from these extreme yet poorly thought-through laws. My philosophy is, tax should be easy enough that anyone with a tradesman’s education should be able to do them. The US fail at this completely.
@CEB
“My philosophy is, tax should be easy enough that anyone with a tradesman’s education should be able to do them. The US fail at this completely.”
Of course, but the US doesn’t function that way., but through the influence of lobbyists. A flat tax would be easier by far and bring in more revenue with less work and so would RBT. BUT the compliance condors must have a big influence.
Phil Hodgens blogs are very helpful and free, unlike other tax professionals. He does seem to know what he is talking about as much as anyone else including the folk at the IRS or any of us here.
“My philosophy is, tax should be easy enough that anyone with a tradesman’s education should be able to do them.”
The incomprehensibility of the US tax code (amplified by the inscrutability of IRS regulations and the perverse refusal to explain what they want) can often be an expatriate’s best friend. Since the USP is left to interpret the gobbledygook as best they can, they can hardly be blamed (or extradited) if they get it wrong.
The fairest, most reasonable and safest interpretation is one that results in a list of assets totalling less than $2 million.
@CEB
Does example 19 in IRS notice 2009-85 cover your case? It contains the phrase (emphasis is mine) “H is a participant in a foreign pension plan that provides benefits pursuant to a trust …is required to report such amount (other than his investment in the contract) on his federal income tax return …”.
The instructions for the exit tax form, IRS 8854, say that anyone who is NOT a covered expatriate need not fill in Part IV section B. That is the section dealing with deferred compensation items.
It follows that the primary goal should always be to avoid, by whatever means, being classified as a ‘covered expatriate’
@DoD: “It follows that the primary goal should always be to avoid, by whatever means, being classified as a ‘covered expatriate’”
Absolutely.
DoD: “… the primary goal should always be to avoid, by whatever means, being classified as a ‘covered expatriate’”
Yes.
@all
It’s kinda hard to avoid covered status by re distribting assets, if your current, unaccesable pension plan already totals 2+ million.
Not necessarily. First, are you quite sure it’s worth more than $2 million? “Formal appraisals are not required,” says the IRS.
Secondly, are you quite sure you could give it away the day before you renounce?
If in doubt, leave it out.
I guess it all depends on flexibility,of plan and owner.
I will be covered just for the returns that I refuse to fill out. I have a grown dual-citizen son that at the moment does not want to know, but will probably retain his US citizenship. If he does decide to go compliant when he finishes school, then there is the problem of him having to pay extra tax on what I give him. My question is: if I do not tell him I am a covered person, how much due diligence does the IRS require from him to find out if I am or not before he can honestly not report it as from a covered person. If I lie to him and say I’m not covered, how responsible can he be held for not reporting my “US coveredship”? I means its not like you get a CLN-type document that states whether you are or not and he can only go on what I say.
Thank you very much @Watcher — that example 19 does seem to support the interpretation that I proposed!
Seriously, without documentation, what does the IRS expect?
Do they demand that any US person getting money from another person require that they reveal their citizenship and provide self-certification that they were never a US person and if they were that are not covered or else either automatically”withhold” taxes from that money for the IRS or refuse to take it? (This sounds familiar, doesn’t it?)
@UnforgivenToo
*If he does decide to go compliant when he finishes school, then there is the problem of him having to pay extra tax on what I give him*
He got any proof u gave him boo? When he finishes school… he has nothing but minor amounts… problem becomes an issue when investing & pensions come into play…. we were stupid…. we invested & saved for our retirement…. if we had known any of this…. we would have totally done everything different…. the duals in our family are saving to get their noose off their necks before they start making a living… not one of them has any interest in the US…. too many rules & restrictions that can hurt them just like it is hurting us…
@US_Foreign_Person,
True, I would have saved a LOT differently, if I had known, especially because I was/am not saving just for my retirement but also to be able to pass some along to him and his prodigy as my parents were not able to do despite their efforts. And when I do, I do not want to leave any thing to the IRS vultures and compliance condors. I also do not want to “contribute to his delinquency” by putting him in a position where HE has to lie to them.
I would like him to get out, but unfortunately his stupid dad brought him up to be proud of his US citizenship and I really don’t want to put to much strain on our relationship until I have to.
My preferred answer would be he doesn’t have to report it as such, if he doesn’t know and I don’t say. If the answer is he has to report/pay as if, when the information is not there, then I need to start work on a some what more complicated solution.
Question for discussion!
I have my CLN. I have read it and don’t see where It says that I have to do anything with the IRS.
What if you just do nothing! What can they do? No US assets.
@Unforgiven Too – “My question is: if I do not tell him I am a covered person, how much due diligence does the IRS require from him to find out if I am or not before he can honestly not report it as from a covered person. If I lie to him and say I’m not covered, how responsible can he be held for not reporting my “US coveredship”? I means its not like you get a CLN-type document that states whether you are or not and he can only go on what I say.”
You don’t get a CLN-type document that says whether the IRS consider you to be covered, but if they DO consider you to be covered, you’ll probably hear from them.
So if you don’t hear from them, it’s reasonable to assume that you’re not considered a covered expatriate and there’s no need even to mention the subject to your son.
They’re probably not going to treat you as a covered expatriate just because of not filing. Lots of people aren’t required to file.
@iota
I’m not mentioning it if he doesn’t ask and may lie when he does.
However, as I understand, I have to file a form by a certain date or automatically be covered and I’m pretty sure that filling it out would break the bank, because I never took US law into account when planning my finances and I definitely earn enough to have to file (not worth millions, though. Thats a problem, I wouldn’t mind having).
My question has more to do with the fact that I am not familiar with the forms (my last one was a 1040EZ from 1990. Still have the damn thing.) so I don’t know if there is some kind of required field for this information when filing taxes for gifts, etc.
The entire US tax system is just so damn complicated and so many different forms and such, despite reading this site for such a long time, I can’t even begin to grasp where to start. A simple kind of “I’m pretty sure that …” from someone who has a little bit of a “durchblick” would help.
German taxes are so much easier: what comes in is income, deduct what you can, they choose what deductions they accept, drop the ones they dont, inform you what they didn’t so you can appeal: done. If you’re late, they assume you forgot and send you get a reminder or two, before things get serious.
@Unforgiven Too – yes, Form 8854 is supposed to be filed within a certain period after renouncing. If you renounce and don’t file 8854, in theory you can be treated as a covered expatriate – if they notice, and decide to follow it up.
If they don’t notice, or don’t bother chasing it up, are you a covered expatriate? I would say no; others might say yes.
Sorry but I don’t know if there’s any form that the recipient of a gift has to file to state whether the donor is or is not a covered expatriate. You could try asking this question on the Expat Forum site (http://www.expatforum.com/expats/expat-tax/)
Found it: https://www.irs.gov/irb/2015-39_IRB/ar18.html
The summary says:
My bolding. As far as I’m can see, the final regs have not yet been published, but I could be mistaken.
@iota
Thanks, that’s what I needed. If there are no final regulations, then I’m just going to apply a few of those Petros Principles and say nothing, do nothing, or lie between my teeth, till they take their toys and go home.
Have CLN You’re correct. Not much at all.
@iota
I scanned through the document you linked, and it looks as though there is the loophole or two as well as a few traps. I will read it through a bit more thoroughly over the next couple days and maybe post a juicy bit or two (or I might just get mad and just forget it).
But I do have to ask who writes these things. How can they think up such complicated rule books and not take the time to consider how this would work in reality.
I work in electronics and I’ve seen junk like this before: you get some big buerocratic monster with huge amounts of resources that needs a little gadget, but can’t do it themselves because their processes are so complex that it would take years and millions to produce, so they outsource it to little guys who can design and slap a working prototype together in a couple weeks for less than what their first global brainstorm tell costs.
You end up with a specification, where everything is defined all the way down to the exact wavelength of the red LED that shows it’s broke, which, of course, is not quite the wavelength of any LED on the market. Then there’s the long chain of interlinking conditions that, if done that way, insures it will never turn on, because module A waits for module B to turn on first, who in turn is waiting for module A. Then despite all the details, someone forgot to define a power plug.