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
@Rebecca, congratulations! Wow, nearly a whole year from start to finish.
Had to laugh with your comment re them telling you about a “team of lawyers and State Department reviewing your application”. If you’re renouncing then they can employ as many teams of lawyers as they like. It’s your right under the Constitution and unless they think you’ve been forced/coerced into renouncing (pretty difficult to prove from Washington), there’s nothing anyone can do to stop you. So this is yet more intimidation from a government that see all citizens living outside the country as tax cheat criminals and nothing more.
Will be interesting to hear if your son gets then same speech when he renounces in June.
Isn’t the collective noun for lawyers a quarrel?
@canoe
“With the dual status return it just feels weird to be using, or shoe-horned into, the “resident alien” status for the first part of the year.”
This discussion has come up several times in the past (if you’re so inclined, have a look at the older posts on this thread.) To summarize: If you’re not a US citizen and you haven’t lived in the USA during the year in which you’ve renounced US citizenship and you have no financial assets in the USA then you do not need to file 1040NR, just file 1040 for the partial year. Full stop. The instructions fully support this approach and (at least in one place) explicitly state that 1040NR doesn’t apply for those who are not US citizens and don’t live in the USA. If you file both, you’ll be unnecessarily making things complicated and confuse the IRS. Keep in mind that it is in the interest of accountants to open a can of worms for their clients… Also be wary of anyone who claims that the instructions were “meant” completely different from what they actually state. That is pure speculation. Be critical!
@notamused — Thanks for your thoughts and advice. I get your point. I did go way back in these threads, reading and re-reading. There is a lot of good information here, and I am grateful for it.
Re: notamused post
I don’t know how a year in which you renounce would not be a dual-status tax year (unless you renounce New Year’s Day). If it is dual-status year, IRS Pub 519 Chapter 6 clearly states that you are to file the form that applies to your status at year-end (1040NR), as well as the statement (e.g a 1040) covering the period up to the day before your status changes.
In practice it may not matter if you file just a 1040 return instead of a 1040NR return + 1040 statement. If the accountant advice mentioned in previous posts is correct, what should happen then is that the IRS transfers figures from the 1040 over to a 1040NR. Including a 1040NR in the first place isn’t opening a can of worms, as it confirms year-end status, and reduces the potential risk of IRS confusion that could happen if they overlook the 8854 form when processing the 1040.
If you have no US-source income after the change-of-status date, filing a 1040NR return as well as a 1040 statement is not complicated.
Any tax filer confusion that is created by the instructions mostly arises because the instructions do not specifically and clearly explain the difference between being treated as resident for US tax purposes while you are a US person who is not a US resident, and treatment of a non-US person who is not a US resident. This difference exists because Citizen-Based-Taxation treats US persons resident anywhere outside the US in the world as US residents for tax purposes. To summarize, this means the year in which you cease to be a US citizen or LPR is a dual-status year even if you are outside the US all year; it’s up to you whether to file an 1040NR or not, but Pub 519 says you should. Full stop.
I reckon it’s just a bureaucratic quick-fix.
They want the renunciant to file a 1040 but their beloved jurat would be worthless on a 1040 signed by a non-USC.
So they tell the renunciant to copy the crucial bits of information from the 1040 to the 1040NR – thus getting the renunciant, a non-USC, to provide them with a handy penalty-of-perjury jurat which could be used against the renunciant in court should the occasion arise.
It’s foul, but in practice, for ordinary non-swindling renunciants it basically doesn’t matter since the jurat will never be used; and following the bureaucratic rules can even be to the renunciant’s advantage – bringing peace of mind because the boxes have all been ticked and the hoops have all been jumped through and it’s all, all over.
Time to celebrate. 🙂
@Fn0 etc
We were told by our tax lawyer (in the US) and our US accountant in Switz that we should file just a 1040NR with the words DUEL STATUS RETURN written on the front at the top. That was 5 yrs ago, all quiet.
We always filed jointly but were told emphatically to file the last returns separately.
That’s DUAL, I hate predictive text!
It’s pretty clear that the instructions are confusing and it’s pretty clear that many have filed in the past, and filed in different ways and the outcome has been the same in almost all cases. no correspondence and the tax return appears to disappear into a hole somewhere. Many get confused because the IRS has illogical statuses, US resident when we are not, Calendar Year Jan – Dec. when our year ended already after we expatriate. The reason why someone is having to file the 1040NR is because the IRS does not have partial year filing. One has to file for the whole year. so one uses the status of the last day of the year.
If it helps someone else, what i did with my dual status return is prepare a summary page from the advise from phil hodgen’s “Step-By-Step Tax Filings For a Noncovered Expatriate”.
This is from phil hodgen’s blog , so i followed this advise. and attached this summary sheet, it was very clear where everything came from.
“The way you pipeline your “income earned while I was a citizen” to your Form 1040NR is a bit cumbersome. We prepare a summary page (on a piece of paper) to attach to the Form 1040NR to give guidance to the IRS so they can see where the numbers came from. We also attach a Form 1040 for that part of the year, where the actual
computations are made. Then the numbers are ported from the Form 1040 to the Form 1040NR with, of course, the helpful little guide to the inquisitive IRS agent who wants to know what happened and why.”
I’ll also say that AFAICT, the “correct” way to file the final (dual status) year return is to use (and sign) a 1040NR with an (unsigned) 1040 attached to show where the 1040NR’s numbers came from. This is what Phil Hodgen says to do, and it’s what my tax people did.
Having said that, lots of people have apparently just filed a partial year 1040, with no ill effect. And, practically, it’s probably not high on the IRA’s radar to go after this, if it even is on the radar.
@ Rebecca,
Thanks very much for your detailed report and timeline info!
Glad to hear it’s done. That was a really long (disgustingly long IMO) wait 11 months from booking request to appointment. It’s annoying to hear about that vice consul and other staffer who sound like jerks and trying to intimidate people – the silliness about the review of the file in DC, as if DC had any discretion in the matter, and telling you not once, but several times, the obvious fact that one doesn’t have a right of entry to the US after renouncing. Doubly annoying because at one time Calgary had a very good reputation. You’re obviously on the ball about renunciation, but I could see them intimidating a less-aware person. And although you weren’t intimidated, I’m still annoyed that you had to deal with jerks, that they can’t just handle it like a routine administrative procedure without the attitude.
But anyway, glad it’s done and I hope you get your CLN soon. No one’s reported renunciation at Calgary since your daughter’s last year, but several people reported more recently from Vancouver and their CLNs came in a few months, as the first staffer (the non-attitude one) predicted likely for yours.
Thanks again for your report. Sorry, I noticed I put the wrong month for your son’s appointment in the time chart. I’ll fix that this evening.
I wasn’t told anything about “a team of lawyers” reviewing the renunciation file. I was shown my signed CLN at the end of my appointment and told it needed to be sent to Washington DC for review and I would receive it by mail (in the envelope I’d provided). Just seemed to be another part of the procedure.
At my one renunciation appointment in Vancouver September 2016, the consular official was polite and not intimidating. I was told that the signed and sworn renunciation papers would go to the State Department in Washington, and that the consulate recommended approval.
@Rebecca, congrats!
Sinful that it took that long to get an appointment.
And re;
“..the vice consul, and both seemed to make a point of telling me that my application would be “reviewed at the State Department in Washington by a team of lawyers”. Each used the phrase “team of lawyers”, which I found — as it is likely meant to be — off-putting and unnecessary..”….
That’s the insult (for free – because US citizenship benefits the citizen wherever in the world they may be found) in addition to the 2350. USD injury extorted out of both renunciants and relinquishers now.
Hello all,
I am trying to understand what is the real difference between the processes of relinquishment and renunciation. I need to choose which way to go! An automatic response to the email I shot to CanadaCLNInquiries@state.gov has been received and it looks like the only difference is documentation of expatriation act (minus form 4080) in case of relinquishment. Does it mean if I go this way I still have to pay the exorbitant fee and go through appointments and wait times? What are the pros/cons of going this or that way?
@OhDear
Everyone gets equal screwing now re: fees.
Originally, relinquishing didn’t cost, now it does. I’m not sure there’s any difference between them now on any after-effects down the line. I’m sure others here with more knowledge will pipe-in.
the cost is the same. If you can show you performed a relinquishing act early enough ( before 2004) you would have been spared any filing requirements. However it appears you have been filing. You seem to have a lot of thinking to do. Do you have ties to the US? Do you feel a need to be right with the IRS after you renounce? and so on.
@Oh Dear,
As Jane mentioned, at one time there was no fee for relinquished-based CLNs, only renunciation-based ones, but about two years ago they started charging for relinquishment-based ones too, same amount, currently $2350.
If you want to get a CLN, the procedure for obtaining one is basically the same – minor difference in documentation, as you noticed, but the same booking procedure and wait time for the appointment.
Re: your question on the other thread:
With a relinquishment, the CLN dates the loss of citizenship as having occurred the date of the relinquishing act – so it would be the date you became a Canadian citizen with the intention of relinquishing your US citizenship by so doing.
However, with relinquishing acts after 4 June 2004, for IRS purposes, the date of citizenship loss is the date the person notified the Dept of State of their relinquishing act (the day you sign the forms for the CLN at the consulate) (USC 877A(g)(4)).
If I were still maintaining the InfoShop, I’d post this stuff there somewhere. Since I haven’t been doing that for three years now, I just lob the bolus here. Maybe some Brockist will want to make it prettier and give it a better home on this site. Maybe not. No worry about cut-and-paste of US government text. Such is never copyright. Freedom and all, y’know.
==================================================================
2004
The American Jobs Creation Act of 2004 amended Section 877 in a quest to establish objective rules based on personal finances and taxation (instead of migration status) as determining when an individual is no longer considered a U.S. citizen or long-term resident.
==================================================================
2008 June 16
The Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act) defines a new US exit tax through IRC 877A expatriation rules [ = end of ten years of filings required after expatriation ]
==================================================================
2010 June 28 Renunciation fee from $0 to $450
Documentation for Renunciation of Citizenship
The CoSS demonstrated that documenting a U.S. citizen’s renunciation of citizenship is extremely costly, requiring American consular officers overseas to spend substantial amounts of time to accept, process, and adjudicate cases. A new fee of $450 will be established to help defray a portion of the total cost to the U.S. Government of documenting the renunciation of citizenship. While the Department decided to set the fee at $450, this fee represents less than 25 percent of the cost to the U.S. Government. The Department has determined that it must recoup at least a portion of its costs of providing this very costly service but set the fee lower than the cost of service in order to lessen the impact on those who need this service and not discourage the utilization of the service, a development the Department feels would be detrimental to national interests. See 31 U.S.C. 9701(b)(2).
https://www.federalregister.gov/documents/2010/06/28/2010-15622/schedule-of-fees-for-consular-services-department-of-state-and-overseas-embassies-and-consulates
==================================================================
2014 Sept 6 Renunciation fee from $450 to $2350
Documentation for Renunciation of Citizenship
The CoSM demonstrated that documenting a U.S. citizen’s renunciation of citizenship is extremely costly, requiring American consular officers overseas to spend substantial amounts of time to accept, process, and Start Printed Page 51251adjudicate cases. For example, consular officers must confirm that the potential renunciant fully understands the consequences of renunciation, including losing the right to reside in the United States without documentation as an alien. Other steps include verifying that the renunciant is a U.S. citizen, conducting a minimum of two intensive interviews with the potential renunciant, and reviewing at least three consular systems before administering the oath of renunciation. The final approval of the loss of nationality must be done by law within the Directorate of Overseas Citizens Services in Washington, DC, after which the case is returned to the consular officer overseas for final delivery of the Certificate of Loss of Nationality to the renunciant. These steps further add to the time and labor that must be involved in the process. Accordingly, the Department is increasing the fee for processing such requests from $450 to $2,350. As noted in the interim final rule dated June 28, 2010 (77 FR 36522), the fee of $450 was set substantially below the cost to the U.S. government of providing this service (less than one quarter of the cost). Since that time, demand for the service has increased dramatically, consuming far more consular officer time and resources, as reflected in the 2012 Overseas Time Survey and increased workload data. Because the Department believes there is no public benefit or other reason for setting this fee below cost, the Department is increasing this fee to reflect the full cost of providing the service. Therefore the increased fee reflects both the increased cost of the provision of service as well as the determination to now charge the full cost.
https://www.federalregister.gov/documents/2014/08/28/2014-20516/schedule-of-fees-for-consular-services-department-of-state-and-overseas-embassies-and
==================================================================
2015 Sept 8 Relinquishment fee from $0 to $2350
Documentation for Loss of Nationality
The Department is expanding the application of and renaming item 8 in the Schedule of Fees to “Administrative Processing of Request for Certificate of Loss of Nationality.” The fee will be applied to cover not only services to U.S. nationals (i.e., U.S. citizens and non-citizen nationals) who relinquish nationality by taking the oath of renunciation under 8 U.S.C. 1481(a)(5), but also to cover services to U.S. nationals who relinquish nationality under 8 U.S.C. 1481(a)(1) to 1481(a)(4) or any earlier-in-time relinquishment statutes administered by the Department of State and request a Certificate of Loss of Nationality. Currently, the fee is paid by those taking the oath of renunciation under 8 U.S.C. 1481(a)(5) at the time the oath is sworn. The fee would be collected from an individual claiming to have relinquished nationality at the time that person requests the Certificate of Loss of Nationality (that is, after completing Form DS-4079 and signing before a consular officer Part II of Form DS-4079 entitled “Statement of Voluntary Relinquishment of U.S. Citizenship”). The Fiscal Year 2012 Cost of Service Model update demonstrated that documenting a U.S. national’s relinquishment of nationality is extremely costly whether the service is for a relinquishment under 8 U.S.C. 1481(a)(1) to 1481(a)(4) or a relinquishment by renunciation under 8 U.S.C. 1481(a)(5). Both require American consular officers overseas to spend substantial amounts of time to accept, process, and adjudicate cases. The cost of the service is not limited to the time consular officers spend with individuals prior to and at appointments. The application is reviewed both overseas and domestically to ensure full compliance with the law. The consular officer must determine that the individual is indeed a U.S. national, advise the individual on the consequences of loss of nationality, and ensure that the individual fully understands the consequences of loss, including the inability to reside in the United States unless properly documented as an alien. Through documentary review, consideration of the individual’s circumstances, and careful interviewing, the consular officer also must determine whether the individual is seeking loss of nationality voluntarily and with the requisite intent, as required by U.S. Supreme Court case law and by statute (8 U.S.C. 1481). This determination can be especially demanding in the case of minors or individuals with a developmental disability or mental illness.
The consular officer must also ensure that the commission of an expatriating act was as prescribed by statute, which is often an issue in non-renunciation relinquishment cases. The loss of nationality service must be documented on several forms and in consular systems as well as in a memorandum from the consular officer to the Department’s Directorate of Overseas Citizens Services in Washington, DC (“OCS”), in the Bureau of Consular Affairs. All forms and memoranda are closely reviewed in OCS by a country officer and a senior approving officer, and may include consultation with legal advisers. This review entails close examination of whether the requirements of voluntariness and intent are satisfied in the individual case. Some applications require multiple rounds of correspondence between post and the Department. The final approval of the loss of nationality must be done by law within the Department (8 U.S.C. 1501), by OCS, after which the case is returned to the consular officer overseas for final delivery of the Certificate of Loss of Nationality to the individual. In addition, every individual issued a Certificate of Loss of Nationality is advised of the possibility of seeking a future Administrative Review of the loss of nationality, a time-consuming process that is conducted by OCS’s Office of Legal Affairs.
Currently, nationals who renounce nationality pay a fee of $2,350, while nationals who apply for documentation of relinquishment of nationality by the voluntary commission of an expatriating act with the intention to lose nationality, do not pay a fee. However the services performed in both situations are similar, requiring close and detailed case-by-case review of the factors involved in a request for a Certificate of Loss of Nationality, and both result in similar costs to the Department.
In the past, individuals seldom requested Certificates of Loss of Nationality from the Department to document relinquishment. Although the Department was aware that an individual relinquishment service was among the most time consuming of consular services, it was rarely performed so the overall cost to the Department was low and the Department did not establish a fee. Requests for a Certificate of Loss of Nationality on the basis of a non-renunciatory relinquishment have increased significantly in recent years, and the Department expects the number to grow in the future, causing the total cost of this service to increase. At the same time, the Department funds consular services completely from user fees. The Cost of Service Model continues to demonstrate that such costs are incurred by the Department when accepting, processing, and adjudicating relinquishment of nationality cases; therefore, the Department will collect a fee from all individuals seeking a Certificate of Loss of Nationality. Taking into account the costs of both renunciation and non-renunciation relinquishment processes, the fee will be $2,350.
https://www.federalregister.gov/documents/2015/09/08/2015-22054/schedule-of-fees-for-consular-services-department-of-state-and-overseas-embassies-and
==================================================================
OhDear. There are 5 or more ways to relinquish. One is to renounce. One is to become Canadian with the intention of relinquishing US citizenship. Otherwise it doesn’t make much difference to you.
Reminds me of a song (I believe mentioned here a while ago), “there must be fifty [five] ways to leave your lover [the US]:
Just slip out the back Jack
Make a little plan Stan…
Thank you for responding! I’ll think some more about it, but right now it seems that renunciation makes sense. As for the final returns – are the requirements the same upon receiving the CLN? 1040/1040NR+8854?
@DoD – yes, I have been filing all along, no ties to the US other than a small traditional IRA balance and a couple of bank accounts/credit cards. Do I really have an option of not having to be right with the IRS? I mean, isn’t it one of the big scares most expats discover at one point or another? I haven’t been losing sleep over US taxes (not literally, anyway) but each year there’s more anxiety to deal with than I feel is tolerable…
@Oh Dear – it sounds like you’re already more or less right with the IRS. Many of us weren’t, hence the scare.
You can fill in the final forms and “exit cleanly”. Or you can choose not to bother. The IRS is probably never going to notice, either way.
Oh Dear. Yes – a lot of us have the option of renouncing and not bothering to file anything with the IRS. If someone has no US ties there isn’t much they can do. Compliance Condors will tell you you wouldn’t be able to cross the border but their is little evidence of that. Only a small proportion of ex pats file US returns.
However, since you are up to date, it would make sense to tidy things up with a final 1040 and 8854.
iota, DoD, thank you. Even being more or less right with the IRS generates waaaay too much anxiety, trust me on that. I don’t look forward to having to deal with it for the rest of my life! 🙂 Alright then, I’m going to start my renunciation timeline and send off the initial packet of documents (hopefully, this week). The current wait times in Vancouver are 4-5 months, we’ll see what it’s going to be in reality.