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
It’s the California Bar Assoc. making these proposals. They would turn the process on it’s head and force people to pay any exit tax and agree to 5 yrs of servitude before being allowed to renounce. Probably unconstitutional but they don’t care about that. Get out while U can
“It’s also not a small point to know that if renunciants have US heirs and they don’t want them to incur a 40% withhold on their NRA estate then they should attempt to be compliant and file returns before they expatriate. Lurkers often don’t know this fact either.”
I agree they need to know about that particular tax; it’s also good to be aware that as long as they don’t file 8854 the IRS will find it difficult to assess them as having “covered expatriate” status.
“That is why I try to give all sides of the argument and let people make up their own minds.”
Indeed, but the point about not being at risk of audit for three years following renunciation is not an argument, it’s a fact. The IRS doesn’t have the power to audit a renunciant at all – let alone for three years!
This is good, and it’s good for those planning renunciation to know that once they’ve sworn the oath they’re free.
Portland – I agree. It’s more likely to get worse than better.
@plaxy
how long to you think will it take for those california based amendments to be enacted if the law is passed?
what kind of timetable are we looking at in your opinion?
patrick – I don’t know if those proposals will ever make it into US law. As Portland said, it would probably be unconstitutional to put such a barrier in the way of renouncing.
Also, even if such proposals were passed, it would be likely to cause a lot of unease internationally, as it would mean the IGA partner countries would be requiring banks to report a USCs worldwide assets to a country that was refusing to allow the USC to renounce until it had confiscated those very same assets. So I don’t think there’s any immediate need to worry about those proposals.
But there are other changes that could be made very easily, such as increasing the CLN fee still further. The only thing I can see for intending renouncers to do is try to get out as quickly as possible.
It is just kind of bizarre that the US has turned itself into a country where such an oppressive proposal could be put forward without the proposers even being aware of the oppressive nature of what they are suggesting.
Regarding the proposal to tighten the exit tax – the very junior lawyers who wrote it have no idea of the reality. They’re looking at a few very wealthy green card holders or naturalized citizens living in the US who already have a second passport. They are completely unaware of the millions of US emigrants, already well established in their new homes, whose assets were earned where they are currently living.
I don’t think this is a serious legislative proposal. However, I agree with Plaxy and Portland – if you’re getting out, sooner is better than later.
Regarding the California Bar Association proposal, I find this hilarious:
Non-compliance “can cause expatriates to live with extensive tax levies they did not know they had. If the expatriate returns to the U.S., transfers assets to a U.S. financial institution, or dies leaving assets to a U.S. citizen, those assets could be suddenly and unexpectedly seized.”
It’s all about protecting the taxpayer from unpleasant surprises, isn’t it? Very thoughtful of them.
The proposal is absurd, we don’t need to really go into it, but I think it did us a service by pointing out the general weakness of the IRS. The policy change makes sense (or a certain sort) if the goal is to prevent millionaires from moving money offshore then disappearing, but it utterly forgets the accidental US citizen.
I’m wondering if it’s worth a stamp, metaphorically speaking, to write to the authors and explain what effects that policy would have on the millions of individuals abroad with no US connection other than birthplace who face loss of access to banking services due to FATCA, for which currently the only cure is a CLN they might struggle to afford already without adding to the cost by requiring tax filings. Most of which would yield zero tax owing but would prove a burden to individuals of limited means, and particularly those without an SSN or good English skills.
Here’s the original article, which I have not had time to read in full. Dated 13 November 2017.
https://marketing.withersworldwide.com/reaction/emsdocuments/PDFs/PCT/Expatriate_Taxes_Tax_Notes_Helen_Cheng_and_Dina_Nam.pdf
Should not be difficult to locate e-mail addresses for the authors.
These last two pages of discussion sound exactly like the arguments going on inside my own head day and night. To put it succinctly, my question for myself is whether to stop filing completely, a full six years before my earliest possible renunciation date. This decision is even more fraught with peril because we do not intend to pay capital gains tax to the USA on the property sale which is funding our new-citizenship-in-progress (and which comprises 100% of our net worth and retirement, as we have ZERO retirement funds, no US social security, and no government pensions here). To make matters worse, our daughter, against our better judgement, has settled in the US, giving us a US heir. Not that inheritance comes anywhere close to being our top consideration. Frankly, hubby and I hope to time it so that we spend our last penny on the morning the last survivor between us meets his or her maker.
Our dilemma is the choice between ending the pain, stress, worry, and anger of the annual filing right now, and postponing our post-renunciation compliance/8854/covered expatriate question; versus extending the torment, anger and worry for another six years in return for the delayed gratification of being able to wipe the USA from our minds completely.
“As Portland said, it would probably be unconstitutional to put such a barrier in the way of renouncing.”
What about this whole mess is not unconstitional?
We can not rely on the US to follow the US constitution.
“it would be likely to cause a lot of unease internationally, as it would mean the IGA partner countries would be requiring banks to report a USCs worldwide assets to a country that was refusing to allow the USC to renounce until it had confiscated those very same assets”
FATCA caused a lot of unease internationally, and yet our banks are reporting us all the same. We can not rely on the nations we live in or have naturalized to give any meaningful resistance.
Japan centric I know, but I wonder if other countries have similar laws. Even if one gains Japanese citizenship, one MUST meet all requirements of their previous nationality’s relinquising laws, rules, regulations with in 2 years or LOSE their newly bestowed Japanese citizenship.
In other words, even after one is a naturalized Japanese citizen, if one does not meet US requirements to relinquish within 2 years of naturalizing, they lose their Japanese citizenship.
“I’m wondering if it’s worth a stamp, metaphorically speaking, to write to the authors and explain what effects that policy would have on the millions of individuals abroad with no US connection other than birthplace who face loss of access to banking services due to FATCA, for which currently the only cure is a CLN they might struggle to afford already without adding to the cost by requiring tax filings. Most of which would yield zero tax owing but would prove a burden to individuals of limited means, and particularly those without an SSN or good English skills.”
They may not have known when they wrote it but do now. They do not care. someone in the Obama administration, when asked about those giving up USCship over FATCA, said that it was worth it to catch those evading their responsibility.
Those who do not know, do not care to know. Those that do know, do not care. Then there are those that know and are happy as they blame us for their fiscal problems.
The question in my mind is why would the two authors of the article (or the California Bar Association for that matter) give a damn about the inherent problems of enforcing the expatriation tax. Are they miffed that some people have figured out how to escape the plantation without being financially gored? Or maybe they’re upset that someone would even have the audacity to leave and want to beef up the tax so it inflicts the maximum amount of punishment?
But what’s in it for them? I suspect they’ve caught the scent of some “billable hours” and want to rewrite the rules to further enhance their job security and profits. Like all the other condors they want to help the IRS do what its not able to do on its own while at the same time stuffing their own pockets.
@Maz
California wants its state cut of the exit returns?
Barbara – this is how I would look at it, if I were on your position: which is riskier, six years of filing or six years of not filing?
If you stop filing, what might happen? Answer: an auto-enquiry might be generated by the system. If you don’t reply, you’ll probably hear nothing more. But you do need to keep your nerve and not reply to robot letters. If you think the very sight of the envelope would seem so frightening that you would react by filing late and paying even more than usual because of penalties and interest, then that’s not worth the stress and strain – just keep filing.
But if you think you could ignore any such auto-enquiries, it’s extremely unlikely you would get any non-auto enquiries. It’s not worth their time and money to chase you.
It just depends which scenario you feel you would find easier to handle: stop and do nothing further, or carry on filing. Nothing’s likely to happen in either case, beyond letters, but it’s a question of what lets you sleep at night.
That’s how I would try to analyse it.
“why would the two authors of the article (or the California Bar Association for that matter) give a damn about the inherent problems of enforcing the expatriation tax. ”
Career progression.
“FATCA caused a lot of unease internationally, and yet our banks are reporting us all the same. We can not rely on the nations we live in or have naturalized to give any meaningful resistance.”
FATCA caused unease because of the threat to banks – not because of the problems caused to USCs. Don’t kid yourself, no country is going to worry about problems caused to USCs by the US government.
Governments just don’t want to find themselves in court, as might well happen in some countries if America started using FATCA reports for purposes of extortion.
But of course some other countries might not turn a hair at helping the US fleece its citizens.
Barbara – “…we do not intend to pay capital gains tax to the USA on the property sale which is funding our new-citizenship-in-progress”
Best not to file then. Nothing’s likely to happen whatever you do, but there’s no point at all in adding perjury to the anxieties.
@Barbara
The way I look at it is by not filing you are not telling them anything that is incorrect. You could both be on a sampan on the way to Tian for all they know. Plaxy’s right, no need to add perjury to the mix.
@MAZ and Nononymous
California always want their share of any tax going. I was warned years ago when I renounced to surrender my Cal Medical license beforehand as although I did not ever live there or possess a residence there it could be construed that I did for state tax purposes along with other resident ‘pointers’ out to catch people taxwise. Would California not be looking for their share of a state exit tax in this new proposal?
@plaxy
the form ds 4079 is very weird indeed
up to question 8 they ask you your personal details,birth,other nationalities and on, then they list from question 8 to 11 all the instances where you would automatically lose your us nationality i guess (oath to a foreign country,military service..)whcih i did not.
then question16″have you renounced your us nationality at a us consulate or embassy? if yes ,provide a date and place”…??? i do not get it,did i already renounce before?
then 17″describe in details the circumstances under which you performed the act or acts question 8 to 16″
???? again,i did not do any of those
then 18 “did you perform the acts voluntarily”
??? i did not do any
then 19 “did you know that bt doing act 8 to 18 you might lose your nationality”
???
patrick – I agree, DS-4079 gives me the creeps. So much so that I went out of my way to find a consulate that didn’t require it (it’s only officially required for those relinquishing, not for those who are renouncing).
Someone who did complete it may be able to offer some helpful advice.
@Patrick
I quote an explanation of that form DS4079 from the renunciation guide here on the Brock site
“One form presented some confusion for most of us, as well as many of the consular officers we dealt with. It’s the “Questionnaire”. The problem with this form is that it’s designed both for people who want to renounce citizenship, and for people who feel their citizenship was taken away unjustly and wish to reclaim it. Some consular officers, not realizing this dual-use, have tried to make people complete Part III, the section for people who committed a “potentially expatriating act” but did not voluntarily intend to renounce citizenship. One of these “potentially renouncing acts” is actually renouncing citizenship in a U.S. diplomatic post. So in one instance we know of, a person wanting to renounce U.S. citizenship was made by the consular officer to fill out Part III, and then the Dept. of State in Washington rejected the renunciation because they thought the person was either not voluntarily renouncing or that he had already renounced and was now trying to claim back his citizenship. The whole situation was a bit silly and apparently took months to sort out. (To be fair to the consular officer in question, the form itself is very poorly written.) So our advice is to skip Part III, despite what any consular officer says. You’ll be better off for it.”
I and many others sought out Consulates who didn’t require this form except for relinquishments.
@ PS Patrick
If you are made to answer, then just answer truthfully, I did not or not applicable.
DS-4079 has absolutely no bearing a renunciation anyway, it’s irrelevant. You don’t have to give any reason why you’re renouncing and the only reasons for possibly refusing it are that the consular staff think you’re either being coerced or you’re mentally incapable of understanding what you’re doing, so all those questions are meaningless. I could vote in the mid-term elections, do my tax return for this year and then stand in front of the consul and renounce the next day – that’s how stupid it is.
I really don’t know why some embassies/consulates insist on using it for them. It has some value for people wanting relinquish, but my feeling it was really designed for people who’d thought they’d lost citizenship and wanted to keep it.
“I really don’t know why some embassies/consulates insist on using it for them.”
To cover their backs in case the would-be renunciant turns out to be a Fugitive From Justice, or a known tax delinquent, or a Democrat who’s just been summonsed by the FBI.