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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thanks plaxy and portland
another question,if i have revenues after the day of my official renunciation,march 30th ,i do not have to file anything on those right?
the 1040 or 1040nr is for revenues up tot the day of my renunciation if i understood correctly…
Correct, as long as it’s not US source income.
thanks plaxy
so if ,after the day of my renunciation,,i make 1M$ in France or Italy ,i do not file to report it but if i make 1M$ in the us ,i have to report it even though i’m not longer a us person?
Don’t worry about it. If you make $1M in the US they’ll take their share before you ever set eyes on it. You won’t even need to file unless you find that the treaty says your $1M should be taxed at a lower rate, thus allowing you to claim a partial refund.
Both events (the $1M and the refund) extremely unlikely. Be happy. You’re free. 🙂
hello guys
if you have a solution for this,you’re welcome to help
this is one of my friends
he’s a us citizen,he’s also french by birth
here are the rules for the exeption to the exit tax and the covered expat status
EXCEPTION FOR DUAL CITIZENS
Under the dual citizen exception, a renouncer who fails either of the first two covered expatriate conditions above (the net income or net worth tests) will still be exempt from the exit tax if the following conditions are met:
You became a U.S. citizen at birth;
You also became a citizen of another country at birth;
On the expatriation date, you continue to be a citizen of that other country;
On the expatriation date, you continue to taxed as a resident of that other country; and
You have been a resident of the United States for not more than 10 taxable years during the 15-taxable year period ending with the expatriation year.
so he fullfills all conditions except the fact that he moved from France to Italy 5 y ago ,so he ‘s not a resident of his second country of citizenship,France,anymore
This rule is ludicrous because what does it chance for the us or the irs that he’s a french or italian resident???nothing.
What do you guys think and could he get out of this mess without paying the exit tax?
“so he fullfills all conditions except the fact that he moved from France to Italy 5 y ago ,so he ‘s not a resident of his second country of citizenship,France,anymore”
Right.
“This rule is ludicrous”
I think it’s malicious. The rule was designed to make it look like the US occasionally pretends to care about human rights, but to avoid providing any actual benefit as much as possible. But you’re right too, the rule isn’t only malicious, it’s also ludicrous.
“What do you guys think and could he get out of this mess without paying the exit tax?”
I think it’s this: Acquire French residency the day before renouncing US citizenship. Optionally abandon French residency on the day of renouncing US citizenship.
But watch out because I might be off by a day. The period of US taxability runs until the day before the day of expatriating but does not include the day of expatriating. But the wording for exemption from exit tax looks like it might depend on his residence status on the day of expatriating, i.e. on a date when he’s no longer taxable by the US. Why should the ludicrousness stop there, eh?
It is also there so that homelanders have something to point to and shout “See! See! There is an exemption so stop your whinning.” and then add some comment about you being an ingrate while not actually providing any relief.
@ patrick
It seems as though those criteria were written by policy wonks who thought all the world does CBT just like the mighty-high-most, exceptional USA. Perhaps they didn’t realize the international norm, by 195 to 2, is RBT. He could seek clarification from the IRS, arguing he has the right to French residency anytime he chooses but he pays taxes in Italy where he is currently living. If they nix his argument he could do a cost-benefit analysis to see if it would be better to establish residency in France (temporarily) prior to renunciation than to pay an exorbitant exit tax. I don’t know his circumstances or France’s criteria for being a French tax resident, so he’s the only one to decide the best way forward.
The best way out of this mess without paying exit tax is renounce and not file the exit tax form 8854
“He could seek clarification from the IRS, arguing he has the right to French residency anytime he chooses but he pays taxes in Italy where he is currently living.”
I don’t know why you think the IRS would care, but even if the IRS did care the outcome would be the same. If the person has a reason to avoid becoming a covered expatriate, take residency in France for the appropriate day.
@ Norman Diamond
“On the expatriation date, you continue to [be] taxed as a resident of that other country …”
So the criteria implies that tax residency in “that other country” is required. How would one day in France qualify for that? One day spent in France when you live in Italy is called a vacation not a being a tax resident of France … hmmm … unless France has a sales tax and that counts.
“How would one day in France qualify for that?”
If France doesn’t allow a person to become a tax resident on the day they enter France, then the person has to spend a longer time in France before renouncing US citizenship (again, this is only if the person wishes to avoid being a covered expatriate).
@Portland, if he doesn’t file the 8854 then he becomes a covered expatriate which may or may not be worse.
@Embee
he’s way over the $2M limit and getting the french residency again would be a mess.
this rule makes absolutly no sense,why should you be a resident of your second birth country at the time of renunciation??and not Italy ,germany spain…the taxes are more or less the same..higher than in the us…
i think you’re right ,he should argue with the irs about this…
@portland
he’s already on the streamline irs program because one of his itaiian banks gave him up to the irs,so he’s known from the us tax authorities..
But you think that just renouncing then not filing the 8854 might be a solution?the irs knows his assets,all non us based but what could they do to him,contact the italian authorities and try to enforce his us exit tax liabilities?
I would just get a French address and say I reside in France. I could myself be subject to this one day because I am also French, but live in Belgium. I think they (the IRS) don’t do research on bona fide residency abroad. They just take what it says on the forms. He could try to change nothing legally vis a vis either France or Italy, and just get mail sent to France. If he needs moral comfort, he could condition himself to think he really resides in France, maybe his heart does, or his mind. And what is the body without the heart and mind, right? Make it easy, he’s not cheating or hurting anybody. Just surviving. I would NOT argue with the IRS about this, just fill in the forms in a way that pleases them.
@patrick
Here is a link to the ‘rules’ of avoiding covered status.
The word ‘continue’ seems to be vague.
https://hodgen.com/dual-citizen-exit-tax/
If your friend changes his ‘resident’ address, I am not sure that there wouldn’t be pointers on his final tax returns that would alert them to the fact that he was still a tax resident of Italy.
It doesn’t matter if he’s a tax resident of Italy or not. We’ve hears of occasional rare examples of people being tax residents of two countries, so why not three?
Since he’s known to the IRS, it sure sounds like the mess of becoming a tax resident of France for the appropriate day would be less messy than any alternative.
@norman
‘Continue’ seems to be the key word. I don’t think a day will qualify. Being a tax resident anywhere in the EU is usually based on at least 6 months a year presence in resident country.
I have a feeling that if I get an employment visa in France I’ll be taxed as a resident of France from the day I enter.
That happens in a particular former colony of France.
Does he want to comply with US exit tax law, or not?
If not, nobody’s forcing him to do so.
It’s pointless for a former USC to send the IRS a form swearing falsely(!), under penalty of perjury, that s/he meets the criteria for exemption from covered expatriate status.
Asking for trouble.
@plaxy
what do you mean “nobody’s forcing him to do so”?
so he should just renounce and not send the 8854 form when the irs already knows the value of his assets?
taking the french residence is not an option,he still owns a flat in Paris but he should tell the irs that he lives there….
so either he renounce and dot send the 8854 form and pays no exit tax risking to be looked after by the irs or he finds something about this ridiculous condition of being a taxpayer of your second country of birth,france,the day of expatriation…
this is the dumbest thing i have ever seen,it makes 0 sense..i’m convinced there’s a way around it.
As stupidity knows no bounds, there is not likely to be a way around it.
“so he should just renounce and not send the 8854 form when the irs already knows the value of his assets?”
What does your friend worry that the IRS might be able to do to him if he renounces without filing the 8854?
What does your friend think the IRS might be able to do to him if he sends in the 8854, swearing falsely under penalty of perjury that he meets the exemption criteria?
@ Patrick
Your friend should read this.
https://isaacbrocksociety.ca/2016/11/01/dual-citizens-of-sweden-france-netherlands-denmark-canada-take-note-your-country-will-not-collect-for-the-u-s/
The only assets that would be at risk would be any he has in the USA.
@ Norman
“I have a feeling that if I get an employment visa in France I’ll be taxed as a resident of France from the day I enter.”
He would not need an employment visa for France if he is a French citizen, so the only proof that he is a tax resident of France would be French taxes he has paid which would be evident on the tax returns he sends to the US.
I agree with Plaxy, it’s a risk. I wouldn’t file.