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
As far as I can tell, if $300 is the amount received up to and including the day before renunciation, it has to go on Form 1040 and almost surely has to be transferred to Form 1040NR. I no longer remember how I made that kind of transfer.
The amount of tax paid to the source country on that $300 can be claimed on Form 1116, passive category. As far as I can tell, this Form 1116 is a schedule to the schedule (Form 1040 being itself a schedule). Form 1116 can also be a schedule to the return (Form 1040NR) but I think you don’t want to do it that way. Transfer the foreign tax credit from Form 1116 to Form 1040. If you still owe the IRS after subtracting the foreign tax credit from amount of tax on Form 1040, then that’s what you owe them.
Having been a compliant idiot in my day, on the rare occasions when I owed money to the IRS I sent overpayments and they sent partial refunds. The only times they didn’t send refunds were when my overpayments were made by financial institutions and reported on Form 1099 and embezzled by IRS employees, and afterwards in other years where they credited the overpayments but seized them to credit towards penalties that were imposed for illegal honesty. (Honesty is illegal in all years but was only penalized in years where overpayments were made by financial institutions and reported on Form 1099 and embezzled by IRS employees.) So anyway, just like you, if I figured I owed $30 to the IRS I would pay it.
Former patriot. Now is a good time for you to read Petros’ principles.
Petros (Peter Dunn) was the founder of IBS
Principle 1 What the IRS can’t know, unless you tell them, can’t hurt you.
http://isaacbrocksociety.ca/2016/07/16/petros-principles-1-what-cant-hurt-you/
Or to put it another way, ‘Never tell them anything they don’t already know ‘
All 12 principles are worth perusing.
http://isaacbrocksociety.ca/2016/08/05/petros-principle-12-who-is-criminal/
As I said, “Having been a compliant idiot in my day” … before I read the Petros principles. Now that the US government and courts have taught me very expensive lessons in the fact that honesty is illegal in the US, I would know not to do it.
By the way the IRS’s Taxpayer Advocate reported to Congress in 2011 that thousands of honest taxpayers found themselves forced to renounce US citizenship, many of them because they learned that honesty resulted in penalties.
@Formerpatriot
if you don’t decide to leave the interest out then the form 1116 is not all that complicated for just one category of passive income. I can understand not wanting to get into it but at least give it a try. why pay something you don’t owe? The renunciation fee itself is exorbitant as it is.
I managed to fill out the form 1116 correctly. Mind you I did have past returns to use as a guide but you can always come back and ask questions. I would not worry so much. Just make your best effort, you are unlikely to hear anything back unless you miscalculate.
as far as transferring over to the form 1040NR, anything that is not exempted under FEIE needs to be transferred over to the form 1040NR (foreign tax credits are also transferred over) and the form 1040NR will show any tax due same as the form 1040 or it will show zero after being exempted with foreign tax credits same as the form 1040.
You can write next to the transferred amounts “From 1040 Statement”. This is what I did.
I checked my returns now and yes you transfer over the full second page of the form 1040 on to the form 1040NR
for me on the 2016 return, it was transferred over from the 1040 Line 38 (amount from line 37 (adjusted gross income). this figure was not zero on my tax return. it could be zero for many people if all they have is FEIE
On the form 1040NR the second page starts with line 37 and that figure from line 37/38 on form 1040 went there. Next to line 37 on the form 1040NR I wrote “from FORM 1040 statement”. The personal exemption was transferred over to line 40 (it existed that year) and the foreign tax credit was entered on line 46 (same amount from the form 1040) and the whole thing became zero again.
I never heard anything back but i know they were processed by calling them 6 months later.
I found out three weeks ago about CBT (I’ve been a UK citizen since 1991 and never realised the financial implications of USA citizenship).
I’m filing under the Streamline programme and paying a firm to help me. I was wondering about the experiences of anyone who did the Form 14653 themselves. I could pay the firm (they charge US$300 for assistance) to help me with this. Has anyone done it without an advisor? It looks rather daunting…
I’m planning to file my five years and renounce.
Bird person. Beware. Streamlined is meant for those who wish to ‘come clean’ and then keep their citizenship. It was never meant for accidentals and long term ex residents who don’t consider themselves US citizens. See the sidebar ‘Beware of the streamlined program ‘
In my opinion, quiet disclosure is better. It worked for us. Renounce and do nothing else ( file nothing) or if you must, renounce and file 5 years worth of 1040s. If you owe no tax, you will not owe any penalties.
I’m not certain I could sleep at night with a quiet disclosure. I won’t owe anything (I earn less than a third of the foreign income exemption) and my assets are laughably small.
Sadly, I firmly believed that I’d relinquished my USA citizenship when I took on British citizenship in 1991. But bullying by a US immigration official when I tried to enter the US on my British passport (in 2003) made me obtain a new USA passport. So I don’t think I can go down the relinquishment route now.
BirdPerson. Whether you decide to file 3 years (and 6 yrs of fbars) under streamlined or 5 yrs. under a quiet disclosure you will be just fine. As you said, your salary is small.
To make your life as simple as possible, renounce as early as possible in 2019. Even better , defer any UK income in 2019 until after you renounce if you can. That way you might avoid having to file 1040 and 1040NR for 2019 or you will make it easier to file them. That’s what we did..
B.P. Do you have a US social security number.? If not,the whole process becomes stickier.
BirdPerson:
I agree with Portland. If you do not owe any taxes, quiet disclosure is the simplest and least expensive way to go. Two examples:
My wife: In 2015 she filed a bunch of 1040 (for a bunch of previous years). Since 2015 she’s been filing on time every year (1040 + 2555 + 8938 + FBAR). She never owns any money to the IRS. She will renounce this Fall.
My son: Last spring he filed six years of 1040 + 2555. Ten days ago he renounced. He is in the process of filing 6 years of FBARs.
So far the only fee I have had to pay was a 325 dollars fee for a one hour consultation with a so-called cross-border accountant who gave me about 10 dollars worth of advice that we can all find on the Internet.
I have a social security number. I’m actually thinking of renouncing as soon as possible (the London Embassy quotes a month’s wait) so 2018 will be the final year (well, part of). My ISA was well under the US$50K value until 2015, so it wouldn’t even need to be reported for 2013 or 2014. Other than my house (again, not high value), it’s the only asset to my name.
If nothing else, this experience has shown me that I’m not even a financial minnow. More like plankton!
BP. Oh Oh.
You have an ISA. They are not tax free on your US tax return. You are supposed to report the gain each year as taxable income. It gets worse. The ISA may hold mutual funds. Most mutual funds are considered private foreign investment accounts for which the taxes are impossibleto calculate without paying exorbitant fees. I’m not sure but the ISA may be treated as a foreign trust with more accounting nightmares. Phil Hodgen who is our go to guy argues that they are not
It might be in your best interest to not mention the ISA to anyone. I’m not sure why 50k is important. The threshold for fbars is 10k. If it were me, I wouldn’t mention the ISA. If I did feel obliged, I would not treat the mutual funds ( if any) as pfics. It gets a little scary. QD returns are probably looked at less closely than streamlined returns which is another reason to prefer QD.
https://hodgen.com/is-an-isa-a-foreign-trust/
There is some kind of limit on when you need to start reporting PFIC investments, I believe over $25,000 so perhaps Birdperson is thinking of that but it’s not $50,000. It’s if all your PFIC aggravate value is not more than $25,000 you can skip all the forms. But one still needs to report on Fbar. Of course this is only for those that want to follow the rules completely. Also the UK Isa will not be sent to the HMRC to report to the IRS but still they are not supposed to be sold to US persons but I think that is partly to do with the Patriots act as well. It is impossible to keep up with all these rules and regulations.
If one owes no tax, the only reason the streamlined comes in handy is for Fbar penalty abatement. The streamlined does waive all Fbar penalties. One can not use the delinquent Fbar submission if you have not reported the income on tax returns. This is the only real advantage. Of course they will have a tough time collecting fbar penalties in most cases but some people prefer not to have the stress of worrying about this.
If there are no Fbars involved, then quiet disclosure is fine. One tends to forgot that there is nothing in the tax code that says you have to file streamlined and people have been back filing returns and amended returns for decades.
$50k is the FATCA reporting threshold for banks under IGAs and also for US residents on Form 8938, so maybe this is what’s being referred to. For non-US residents, the threshold rises to $200k (or $400k if married filing jointly).
Unfortunately, this doesn’t mean an ISA below this value is immune. It’s still subject to the full horror of schedule B and possible PFIC tax, and FBAR reporting beyond that. (Assuming one doesn’t somehow ‘forget’ they have it, that is — and unless it contains entirely benign non-PFIC stuff, that may well be the better course of action; a shares ISA can and often does contain PFICs, but this could also be a plain cash ISA, and so much less problematic.)
@watcher yes you reminded me of the bank $50,000 but sadly many banks report all accounts to save money. The bigger banks don’t. and of course some just don’t take US persons but definitely there is a threshold for PFIC investments for those ominous forms. I went back and looked up the information in case someone is reading this and needs to know. So the clock is always ticking and people should renounce while the going is good. (or stay undercover if they can and or have a disposition not to worry)
“The actual threshold for specifically reporting income from a PFIC was changed in 2014 to make it easier for small investors. The threshold amount for filing Form 8621 is an aggregate of $25,000 for all shares held in one or more PFICs.”
There have been no penalties on late fbars if there were no taxes owing. We filed 4 years of late fbars including large rrsps. Not a word.
As the US slowly dies, and become increasingly irrelevant, the US empire will become even more desperate-like Rome. Lots of bread and circus, distractions, smoke screens, and patriotic laws to appear relevant and/or generate $ for more of nothing. Lots and lots of forms, documents, crapliance, etc etc..all an america RACKET for hu$tlers and hucksters.
In our opinion, There will be changes (not in a good way) to CBT and FATCA, birth placed taxation (in co. w/Eritrea)–backed into a corner, like a mouse fighting for its’ life–like a 5 yo with a bazooka. Also, the US IRS is notorious for radio silence (2,3,4yrs+) then WHAM. Letter in mail, requresting “examination” forms, documentations, forms, docs, docs, forms, etc…the american way. Keep the tax subjects in a perpetual state of agita (Hofsteder), restlessness (Cleveland Moffett), and make em hamster wheel for as long as they can.
RENOUNCE whilst you have the chance. Get the heck outta dodge b/c it you thk it’s bad now, what do YOU thk is waiting for you 5,10,15yrs+ down the us pot-hole filled road?
Any huge changes/repeals of FATCA and CBT are unlikely–maybe some PR tweating for accidentals (thx to backbone/integrity France), but for USA-ers–you’re fcked. And knowing that reality, there’s a peace and tranquility living in reality. Our insistence on sticking to reality generates a lot of american rage, because most americans were interested in fairy tales; and their own lives were hardly models of authenticity. Folks who insist on reality thus remind them not only that the dominant us ‘reality’ was a pile of feces, but that this description applies to their own lives as well. Cognitive dissonance.
I have just emailed the requested documentation to the London Embassy and asked for an appointment to either acknowledge my relinquishment in 1993 (which I understand won’t be granted, as I obtained a new USA passport after an immigration official in the USA nearly didn’t let me in on my UK passport) or to renounce.
The Embassy quotes a month’s waiting time, so I hope to have this settled soon. There’s only the one meeting.
@ BirdPerson,
There’s a possibility they might acknowledge it as a relinquishment. It’s pretty iffy, though, it being an indicator the person considers themselves to be a citizen. Some people who have used a US passport, or applied for their first US passport after their relinquishing act, due to bullying or misinformation/misunderstanding, have received CLNs based on their relinquishing act, but some haven’t.
They seem to have gotten stricter on the passport factor in recent years (albeit, we have very few reports to base this perception on). It isn’t, and never was, a slam dunk – even in some of the cases which went smoothly, there was consultation between the consulate and Washington (either at the time of their consulate meeting or during the weeks prior to it) before the person proceeded with their application).
If the embassy/consulate feels it is not a relinquishment, the person has three choices:
The person can renounce on the spot.
Alternatively, the person can have them send the application to DC anyway (DC has overruled a local embassy/consulate’s evaluation in several cases at Brock. IIRC these cases all concerned relinquishment due to government employment (basically the dispute was on a point of law, not on inferring intent) — I’m only familiar with a handful of passport cases, but FWIW the successful ones I happen to know of either went smoothly from the get-go or involved communication between the embassy/consulate and DC prior to filing the application;
Or the person can choose not to proceed for a CLN and self-document his/her relinquishment (this can be useful in Canada, where Canada Revenue Agency’s FATCA Guidance Note to Financial Instititutions specifically mentions this regarding pre-04.06.2004 people).
This is some information and links to reports from people who used/renewed/got a passport after their relinquishing act.
2012 Halifax
Baird
Got passport because border agent told him he had to.
CLN received 2 months
2012 Vancouver
David Submitted on 2012/12/20 at 10:41 pm
Used passport to enter US, thought he had to.
CLN received 3 months
2013 Jerusalem
BenPloni See Consulate Report Directory, Jerusalem.
Renewed/used passport.
After lengthy back and forth (a couple of months) between person, consulate and DC, person was told could only renounce.
Renounced
2013 Consulate in Western Hemisphere, but not in Canada.
Anonymous
Had been given a very hard time in secondary entering the US on non-US passport, so got a US passport.
CLN received 3 months
2013 Toronto
AtticusInCanada: Submitted on 2013/09/26 at 10:48 pm
Used passport.
CLN received 13 months
2014 Toronto
Anonymous
Used passport until it expired. Did not renew.
Was told could only renounce.
Became self-documented relinquisher
2014 Vancouver.
BC_Doc Submitted on 2014/05/16 at 6:39 pm
Renewed (used?) passport.
Was told could only renounce.
Became self-documented relinquisher
2014 Vancouver
Ghost66 Submitted on 2014/04/20 at 11:56 pm
Used passport.
Was told could only renounce.
Renounced
2014 Amsterdam
Murdo: Submitted on 2014/12/03
Renewed/used passport.
Relinquishment claim sent by embassy to DC but rejected 2 months
2014 Melbourne
Anonymous
Renewed/used passport.
Reliinquishment claim sent by embassy to DC but rejected 14 months
Renounced.
BirdPerson
Just to add to Pacifca’s very comprehensive information …
If you decide to have your relinquishment request sent to DC for consideration after a negative response from the embassy, you may then have to pay another $2350 fee for renunciation if DC refuses your relinquishment. It is worth checking with them first before making your decision.
You should also emphasize the fact that you intended and believed that you had relinquished your US citizenship when you became British. That you had travelled on your British passport into the US many times but were forced into applying for a US passport by an immigration official through fear of refusal of admittance.
You can also add your swearing of allegiance to the Queen. Lets hope she has some influence :-).
Good luck and let us know the outcome.
I actually have a USA visa stamp in my old British passport (looked at it earlier today).
I’m a full time priest in the Church of England, so I also swear an oath of allegiance to the Queen every time I take on a new church. I fully plan to go to the appointment wearing my clerical shirt and dog collar. Never mind the Queen, I hoping God will provide some influence!
By the way, when I renewed my USA passport in person at the US Embassy, I handed over my British passport fully expecting to be told that I couldn’t have both citizenships and that I’d have to make a choice. The official said NOTHING about the British passport but merely photocopied it. Seems he was supposed to formally ask me if I’d planned to retain USA citizenship when taking on British.
But I’m resigned to renunciation. And then becoming compliant with my tax returns so I can once again sleep at night. I’ll have to take out a loan to pay for all this, sadly.
Again, everyone, I am so very thankful for the help/support you’re all giving me. I’m a single woman, and there are times I’ve felt very alone during this nightmare. That people like you are taking the time to offer me advice means a lot to me. Thank you.
PS BirdPerson
Another consideration is your planned trip to the US in Oct.
A renunciation is slam dunk and takes effect immediately. A relinquishment needs consideration before affirmative or negative, so you would not get a letter confirming renunciation to give to the immigration official. This would mean that you would have to renew your US passport to travel
@BirdPerson, you’re not alone, never think that. We’ve all been in similar situations which is why we found our way here. If you need to talk then do so because we’ll listen and offer what advice we can.
Thanks Heidi, yes, I realise that.
Filing tax returns will cost me in advisor’s fees etc, but I won’t ever again be able to spend this time with my sister. Oh, her name is Heidi, by the way.
Pity I couldn’t have found out about this a year ago, really, when I had no such time pressures.
Medea many thanks for your message!