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
@Formerpatriot
I would recommend C – wait and see, don’t pull the trigger at 18, since you never know where life may take you. That’s the approach I’ve advised my daughter to follow. (In the end it’s their decision – you can give them the information, and offer to pay the fees, but it’s not your vote.) In her case we did register the birth (in Europe) and obtain a passport, but not an SSN, and nothing has been done in the intervening years. I suppose one day if they bought new computers at the US border they might ask if she’s the US citizen born the same day in the same city with the same name, but they don’t have that ability now and she’s never had issues crossing with her Canadian passport. Her approach going forward is to do nothing, obviously file nothing, and keep her mouth shut around banks.
@BirdPerson
As a cheap option, consider DIY “partial compliance” after you renounce – spend a little time learning how to fill the forms out, rather than paying vast sums, then file simple 1040s with income well under the FEIE, plus FBARs on a few bank accounts (particularly to match anything that might have been reported under FATCA). Don’t mention ISAs or anything like that. The final 8854 thing should be quite easy. Make sure you ask for the extension so that you have until next October. The IRS will not look at any of this, and as you know, can’t do anything to you anyway.
(Caveat – since I long ago decided not to bother, I no longer pay much attention to discussions of which form is filed when, so take anything I say on the technicalities with a great degree of caution.)
@BirdPerson
And of course you have two additional money-saving options:
Renounce without bothering to do any compliance afterwards.
Do nothing whatsoever. If you aren’t facing banking discrimination like those in Switzerland, you may have no great need of a CLN.
@FormerPatriot
Your son is completely free to open a TFSA at any time, just as he was free to have an RESP while growing up.
He needs to not report it to the US government, is all.
I’m thinking of maybe doing the 2014 and 2013 tax returns myself. The ISA was under the US$25K value those two years, so I assume only goes on FBAR but I wouldn’t have to file any other forms about it. I’m also thinking I might do the 8854 myself. I can’t think the IRS will ever care about a plankton like me.
@BirdPerson
I suspect it’s dead easy to do all your returns, particularly if you pretend that the ISAs are just savings accounts. If they aren’t reported by FATCA the IRS won’t know about them, and really you don’t need to tell them anything they don’t already know. Tell them as little as possible, just wrap it up cleanly, if that’s the route you chose.
Well, the ISA would have been reported last year, when it edged over the limit. But I can’t think I’m very high on their priorities.
In my experience, many of us think we’re far more important in the wider scheme of things than we actually are.
I would do some digging to confirm that the ISA was reported, and if so, as what information exactly. In Canada, the various tax-protected savings accounts available to Canadians (for retirement, education etc.) are specifically excluded from FATCA reporting, so the IRS won’t know about them if you don’t tell them.
Nononymous wrote
“In Canada, the various tax-protected savings accounts available to Canadians (for retirement, education etc.) are specifically excluded from FATCA reporting, so the IRS won’t know about them if you don’t tell them.”
I was curious about that. So I did some digging and here is what I found.
On the US Department of the Treasure there is the following page regarding the various IGA (intergovernmental Agreements):
https://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA.aspx
The IGA between Canada and the USA is a 47 page pdf.
On pages 45 and 46, it says
“The following accounts and products established in Canada and maintained by a
Canadian Financial Institution shall be treated as excluded from the definition of
Financial Accounts, and therefore shall not be treated as U.S. Reportable
Accounts under
the Agreement:”
The list that follows this statement includes RRSP, TFSA, RESP, RRIF, and a few other types of accounts.
However, if one wants to be fully compliant, one has to report these accounts on Form 8938 (if total value exceeds 200K) and on FBAR (if total value exceeds 10K).
@Formerpatriot
Right, but if one does not wish to become compliant, or is happy to be “partially compliant” by only reporting a subset of your financial data (a useful approach to reduce cost and complexity if one chooses to exit the tax system after renouncing) then it’s useful to know that the IRS will not learn of RRSP, RESP, TFSA, etc. accounts if you do not yourself report them. (Petros Principle: never tell them something they don’t already know or can easily figure out.)
My suggestion to BirdPerson was that this might also be the case for ISAs, and that one should research the UK-USA IGA to figure that out. (Anyone know the answer?) If they aren’t reported, then ignore them altogether if declaring them yourself means piles of paperwork and/or taxes owing.
Yup, as expected, on page 39 of the UK IGA it states that ISAs are exempt from FATCA reporting. So, ultimately it’s a question for BirdPerson to discuss with his/her employer’s boss whether he/she wants to declare ISAs on any US tax filings.
Bird persons employers boss appears to be God or perhaps the Queen. Doubt they want to talk about it.
But I digress. I would keep the ISA out of it. Don’t tell them anything they don’t already know.
That was a convoluted way of saying it’s a matter of conscience. Hadn’t occurred to me that the Queen was an intermediary, but yes, after having seen the first season of The Crown, I suppose she’s in the chain of command.
Thanks for giving me a reason to laugh!
God is the boss. My bishop is my line manager. Not quite sure where the Queen really fits into this, although I swear an oath of allegiance to her every time I move to a new church.
What is this UK IGA thing? Everywhere I read about ISAs on line, people opine that they are PFICs.
You don’t know where the Queen fits in? Boy, you’d better do some homework.
https://www.royal.uk/queens-relationship-churches-england-and-scotland-and-other-faiths
She’s the Defender of the Faith and Supreme Governor of the Church of England. She appoints your line manger bishops on the advice of her Prime Minister and they swear an oath of allegiance and pay homage to her. So she’s your boss’s boss and I guess God’s deputy on earth since she appoints Archbishops as well.
@BirdPerson
The Queen is probably Chairman of the Board, with occasional oversight responsibilities but no day-to-day managerial duties.
The IGA is the Intergovernmental Agreement between the US and UK governments that sets out the terms of how FATCA information is collected and transmitted. In some countries the agreement exempts tax-protected savings accounts like ISAs from any FATCA reporting. This does not change the fact that US citizens “must” report them on their tax returns, however.
Hence the paradox. On the one hand, ISAs must be declared on returns, could be considered PFICs and thus a paperwork nightmare, and gains might be taxable by the US. On the other hand, they aren’t reported to the US under FATCA, so the IRS won’t know about them unless you tell them. (Some might see this as a tacit admission by the US that it has no right to tax these accounts.) Ultimately it’s a question of conscience – a matter for you to discuss with your boss – whether you want to report the ISAs on any US returns, because the US will never learn of their existence otherwise.
I’m surprised this hasn’t been mentioned already, but I suppose the “lie, cheat and steal” brigade, of which I’m a proud member, took the weekend off.
Ha ha ha. What I meant was in real life, day to day practice. The chances of me ever meeting the Queen are very remote. Whereas God and I interact daily, and my bishop and I bump into each other at least several times a month.
The Queen also appoints the Deans of cathedrals.
@BirdPerson
Just to get ‘down to earth” on all this, if the ISA’s aren’t reported and you being a small fish on the face of the earth, it may be worth your while dismissing you tax accountant whom you have informed of your ISA and will inevitably want to also include the kitchen sink . Why not just do the filing yourself? It sounds as if it would be straightforward and you can always ask questions here as many have done.
@ Nononymous
“I’m surprised this hasn’t been mentioned already, but I suppose the “lie, cheat and steal” brigade, of which I’m a proud member, took the weekend off.”
I believe UK Rose mentioned the non reporting of ISA’s under FATCA a while back when you had your weekend off.
🙂
I filled out the FATCA form for my ISA company a few years ago. I’ll be honest, I didn’t really pay much attention to it. I was working 70 hour weeks with only one day off, so I just thought it was something which all investment firms were doing for their own records. I never had a form from my main bankers.
I think I’ll try to do the 2013 and 2014 returns myself, although they do look daunting. I’ve filled in UK tax returns for years, and those are very simple–written in the Queen’s English.
Just because you filled in a FATCA form, does not mean that the ISAs were reported. Most likely that would just be standard due-diligence by the firm, so that if you had or later opened a reportable sort of account it would then be reported.
In other words, if you want to fire the accountant and go minimalist, the fact that you signed some FATCA forms does not necessarily mean that you cannot do so.
“I can’t think the IRS will ever care about a plankton like me.”
They do. They assess penalties and abuse plankton because we’re the ones who can’t afford to fight back.
The courts are the ones who don’t care about plankton. Courts dismiss for lack of jurisdiction, leaving the penalties in place. Rich people get due process. We get screwed.
BP We are (mostly) all on the same hymn page here. Our best advice is to forget about the ISA. As someone said, we are not minnows we are krill.
in any case , good luck, and we would like to hear how you make out.
‘Right, but if one does not wish to become compliant, or is happy to be “partially compliant” by only reporting a subset of your financial data (a useful approach to reduce cost and complexity if one chooses to exit the tax system after renouncing) then it’s useful to know that the IRS will not learn of RRSP, RESP, TFSA, etc. accounts if you do not yourself report them. (Petros Principle: never tell them something they don’t already know or can easily figure out.)’
In addition to not wishing to become compliant or being happy to be “partially compliant” there are other reasons not to comply. For example necessity, being forced into non-compliance despite any foolish naive wish to be compliant. The IRS penalizes attempts to be compliant, but the IRS doesn’t penalize what it doesn’t know about. Sauve qui peut. Yes see the Petros Principles.
@BirdPerson
Ignore ND’s comments above. Distraction. Penalties will not be assessed, nor could they be collected.