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
Although Mr. Dewees wasn’t plankton, he will surely be grateful to learn that penalties assessed for trying to comply could not be collected because no other tax department would help the IRS.
Sigh. You know perfectly well the details of the Dewees situation. BirdPerson is a UK citizen.
“BirdPerson is a UK citizen.”
But not a Canadian citizen. So if he tries to comply with the IRS, he had better not have any assets in Canada.
@BirdPerson, you might want to have a look at the Consular Report Directory to see what sort of experiences other people have had at the UK embassy when renouncing/relinquishing.
http://catseyesap.com/crd/Consulate%20Report%20Directory%202018.04.b.pdf
@Nononymous
Penalties may not be assessed but remember MonaLisa?
Her accountant carefully worked out the tax due on her ISAs and mutual funds , it was reported and she was left to pay a huge tax bill and many hours of accountants fees in the process.
If BirdPerson does not wish to simply ignore the back tax filing, then
she should either do it herself or find another accountant not privy to her ISA fund investments.
Hopefully God and the Embassy will grant her a backdated relinquishment and all this tax discussion will be acaedemic.
Thank you everyone. I’d like to put the ISA discussion on the back burner, please. Again, it’s a small fund, the distributions come to around £1000 pa, and my own quick calculations re ‘excess distributions’ brings the excess to less than £70pa. The tax advisor I’m using quotes a flat US$150 to file the necessary form, plus a piece of software was released in 2016 which promises to do all the number crunching for you, thus taking away the hours of chargeable time. If the advisor I’m using doesn’t use this software, I’ll find someone who does. I’ve lost enough sleep over this investment!
My main decision is whether to push for relinquishment or to renounce. I feel very strongly that I was coerced into obtaining a new USA passport. I also came across something in an on-line version of an Embassy handbook (must track that down) which stated that an embassy official, when handed a foreign passport, must ask the person whether they had planned to retain USA citizenship when taking on the other citizenship. I was not asked this by the official–he’d spent 10 minutes berating me for daring to change my name by deed poll, ‘Which is not a method recognised in law by the United States of America.’ Although I expected him to tell me I had to choose nationalities when he took my UK passport from me, all he said was ‘I’ll get a photocopy of this.’
It is a matter of honour to me. Just like it is a matter of honour to me to declare the ISA. (Please don’t try to talk me out of it.) But it’s a US$2350 roll of the dice. If the USA decides to turn down the relinquishment, then I need to go back and renounce, and pay the fee again. Plus the time I’ll have to wait for the decision means more time in the USA tax system if the government decides to decline.
My current thinking is to write a fuller statement to attach to the DS-4079 and to submit that ahead of the appointment. If at the meeting the official states that s/he would support a relinquishment claim, then all and good. If not, then I’ll have to decide whether to go ahead and renounce just to get this all over with.
I will put in the statement a plea that US officials consider the impact it has upon a small woman (I’m only 5′ 2″ tall) who has suffered both childhood and domestic abuse to have a tall man shout at her when she’s desperately trying to enter the USA to meet her nephew and niece for the first time or when she’s trying to sort out passport issues. People like me have an automatic reaction to do whatever is necessary to get away from said man because we feel intensely unsafe at that moment.
Sorry if that’s all TMI!
BirdPerson:
“I think I’ll try to do the 2013 and 2014 returns myself, although they do look daunting.”
You could use one of the free programmes such as TurboTax or TaxAct to generate a dummy return, which you could then use as a model for completing the actual returns yourself.
Two other forums you might find helpful for answers to specific filing questions:
https://talk.uk-yankee.com/index.php?PHPSESSID=j34c9t9b3gaa7tah6fmbp3hdu4&board=11.0
https://www.expatforum.com/expats/expat-tax/#/forums/158
As for the ISA, my suggestion would be to simply report it on the returns as a savings account, and include any income received from the ISA in your calculation of tax due, as you would with the income from any other savings account. There is no reason you should know about all the tortuous pfic nonsense the IRS tries to persuade taxpayers to struggle through in the hope of charging “accuracy-related” penalties; no need to encourage such unethical behaviour by playing their game; but also no need to play their game by trying to conceal the existence of the account, thus perjuring yourself. Treat it as a savings account (which is what it is); God’s on your side, if She/He’s on the side of rational justice. 🙂
BirdPerson:
“I’d like to put the ISA discussion on the back burner, please. ”
My apologies. My post crossed with yours, so I hadn’t seen your request when I posted.
@plaxy–no probs! And actually good advice for the previous tax years, especially as it was under the US$25000 value in those years anyway.
@BirdPerson
The relinquishment vs renunciation sounds like a good plan to me,
The ISA discourse is of course entirely up to you to decide, but we would all feel amiss if we didn’t mention the pitfalls and it also serves to alert anyone else who silently comes to this site in need of advice from those who have already been through the mill.
Good luck, go well and please let us know the outcome.
@Heidi
I am truly grateful for everyone’s time, and warning about pitfalls.
I also need to stop spending hours reading about PFICs. There isn’t enough red wine in the world to help my head recover from that.
@BirdPerson
Red wine, been there done that on my FATCA trip !
I’m working on the statement I plan to submit.
If anyone would be willing to give it a read (if you feel you have useful advice/experience) perhaps you could obtain my email address through the admins and contact me?
@BirdPerson
I have little experience, but what you have told us sounds perfect. Also do wear your dog collar, so they will understand that you are an honest and honourable person. The Embassy employees are generally reasonable people. The Consul at my Embassy said she fully understood why people were renouncing.
BirdPerson:
“actually good advice for the previous tax years, especially as it was under the US$25000 value in those years anyway.”
Word of warning: It probably wouldn’t be possible to treat it as an ordinary savings account in low-value years, and as an account holding PFICs in high-value years. If you feel you must report it under the PFIC rules for the high-value year(s), I suspect you have to do so also for the low-value years. Someone more PFIC-knowledgeable than I may take a different view.
Thanks for that! I’ll bear it in mind.
Reading IB makes me sad. 🙁
My son is now considering his future, in OZ, the ONLY country which actually supported him as a person & student. Thank God for AU. USA offered zero, as it later turned out.
I’m sick that I (tho fine with it, myself, shouldn’t have had to do so) & my son & his sister have to consider renunciation in order to lead a normal tax life here in AU.
As Allison Christians stated: “why did we do this to you?”.
Happy for @patrick, angry for those who go through a gestapo-like experience. I had to attend three appts. And when I enquired the progress, was basically put off. This is in Perth, AU– hardly an over-whelmed branch (in fact, no one was there seeking help when I was there).
A further testament that this “law” is illegal (no debate in Congress, yet they voted it in?) & poorly implemented due to this.
Formerpatriot here, just thinking out-loud (in a written kind of way)…
Say you late-file your 2013 (and 2012, and 2011, and…) IRS tax returns in March 2015.
Say you then file your 2014, 2015, 2016, 2017 IRS tax return by the due dates.
Say you declared just about everything.
Say you made just a couple of tiny white lies that could, upon scrutiny, pass as honest mistakes.
Say it was all very simple (1040 + schedule B (interest income) + 2555 + 8938 + FBAR).
Now it’s August 2018.
What is the chance that you’ll get a letter from the IRS regarding your 2013 (or prior year) tax return?
Pretty small, right?
I would be comfortable with anything less than one tenth of one percent. 🙂
@Plaxy&BP
That’s why I suggested a DIY or another accountant approach, so the ISA’s could be reported as simple savings accounts for all years.
Pity MonaLisa isn’t around as she went through the PFIC saga.
I will now put it to rest unless resurrected by BP
@FormerPatriot
The Statute of limitations is three years from filing.
Honest mistakes can be treated as dishonest ones, $10,000 a shot.
I guess it all depends if you look worth the scrutiny.
“That’s why I suggested a DIY or another accountant approach, so the ISA’s could be reported as simple savings accounts for all years.”
Separating this discussion from anyone’s personal affairs: I take the view that it’s perfectly reasonable and honest if a former USC approaches the “tax citizenship” back-filing on a good faith basis and with the aim of paying the treaty rate of tax on non-treaty-exempt income actually received (not deemed) during the five years preceding renunciation.
This is however an approach that’s only available if filing (and signing!) for oneself.
@heidi
Oh I remember MonaLisa. But that’s not a penalty, that’s a bad accountant. The better option is always education and DIY (or nothing) rather than paying what some idiot tells you to pay.
@Nononymous
Precisely, but I didn’t mention penalties, I was concerned with tax owed on UK non taxable accounts plus accountants fees for time spent …that is what I was trying to emphasize. Mona did not pay any penalties but I believe she quoted somewhere in the region of $30,000 was spent on trying to become squeaky clean compliant on a modest investment planned for her retirement. B P has an ISA that a tax accountant has ‘taken into hand’.
I would hope any decent advisor would be using this bit of software rather than do it all by hand and slide rule:
https://www.form8621.com/pfic-calculator/
If he doesn’t, then I’ll go to this company to do the calculations for him.