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
@plaxy:
Do you mean “Renounce without doing any filing of 1040s and FBARs?
The problem with that is Form 8854, Part IV, Line 6:
“Do you certify under penalties of perjury that you have complied with all of your tax obligations for the 5 preceding tax years?”
But I suppose Option D would be okay of your income is below filing requirement.
Indeed a good option missing from my original list.
“Do you mean “Renounce without doing any filing of 1040s and FBARs? The problem with that is Form 8854, Part IV, Line 6:
“Do you certify under penalties of perjury that you have complied with all of your tax obligations for the 5 preceding tax years?” ”
That would be a problem only if the renouncer filed 8854.
Depending on residence country, renunciation may be the simplest and most straightforward option for an individual who can afford the fee and doesn’t want the citizenship or any of its benefits or obligations.
@Formerpatriot
D = renounce and do nothing at all, not even 8854. That’s a perfectly reasonable option if you need the CLN to avoid banking discrimination (i.e. you live in Switzerland) but wish to avoid the hassle and expense of tax compliance. However, if you live in Canada, where US personhood does not cause restrictions on what you can and cannot do, and FATCA is easily avoided if you don’t wish to be reported on, then in my view option A is sufficient. Possibly it’s the better option since the IRS will never learn of your existence, provided you lie to banks, whereas they will at least see your name on a list if you renounce (not that they are likely to do anything about it).
E may be a good route for those who renounce and want to file something but keep it simple. However, one can make that case that filing incorrect returns (e.g. by not declaring TFSA or RESP accounts that you know aren’t reported under FATCA) is worse than not filing anything at all.
Nononymous:
“…they will at least see your name on a list if you renounce (not that they are likely to do anything about it).”
But there’s no need for a person with no US connections or assets to be concerned about this, unless there are local or personal factors (such as US connections or previous filing) which make it advisable to comply with US tax laws.
Everyone of course has to decide what’s best for their particular circumstances, but more should be aware that simply renouncing maybe all they need to do; and if that’s the case and they choose that option, they needn’t fear reprisals from overseas.
@plaxy
I quite agree, but in fairness feel I should always point out that renouncing means the IRS gets your name. If you are in a situation where it could potentially be problematic that they are aware of your existence but you don’t wish to become compliant, you should know. I expect it’s never a problem for an ordinary sort of accidental – it is NOT having “a target painted on your back” like the scaremongering fools from Moodys will tell you.
I’ve come to the view that for a dual in Canada with no US ties, “simply renouncing” is expensive overkill. Banks here will let you invest in whatever you want to invest in, regardless of whether you lie or tell the truth on any FATCA/CRS forms. So just ignore the whole business.
Yes, Option D is perhaps more likely to be appropriate for residents of IGA 1 countries which are not as close to the US as Canada. It seems bank access isn’t a problem for USCs in Canada, whereas in, say, the EU, bank access is for many the only problem. And in many cases, a CLN solves the problem completely. So a CLN may be a better buy in Europe than in Canada.
Was intending to italicise only the word “only.” Never mind.
My flowchart for non-compliant accidentals has been reduced to:
Do you live in a country where your US birthplace will cause banking problems?
YES = spend US$2350 for your lifetime free bank access pass (aka CLN)
NO = all good, continue doing nothing
I’d say that about sums it up, with a couple of minor revisions:
My flowchart for dual US/* citizens living outside the US:
Do you live in a country where your US birthplace will cause banking problems?
YES = spend US$2350 for your lifetime free bank access pass (aka CLN)
NO = all good, continue as you were.
nononymous……..where were you with this flow chart 5 or 6 years ago? it would have saved me many sleepless nights till i reached the “continue doing nothing” stage.
i have lied on several forms now asking the dreaded “amerikan” question and have not heard a peep i have no problem doing so to banks or who ever. it is none of there damn business where i was born or what my citizenship is besides CANADIAN. i have a certificate in the top drawer of my desk atesting to that fact.
i reside in canada and i abide by CANADIAN law and CANADIAN law only. if i were to live in xyz country i would then abide by there law.
i have not crossed the border to the south of me for 5 years nor will i ever cross it again (although the seahawk vs raiders game is enticing)
life is a lot less complicated since i have put my amerikan problems behind me. i sleep more, drink a lot less and just in general am more pleasant to be around.
a quote that hangs on my office wall reminds me each morning of this “that’s a racist question. are CANADIAN citizens born else where less CANADIAN? i do not answer racist questions” this needs to be attributed to a former frequent poster here at brock who’s name escapes me.
@ Mettleman,
It’s from George.
His full comment is here, posted 2015/01/18 at 8:17 am.
@Nononymous and plaxy: Cute flow chart… but…
For dual Canada-USA citizen who
– live in Canada;
– have no connection with the USA other than visiting some relatives once in a while;
– have no intention to ever moving to the USA;
– are not at risk of being considered covered expatriate now, but could be later in life;
– are compliant or can become compliant by late-filing 6 years of 1040 and FBAR with no cost involved,…
I would argue that renouncing now (with late-filing if needed) is a VERY good idea.
The US$2,350 fee is well worth the peace of mind.
Total peace of mind!
For US-born individuals living outside the US:
To solve bank-access problems, renounce if possible.
To solve current or potential US taxation problems, comply and/or renounce.
@Formerpatriot is it really total peace of mind. that country to the south can not be trusted to not change the rules to fit their needs at a later time.
i trust more the certificate i have in the top drawer of my desk. the one with the queens crest on it.
and remember justin said “a canadian is a canadian is a canadian”
there will not be any jack booted thugs knocking at my door at night because i lied on a form to a bank. those thugs have no idea even who i am or where i live. i left there in 1966.
if someone really does have an excess $2,350.00 just burning a hole in their pocket don’t waste it on a piece of paper that may or may not have any worth instead spend it on themselves or give it to a charity that actually will make good use of it.
certainly people will have “total peace of mind” having this paper i just don’t. like what has been said many times here before each and every one of us are individuals and each and every one of us has our own story and reasons for what we do and there really is no correct answer only what works for that certain person and their level of tollerance for coloring inside the lines.
@mettleman
5-6 years ago I was basically saying the same thing that I’m saying now – “they’ll never find you and so what if they do?” – but I lacked one key piece of information that has since made the case stronger: a Canadian citizen and resident is protected by the tax treaty from any form of US collection. I also later learned that one can renounce without compliance.
@Pacifica777
Indeed. But as we know, Canadian banks don’t ask that question. They ask if you have “foreign tax residency” and/or if you are a US citizen/person. And they don’t check your answer.
@Formerpatriot
Everyone needs to do what works for them. If renunciation followed by tax exit provides peace of mind, great, buy the CLN. The rules probably won’t change to bite you retroactively, but it’s possible that access to the US could become more difficult for anyone who’s renounced. My personal calculation is to save the money and continue ignoring the dumb, blind beast to the south because it can’t do anything to me.
“there really is no correct answer only what works for that certain person ”
Indeed. It helps, though, to draw a distinction between what’s necessary because the law requires it, and what may be necessary / advisable / because of one’s own situation or objectives.
Quite a few people might stop being concerned about the tax issues, once they know that under the law of the land they’re only required to comply with the tax laws of their own government.
@plaxy
As you know, the minor wrinkle in your flowchart is that a few countries will help the US collect against non-citizen residents. If poor Mr. Dewees had both Irish and US passports while living in Canada, he’d fit your description but still be screwed.
@ Nononymous,
Re:
Sorry, I accidentally addressed my comment to you — it’s in response to Mettleman’s question, asking if anyone knew who was the author of the quotation (I’ve just changed the comment to address Mettleman).
The quotation, as I mentioned in my comment, is not mine, it’s from George. He’s in the UK.
Dewees was assessed because he volunteered, and then had to pay the assessed tax debt because he wasn’t a Canadian citizen.
He would have been fine if he hadn’t signed those US tax forms.
Indeed. But lack of Canadian citizenship was a key factor enabling him to self-harm.
In these long threads, articulate remarks from years ago get lost; commenters come and go. A few years back a couple of Brockers got through to an IRS Director who gave them a phone meeting. The Director said (I’m paraphrasing), regarding what expats might do, “It’s not an ethical decision or a financial decision, it’s a business decision.”
I did find it an ethical decision, however, and consulted a expert in such matters, who helped me sort out my strategy.
@ Duchesse,
That comment is from Duke of Devon, November 9, 2014 at 1:40 am.
Nononymous:
My point is, the US doesn’t have the legal authority to compel the filing of the return. That is why residents of other countries don’t have to comply with US tax law, and needn’t feel they must hide from the IRS.
A lot of people might not feel comfortable filing returns and then refusing to pay the assessed liability; but would feel perfectly ok about not filing the returns in the first place, if they knew they weren’t legally obliged to do so.
Norman Diamond recently cited U.S. v. Bull, and it’s well worth having a look at. It has this handy explanation:
https://caselaw.findlaw.com/us-supreme-court/295/247.html
Once the tax is assessed. Not before.
Thanks, pacifica77, that’s it! Four years ago, what a memory!
I will leave off, as the air temperature has reached the point where brains no longer function. But one final question:
Though highly unlikely, is it not theoretically possible that the IRS could, with suitable information, generate a substitute return for a non-compliant US-only citizen in Canada, present them with a bill, then compel the Canadian authorities to assist with collection?