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
@Kabby
It depends how soon you want or need your cln.
I thought you wanted to sell your US house and move the money to the UK. To move money at a favorable exchange rate you really need a forex account, and in my experience they will not offer an account to US citizens. I went through this dilema. Bank exchange rates are terrible and they also charge large transfer fees. IMO the sooner you get a cln in hand the better…The tax returns can wait
Or don’t renounce and just put the proceeds from the US house sale in a Roth IRA, and wait until the exchange rate improves and then roll it into an ISA.
@plaxy
I guess brexit could bring the pound down even further to dollar equivalence as it was in 1985. So maybe a good time to sell and move it next March. 🙂
Whatever. An asset not a problem, at any rate.
@Kabby
I would keep the appointment in January 2019 if you can’t get one this year. One good thing about renouncing the first month of a year is that you probably won’t have to file a thing for 2019 because you won’t meet filing threshold. You do your 2018 normally and then just turn in the form 8854 for year 2019 and no messing around with dual status returns. and you’ll definitely have your CLN by then. Sometimes if there is a wait and you renounce too late in the year, the following year you are anxiously waiting for a CLN. However they appear to be turning over the CLN quicker now in most places. This is of course if you decide to file and I think in previous posts you said you were but I may have lost track.
It’s perfectly normal to have anxiety and doubts. it’s not something that people do lightly but generally a practical decision. Think with your head and try not to get emotional. Good advise for most things in life.
Isn’t it true that the final 1040 filing covers income only up to the date of renunciation? Therefore, if Kabby renounces in January, then the final 1040, filed in 2020, will only require reporting 2019 income up until January, which will certainly be under the filing threshold, which means that no 1040 at all is required in 2020. But if Kabby waits until December 2019 to renounce, then the full year’s income is subject to reporting and is likely over the filing threshold, hence requiring all the forms.
In other words, renouncing in January 2019 is the better and simpler option. Or am I wrong? Does everyone still have to file a “final” 1040, regardless of declared income?
It would be illogical for a person who is no longer a US Person to convince himself or herself that renouncing in December and not filing a tax return would be risky, but renouncing in January and not filing a tax return would not be risky because one month’s income would be less than twelve month’s threshold allowance.
“Renouncing is EASY,”
Yes.
“no one will try to trip you up.”
The US embassy in Tokyo tried to trip me up, but after a few months they gave in. I think I’ve read that they no longer try to trip people up.
“There is no minefield, unless your affairs are very complicated, involving large sums of money, businesses or hiding the sort of investments that the US does not like.”
Such as owning shares of mutual funds and paying correct taxes on them in your country?
“Heard from the Lonodn embassy no appointments till the end of January 2019 so that would mean me filing the final tax paperwork not till the following January 2020.”
15 June 2020, for any renunciation date in 2019.
“The IRS doesn’t and can’t audit people for renouncing.”
They can. If they owe you money they won’t audit, but they can. (If they owe you money they won’t audit but they’ll still penalize you for illegal honesty.)
“Isn’t it true that the final 1040 filing covers income only up to the date of renunciation? Therefore, if Kabby renounces in January, then the final 1040, filed in 2020, will only require reporting 2019 income up until January, which will certainly be under the filing threshold, which means that no 1040 at all is required in 2020.”
The final return is a signed 1040NR with an unsigned 1040 attached as a schedule. I don’t know if the filing threshhold for 1040NR return is the same as for an ordinary signed 1040 return.
If you read IRS instructions
https://www.irs.gov/individuals/international-taxpayers/taxation-of-nonresident-aliens
then you don’t have to file a 1040NR at all. But US law doesn’t let you rely on IRS publications. You might still get in trouble.
Norman Diamond:
“They can. If they owe you money they won’t audit, but they can. ”
They can’t, actually. They can request extradition, if the NRA committed a felony such as perjury in an attempt to swindle the US tax system, but that would be a lot of trouble and might be resisted by the NRA’s country.
Norman Diamond:
“If you read IRS instructions
https://www.irs.gov/individuals/international-taxpayers/taxation-of-nonresident-aliens
then you don’t have to file a 1040NR at all.
Correct.
But US law doesn’t let you rely on IRS publications.”
And hello? You aren’t subject to US law, once you’ve spoken the oath.
“You might still get in trouble.”
If you renounce but keep trying to use US law, undoubtedly.
Leave them alone and they’ll leave you alone.
A person who is renouncing because the US has made it impossible for them to carry on normal financial activities, obviously has no need to placate the bloody country by carrying on sending them pointless tax returns.
But a person who is renouncing because they want to quit filing for reasons of fear, has the option of filing for the last part year and filing the 8854, if that feels safer.
And a person who is renouncing regretfully, may feel they have a moral or patriotic obligation to file for the last part year and also file the 8854.
“They can. If they owe you money they won’t audit, but they can.”
‘They can’t, actually.’
They can. For example they can contact payers. Under QI they can contact lots of payers all over the world. Under FATCA they can contact some payers.
In historical times when the IRS had offices in US embassies and consulates, they could use some Hague treaty to request a participating country to subpoena you to appear at the embassy or consulate. I have a feeling that if they really want to pursue you (for example if you told really big truths but if they don’t owe you money) they could still request your country to subpoena you to appear at the US embassy or consulate.
Norman Diamond:
“They can. For example they can contact payers. Under QI they can contact lots of payers all over the world. Under FATCA they can contact some payers.”
And do what?
The IRS has the power to require US payers of US-source income to withhold tax at the statutory rate. If the payer withholds more, sue the payer, not the IRS.
“In historical times when the IRS had offices in US embassies and consulates, they could use some Hague treaty to request a participating country to subpoena you to appear at the embassy or consulate.”
So that would be your own country acting against you. Which would be extremely unlikely, in any European country, unless there was evidence of crime.
“I have a feeling that if they really want to pursue you (for example if you told really big truths but if they don’t owe you money) they could still request your country to subpoena you to appear at the US embassy or consulate.”
“Stop ruminating about it”, would be my suggestion, to banish such unnecessary fears.
Norman Diamond:
The US can indeed assess as US-taxable the non-US-source income of a US citizen, if the USC
(a) is resident in the US or
(b) is not US-resident but has agreed to the taxation by reporting the income as US-taxable on a US form and signing the jurat.
But the US can’t tax the non-US-source income of a NRA. As should be obvious.
No minefield
“They can. For example they can contact payers. Under QI they can contact lots of payers all over the world. Under FATCA they can contact some payers.”
‘And do what?’
And do the audit which you said they couldn’t do.
“The IRS has the power to require US payers of US-source income to withhold tax at the statutory rate.”
And under the QI system and FATCA, non-US payers of non-US source income too.
“If the payer withholds more, sue the payer,”
I think that is an option.
“not the IRS.”
Under statutory yes the US (the defendant will be the US not the IRS). Under US statutory law, all withholding is a credit to the beneficiary, regardless of whether the withholding was at a statutory rate. Under US case law it’s hopeless because the lies of the DOJ (not the IRS) will be accepted by the court even when you prove the lies are lies.
In practice, of course, most non-US-resident USCs who file a US tax return to report their non-US-income as US-taxable, claim on the same form that some or all of their non-US-taxable income is not US taxable due to FTCs or FEIE.
Which is pretty pointless but provides a living to a lot of tax advisers. 😉
“In practice, of course, most non-US-resident USCs who file a US tax return to report their non-US-income as US-taxable, claim on the same form that some or all of their non-US-taxable income is not US taxable due to FTCs or FEIE.”
Except that the US taxable part is all of their non-US income and the US non-taxable part is their non-US EMPLOYMENT income. Guess which part their mutual funds fall into?
But meanwhile, the biggest reason they file is that they’re idiots the same as me, who thought they were supposed to obey US law and thought they were supposed to tell the truth.
@Kabby
If you have decided to leave then IMO you should leave sooner rather than later before things get even worse. Just look at thier MO from the past, the fees went from $450 to $2350, TTFI was introduced, then the threat of passport revocation based on tax debt. What is to say it won’t get worse, as Phil Hodgen aptly said, get out while you can.
Norman Diamond:
“And under the QI system and FATCA, non-US payers of non-US source income too.”
Of course not. A bank can’t steal a customer’s money and send it to the IRS.
” Under US statutory law, all withholding is a credit to the beneficiary, regardless of whether the withholding was at a statutory rate.”
That makes no sense as a response to what I said. You sue the payer for not paying you your money. It doesn’t matter a hill of beans what the stealer did with the money. You might or might not win.
Suing the IRS would be a waste of time and money and spirit.
Under US case law it’s hopeless because the lies of the DOJ (not the IRS) will be accepted by the court even when you prove the lies are lies.”
You really need to stop obsessing a op US tax courts. You do
If one is under the filing threshold one does not need to file, even the final year. This is why I said for Kabby (if she is filing) to renounce Jan 2019. Unless self employed which has a ridiculously low threshold, most are bound to be under the filing threshold first month of the year. Many even plan it this way for an easier renunciation. The instructions for the form 8854 are pretty clear. You either file it with your dual status return and send the copy to the Philadelphia Office or if under the filing threshold, you just sent the form 8854 to Philadelphia.
If one doesn’t file then of course nothing is done. no tax forms or form 8854. and nothing is sent anywhere.
Norman Diamond:
“Except that the US taxable part is all of their non-US income and the US non-taxable part is their non-US EMPLOYMENT income. Guess which part their mutual funds fall into?”
Not at all. The US-taxable part of their non-US income is what they report to the IRS as US-taxable. If they report non-US income to the US as US-taxable, and can’t claim credit for foreign tax paid, they will indeed get assessed for tax on that income.
“But meanwhile, the biggest reason they file is that they’re idiots the same as me, who thought they were supposed to obey US law and thought they were supposed to tell the truth.”
Most who file seem to do so either because they think the IRS can “come after them” (correct for US residents, incorrect for non-US-resident USCs); or because, as you say, they feel an obligation to obey the law.
The fear is unnecessary; the moral obligation is the USC’s concern.