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.
Participants will need to provide their e-mail address (real or fake) and an alias. The only written rule is that participants must use a same alias each time they post (and not “anonymous” or derivatives thereof).
Bear in mind that any responses that you get from participants is peer-to-peer help, and it is not intended as a replacement for professional advice. Also, the Isaac Brock Society provides this disclaimer: neither the Society nor any of its members are professionals. We offer our advice here only in friendship and we recommend that our readers seek professional advice if they need it.
If you wish to receive an e-mail notification of comments, check the box to that effect when making your first comment.
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
Correction.
I said “they feel an obligation to obey the law”
Should have said “they feel an obligation to obey US law.”
@Kabby
Why not request they inform you of any London Embassy cancelations or as I said email other embassies, Amsterdam, Dublin, Luxembourg etc to see if they have any 2018 appointments? I am sure you could get a cheap flight at this time of year and you could make a holiday of it too, as others have done.
UK Rose:
“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.”
Are they? Wouldn’t the threshold for one month of the year be one-twelfth of the filing threshold for twelve months of the year?
It wouldn’t actually matter either way, of course. Purely theoretical since the IRS will never even notice the non-filing of a 1040NR by a renunciant who’s not suspected of richness or crime.
Heidi:
“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. ”
Was TTFI a typo for TT?
TTFI is the name Republicans Overseas use when talking about Holding’s suggested bill.
Which is currently not named; reportedly not scored; perhaps not that likely to get introduced in the House now control has switched to the Democrats.
Thats exactly what we did. No 1040 & no 1040NR. We were under any conceivable threshold for both periods. Did file 8854.
Haven’t heard a dicky bird
Portland – you wouldn’t have heard a dicky bird, regardless of whether your income was or was not less than one-twelfth of the rhreshold allowance.
What happens when a non-US-resident former citizen doesn’t file is the same as when a non-US-resident citizen doesn’t file: exactly nothing.
Same as it ever was.
@plaxy
Yes, thanks, a typo, my predictive text seems to have a life of its own although I keep switching it off!
@plaxy,Norman Diamond. You completely lost me in the filing stuff but think I have the jiste of it.@Nonoymous. As far as horror stories of audits and what could happen after…… I can’t remember all the web sites but generally I have read in the past on various sites maybe these were lawyer sites that were drumming up busniess or sites like Moodys Gartner or Hodgen etc about how careful one must be and dangerous the whole thing is and getting everything right and if not the chances of being audited are there.. @’Portland,Heidi, UK Rose, Barbara, Thanks for all the comments. I dont have a house in the US I sold that years ago I was renting up to the time of leaving and have no mutual funds or anything complicated in the US. All I have is some $ in the bank there which isnt a huge amount. I have no earnings now in the US so no income there and I will take Heidis advice and transfer that money after I have renounced maybe as she suggsted through a Forex although never done that before. Maybe I should e mail the US Embassy and ask if they get any cancellatios to let me know ( or would that raise a flag as they may wonder why this person wants to get out before the end of the year) otherwise it will end of January next year 2019 but reading on this it doesnt seem to make a huge difference although it would be nice not to have to wait another year to do the final filing in 2020. After you renounce are you then free? Why do you not sign form 1040 but sign 1040NR? I am self employed (well slelf contracted) so may have to file a 1040 for any income January 2019 in 2020 as the threshld to file is only $400 and then would file the 1040NR but that income would be zero as I would have no US income apart from a bit of interest on the $ in the bank there but minimal. Do you ned to file FABAR’s for the final year too from the 1st of the year to the date of renunciation and would I need a specialist tax accountant fo file these final forms or is this something people do them selves? I think i prefer to file as I have done always in and out of the USA just ti put my mind at ease that I have exited as cleanly as I can.
“Why do you not sign form 1040 but sign 1040NR? ”
Because it depends on your status at the end of the tax year. You’ll be NRA at the end of the tax year so you can’t file a 1040 to report your worldwide income to the IRS. So they tell you to file the 1040NR and attach the 1040, unsigned, as a statement.
“Do you ned to file FABAR’s for the final year too from the 1st of the year to the date of renunciation?”
You might as well file the FBARs since you’ll be reporting the accounts on the unsigned 1040 statement.
“lawyer sites that were drumming up busniess or sites like Moodys Gartner or Hodgen etc about how careful one must be and dangerous the whole thing is and getting everything right and if not the chances of being audited are there.”
Though Hodgen is a tax adviser, I would be very surprised if you could find any blog entry where he has tried to scare renunciants into thinking they can’t renounce without paying him to help them, or has tried to scare people into thinking they’re at risk of being audited by the IRS if they renounce.
Hodgen’s site is very helpful and reliable, IMO, though obviously as a tax adviser he will always advise filing final forms.
@kabby
Yes, officially Fbar should be filed for year 2019 up until renunciation date.
No Embassy won’t bat an eyelid if you ask for a cancellation, why would they? Others have been contacted and offered earlier dates in the past.
Forex companies will offer you a ‘prefered’ rate for large amounts. You can call them or go online to open an account and they will ask for proof of address and identity just like a bank. You can watch the rates and decide yourself on the day or they can offer a spot rate where you tell them what you will accept and they call you when your rate is reached. They usually offer within 0.6% of the interbank rate (the rate banks lend to each other) for larger sums.
I use moneycorp but there are many others.
I had originally opened my account with an American passport but once FATCA came into force they canceled my account until I produced my cln.
I said:
“Hodgen’s site is very helpful and reliable, IMO, though obviously as a tax adviser he will always advise filing final forms.”
… i.e., Form 8854, plus (if required) the 1040/1040NR.
Hodgen’s blog entry explaining how to do the 1040/1040NR filing:
https://hodgen.com/your-expatriation-tax-return-when-u-s-income-is-zero/
@”Kabby
Hodgen is a tax lawyer/accountant who deals with high net worth clients, so the advice he gives is directed and structured towards them as they have much to lose. He has however published his advice to minnows on the internet free of charge and also helped with question and answers on Brock in the psst. So he is not the usual compliance predator. IMO.
@plaxy
It doesn’t work like that. People file for a full calendar year, so if you have taxable income over the threshold for the calendar year, something like $10,000 threshold for a single person, you need to file according to their rules and if you don’t then you don’t need to file.
Your citizenship ends on the day you renounce or leave the country for resident tax payers. This is why someone can wind up with a dual status return, one year, two different statuses. The only time a year is cut short is when someone dies, than it ends that day. Let’s say someone renounces Jan 2019 and they only have something like $50 interest earned up to that date, not necessary to file by the end of that year. Of course if someone has US source income after they renounce, things get a bit more complicated with treaty rules coming into play,
UKRose: “It doesn’t work like that. People file for a full calendar year, so if you have taxable income over the threshold for the calendar year, something like $10,000 threshold for a single person, you need to file according to their rules and if you don’t then you don’t need to file.”
I don’t suppose we’ll ever know, since the IRS can’t even force a non-US-resident citizen to report their non-US-source income as US-taxable. Much less a NRA.
“if someone has US source income after they renounce, things get a bit more complicated with treaty rules coming into play,”
You need to inform the payer, and probably sign a W8-BEN for them in order to claim the treaty rate.
@Kabby
Three points:
1. Concerning “red flags” if you request notice of cancellations etc. You need to stop with the conspiratorial thinking. The Embassy won’t care. What possible difference would it make to anyone if you filed your final returns a year sooner or later? It’s completely legitimate to “hurry” renunciation to avoid future taxable events.
2. The horror stories you read were almost certainly on lawyer and tax advisor sites. There are no renunciation horror stories here. There are plenty of “it’s costing me a pile to be compliant” horror stories though.
3. Speaking of horror stories, it’s best just to ignore Norman’s comments. They will make you confused or nervous. Due to some mysterious episode in the past he attributes to the US government powers it does not have. I tend to skim over but when someone here is struggling with the situation and anxious I do call it out because being told nonsense about the IRS coming after your money outside the US just doesn’t help. (It’s not true, by the way.j
@nononymous
Wasn’t it the case with Norman that he chose to go to the US to face them in court? I admit I cannot follow the machinations of his argument with them but I also just want to say that although we empathise with him ihis situation is certainly not relevant to those who come seeking a simple solution to their simple problems of renunciation.
@Heidi
I honestly don’t even know. My tiny human brain understands none of it. I simply advise people like Kabby to skip those comments.
@plaxy I don’t suppose we’ll ever know, since the IRS can’t even force a non-US-resident citizen to report their non-US-source income as US-taxable. Much less a NRA.
these are the rules, nothing about not knowing. It’s in a stature somewhere too which I am sure I posted on here at some stage. the final year is treated no differently than any other year except for the form 8854. You mention about forcing people. The US tax system and filing is somewhat voluntary even for residents. If one has US source income, the IRS do have records to go by that may alert them to the fact you need to file but even then it can take a few years to year from them. A US friend got a demand for some stock sold in 2015 only this year. She completely forgot she sold it. Outside the USA, they don’t know and probably don’t care. Fatca is harmless to a large extent because end of year bank balances are meaningless on their own. Money isn’t income.
and also the stock my friend sold was US stock of course so they would have eventually matched the records. It wasn’t overseas stock and don’t want to give anyone here that impression. the IRS only got around to matching their records a few years later.
@UKRose
” Fatca is harmless to a large extent because end of year bank balances are meaningless on their own. Money isn’t income.”
I have wondered if this is the case with CRS too, (apart from the loss of privacy without suspicion). Banks pay little interest now days, so would Govs ask all their residents with foreign accounts to prove the source of their money in foreign bank accounts. It seems a huge task for supposedly little return, especially without ‘reporting penalties’ as with FATCA!
UKRose:
“these are the rules, nothing about not knowing. ”
It doesn’t matter. That’s the point. US citizenship vanishes in a puff of invisible smoke in the consulate, following the oath. IRS rules become irrelevant in that instant.
US-source income is different. NRAs don’t need to file to report it – tax either gets withheld by the payer (and the residence country gives credit), or in some countries including the UK if it hasn’t been taxed by the source country, it’s taxable by the residence country.
Former US citizens don’t have to file US tax returns in the year following renunciation.
“Fatca is harmless to a large extent because end of year bank balances are meaningless on their own. ”
FATCA is far from harmless. It’s the reason US citizens need to renounce to carry on a normal financial life.