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
@Pauly, if you don’t have a Social Security Number (SSN) then there’s really no need to do any filing since the IRS have no idea who you are as you’re not in their system. Yeah, you could apply for an ITIN along with any filing you do, but what’s the point? You’re just doing paperwork that’s pretty much unnecessary.
If you have an SSN though, then just do the renunciation and then file afterwards. Being tax compliant is absolutely not necessary to get rid of the American taint. The embassy/consulate are not even allowed to ask you about your US tax status. All they can do is remind you that you might have outstanding tax obligations even though you’ve renounced.
I can understand wanting to make a clean break and if that’s what is going to give you peace of mind then go for it. Everyone is different in how they deal with this bag of s**t. Do what is best for you personally. And we’re here if you need to vent or want advice.
@Pauly
I agree with Plaxy and Medea, but if you are certain that you want to exit by their rules there are some considerations if you are a Dual citizen from birth re the exit tax (if you have over $2,000,000 in assets, or your average annual net income tax for the 5 years ending before the date of expatriation is more than a specified amount that is adjusted for inflation ($162,000 for 2017).
EXCEPTION for Dual Citizens
Under the dual citizen exception, a renouncer who fails either the net income or net worth tests, will still be exempt from the exit tax if the following conditions are met:
›You became a U.S. citizen at birth;
›You also became a citizen of another country at birth;
›On the expatriation date, you continue to be a citizen of that other country;
›On the expatriation date, you continue to taxed as a resident of that other country; and
›You have been a resident of the United States for not more than 10 taxable years during the 15-taxable year period ending with the expatriation year.
This of course is dependent on certifying on Form 8854 that you have complied with all U.S. federal tax filings and obligations for the 5 years preceding the date of your expatriation. So it would mean having to back file.
Your call 🙂
Medea Fleecestealer:
“…you might have outstanding tax obligations even though you’ve renounced.”
An admirably succinct statement of the situation.
US citizens who have been aware of the worldwide filing obligation attached to US citizenship, may indeed have residual tax obligations to settle pot-renunciation.
US citizens who have never filed US tax returns, don’t have any outstanding US tax obligations to settle.
That’s really all there is to it.
“Do what is best for you personally. ”
Absolutely.
I said:
“US citizens who have been aware of the worldwide filing obligation attached to US citizenship, may indeed have residual tax obligations to settle pot-renunciation.”
Should have been:
“US citizens who have been aware of the worldwide filing obligation attached to US citizenship, and have previously been filing US tax returns, may indeed have residual tax obligations to settle post-renunciation.”
@Plaxy
A POT renunciation sounds more fun, less stressful. 🙂
Heidi – so true! 🙂
@heidi….
ok, thats confusing me now 🙂 i was born german (mother) in Germany with a german birth certification. Dad US soldier…unfortunately. In my understanding, I have nothing to do with Exit Tax either, right?
I did not know about my duty until 2 weeks ago and did not report tax or FBAR. Consequently, I never reported anything. My research has revealed that I probably would have never had to pay taxes – but FBAR I would have had to report (I had more than 10k in the account).
Things have changed since the new tax reform at the end of 2017. I have a company with over 60% – so I am obligated to pay Transition Tax + GILTI (crazy).
Since I have tax liability so to speak, I think it makes sense to do my duty to have a white vest.
If I do it this way, then it is correct?
– make appointment in the consulate
– following, taxes of the last 5 years later + FBAR 6 years via Streamline
– After receipt of CLN final tax (dual)
– Live in peace
@Pauly, yes that’s almost it, but you must file an 8854 form as well to exit the tax system cleanly.
Ah, so correct is:
– make appointment in the consulate
– following, taxes of the last 5 years later + FBAR 6 years via Streamline
– After receipt of CLN final tax (dual) + Form 8854
– Live in peace
Thank you all! Great page, great people!
In case anyone else is reading who has a non-US company and is wondering whether they may be liable for the transition tax (repatriation tax):
You’re not liable for the transition tax merely because you own or part-own a non-US company. It depends how/whether the company has been previously classified as a ‘C’ corporation for the purposes of US taxation.
‘C’ corporations are (or were until the TCJA) treated like US corporations: tax on foreign E&P was deferred until the money was repatriated to the US. Form 5471 will have been filed each year, reporting the E&P to the IRS.
Owners or part-owners of non-US corporations which have never entered the US tax system, do not have a transition-tax liability.
But certainly can volunteer to pay the transition tax, if they feel it is their duty.
Pauly:
“i was born german (mother) in Germany with a german birth certification. Dad US soldier…unfortunately. In my understanding, I have nothing to do with Exit Tax either, right?”
Probably not. Form 8854 is the form that determines whether you have an Exit Tax liability.
You pretend you sold all your worldwide assets the day before you renounced.
If the imaginary proceeds from the imaginary sale totals more than over the threshold, you pay the IRS a percentage (iin real money, unfortunately; the IRS does not accept payment of imaginary liabilities in imaginary money.)
Pauly:
The advice to Accidental Americans is not to enter the tax system. It could cause you more problems, particularly for your company.
I left the USA at 21, and have lived (and paid taxes) here in the UK since then, for over 32 years. I never filed a single US tax return in my life. I have renounced, and I will not file anything now.
If you were born in Germany, and if your birth was never registered with the USA, you could probably just ignore the whole thing. You can just claim German citizenship if anyone asks.
@ Pauly
Sounds like you had dual citizenship at birth, (like my kids).
This means that the exit tax should NOT apply to you as long as you meet their resident in your second country criteria even IF you are above their wealth threshold.
The Exit tax is applied IF
You have over $2,000,000 in assets or earn on average over $162,000 over the last 5 yrs, you will be labelled as a covered expatriate and the IRS will slam you with an exit tax of 15% on any unrealized gains over a threshold of $699,000.
Duals from birth are excused this IF
›You became a U.S. citizen at birth;
›You also became a citizen of another country at birth;
›On the expatriation date, you continue to be a citizen of that other country;
›On the expatriation date, you continue to taxed as a resident of that other country; and
›You have been a resident of the United States for not more than 10 taxable years during the 15-taxable year period ending with the expatriation year.
You should take a look at form 8854 and familiarize yourself with it.
@Pauly
On the other hand
Just take Birdperson’s advice!
Pauly
I can understand your desire to be ‘clean’ and do what you might think is ‘the right thing.’ But ask yourself if another country has the right to expect you to do any of this.
Here’s a link to a website article which finally made my mind up for me. I decided that US law ends at it’s borders. I am not owned by the USA.
https://renounceuscitizenship.wordpress.com/2014/12/31/are-americansabroad-members-of-club-usa-or-owned-by-club-usa/
If the US soldier father wasn’t married to the German mother then the offspring might not even be a US citizen. Maybe the safest thing to do is to avoid learning the answer to that question and act as a German citizen only.
Im pretty sure i am…i have a valid us passport and a SSN.
I already got offers from cpas – and they are crazy. the cpa + the potential transition tax would cost me 10.000 Euro. Im really middle class…i never earned more then 35000k a year (before hight german tax). my company is my only retirement plan…so this whole thing is horror! If it would just be the fee 2350 dollar…i would say…”ok…well…just pay and goodbye”…but in this case….merry christmas.
Pauly
You CAN just ‘pay and goodbye’. Plenty of people on this site have done just that.
Don’t give in to fear…
Worth noting that the US does actually understand that US law ends at its borders, and doesn’t in fact try to compel US citizens luving outside the US to file US tax returns.
Citizenship-based taxation is one of the obligations attached to US citizenship, like the obligation to register for military service. There’s no point in volunteering for US taxation when one is no longer a citizen or doesn’t want the citizenship.
Any more than you’d turn up to register for US military service the day after losing US citizenship.
Pauly:
“i have a valid us passport and a SSN.”
In that case, you’re a US citizen.
Renunciation is extremely easy, when dealt with separately from the issue of US taxation.
If you’re sure you don’t want the citizenship, you can renounce, and think about what you want to do regarding taxes. You don’t have to decide now.
@Pauly
We here are mostly honest individuals who have paid taxes in the country in which we live for services rendered to us there. Most who come to Brock want to leave ‘cleanly’ whatever that means. It certainly does not mean cleanly if it also means forfeiting a large part of your income and future pension to a country which has given you nothing in return. It simply means extortion. If you have the citizenship of the country in which you live, the IRS can do nothing to collect any imaginary tax they say you may owe. Germany has no collection policy with the US and how the hell does the US assess you if you tell them nothing. Many here have just renounced, period. They have obtained ESTAs and travelled to the US with no problems.
After you renounce you are no longer under their jurisdiction.
Heidi:
“After you renounce you are no longer under their jurisdiction.”
You’re not under US jurisdiction anyway, if you don’t live there. The tax issue is a citizenship obligation, not a legal duty.
As soon as you swear the oath, the obligation vanishes with the citizenship.
@Pauly, do you have German citizenship or the chance to apply for it? If not, do you have another citizenship besides the US one? Because otherwise you’ll become stateless and that can make life difficult for you.
@medea
He said he was born in Germany to a German mother, I believe that makes him German.
@plaxy
He would be under US jurisdiction he he entered the US with his US passport.
🙂 I was born in Germany….german mom…german birth certification…german pass! I´m 100%!