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
On the page of irs medic (https://www.irsmedic.com/blog/2009/06/bye-bye-irs.html) it says:
“You will be required to swear under oath that you are in compliance with all tax laws. If you have not come clean with the IRS on undeclared bank accounts, the IRS considered that non-compliance and therefore, you entire renunciation of citizenship would we considered invalid.”
this is almost exactly the opposite of what you guys said 😀 confused again!
Heidi:
“He would be under US jurisdiction he he entered the US with his US passport.”
Yes, everyone who enters the US is under US jurisdiction. That doesn’t make them an outlaw for not filing US tax returns.
A US citizen doesn’t have a US tax liability unless a liability has been properly assessed. Someone who has never filed doesn’t have a liability.
If they stick around, they’re under a legal obligation to report worldwide income to the IRS, if over the threshold; and to pay any tax assessed as due.
Pauly
You don’t swear anything of the sort when you renounce. I should know, I renounced in September this year.
Don’t look at websites of tax professionals. They want you to become compliant so they can earn money.
It is your right to renounce US citizenship. The IRS cannot prevent that.
Pauly:
It’s not true.
Why not email the Consulate where you intend to renounce, and ask for an appointment? They’ll tell you exactly what to do, so you can see for yourself that it doesn’t involve filing US tax forms.
The renunciation forms draw your attention to Form 8854 – the Exit Tax form. That’s all.
@Pauly, these two are the only forms you swear to when renouncing
https://eforms.state.gov/Forms/ds4080.pdf
https://eforms.state.gov/Forms/ds4081.pdf
As said the embassy/consulate is not allowed to ask anything about your tax status so there’s no way you would need to swear you’re up to date with tax filings. This is just the IRS trying to scare people into filing.
@Pauly
That is NOT true. Your right to renounce is a human right, it is independent of any tax obligation the IRS may say you have.
There is NO swearing under oath that you are in compliance with tax laws, believe me, we here have all been through it!
Pauly – take note by the way that if you have only German accounts, you don’t have any “undeclared foreign accounts”.
US tax law pretends that you live in the Dictrict of Columbia, USA.
If you really did live in D.C., your German accounts would be foreign accounts. But since you live in the same country as your bank accounts, your bank accounts are not in reality foreign.
US tax law does a lot of pretending.
@Pauly
Here are the state forms including the oath, take a look. TAX does not enter into the renunciation process.
http://isaacbrocksociety.ca/department-of-state-forms-and-procedure-manuals-for-renouncingrelinquishing/
I said:
“US tax law does a lot of pretending.”
In addition to pretending that all non-US-resident US citizens live in D.C., there’s Form 8854 (requiring the former citizen to pretend s/he sold everything the day before renunciation;
And the transition tax, which requires owners/shareholders to pretend they have moved a big bunch of money to the US so the US can tax it.
US tax law also likes to pretend that you have to do any of this. When you’re a fully legal, tax paying citizen in another country.
I refuse to fill out a Form 8854. All my assets are in the UK, earned in the UK, and already taxed by the UK. Nothing to do with the USA.
All these pretences have the same purpose: to turn non-US income into US income, so that the US can tax it.
As long as the US citizen clings to reality and keeps bearing in mind that s/he doesn’t live in the US; hasn’t sold his/her home, car, and retirement; and hasn’t moved a big bunch of cash to America, all will be well.
Even more so (clinging to reality) for someone who is no longer a citizen.
BirdPerson –
“more so (clinging to reality) for someone who is no longer a citizen.”
Absolutely. Which is always the case, with Form 8854.
So you guess would recommend to just renounce and that’s it? NO 8854 and so on…
Thank you all for your great answers! You don’t believe how much this helps me!
@ Pauly,
Re:
IRS Medic is not referring to the procedure of renouncing (Dept of State). He’s referring to the IRS procedure, specifically the 8854 form, part IV, Question 6, “Do you certify under penalties of perjury that you have complied with all of your tax obligations for the 5 preceding tax years?'”
https://www.irs.gov/pub/irs-pdf/f8854.pdf
The statement “and therefore, you entire renunciation of citizenship would we considered invalid” is incorrect. US citizenship status is not dependent on tax compliance. If a person who renounces never files US tax (or filed and owes a ton of money he hasn’t paid, or has a dispute in progress with IRS, or whatever with IRS), their lack of US citizenship remains in effect.
In the context of IRS, a person who doesn’t file 8854
remains a US person for tax purposescould be subject to a $10,000 fine. However, for persons with no financial connection to the US, that’s generally pretty irrelevant (based on reports on this site over the past seven years, no one who’s posted here, who chose not to file, has heard anything from IRS).So although some people choose to file the past 5 years and the 8854, some don’t.
People should choose to file or not file based on their personal situation and which choice they are most comfortable with. But this choice does not affect the actual citizenship itself (or lack of it) and does not affect the validity of the CLN.
See also:
http://isaacbrocksociety.ca/renunciationrelinquishment-interactions-between-department-of-state-and-the-internal-revenue-service/
Pauly – “So you guess would recommend to just renounce and that’s it? NO 8854 and so on…”
Personally I’d say if you’re sure that you don’t want the citizenship, renounce; and then you can consider whether to file US tax forms.
There’s no hurry. You can take your time.
Pacifica:
“In the context of IRS, a person who doesn’t file 8854 remains a US person for tax purposes.”
Not for FATCA purposes. Not for tax treaty purposes. Not for withholding purposes.
You can take a taxi from the Consulate to the bank and cancel that W-9 and replace it with a self-certification form certifying that you are not a US Person.
Then go home and go online to notify the payer of any US income to change the withholding rate to the NRA rate.
The US may like to pretend that you’re still a US Person after renunciation, but in fact, out here in Realityland, you’re not. You’re just not.
@all
The IRS Medic page is dated 2009. Might explain some of the incorrect information (or at least misleading inferences). He’s supposedly a decent guy, but at the end of the day still part of the compliance-industrial complex.
@Pauly
If you decide to renounce and filing all returns and 8854 would cost you a bunch of money because of the transition tax, then simply don’t do it. I used to believe that filing a “simplified” returns that always came out to zero was a good strategy, but now that we have multiple years evidence of the IRS not attempting to contact anyone who renounces, it’s probably better to do nothing than to send them paperwork you’ve signed that is false, even if they have no way to validate the information you’ve given them (if you haven’t been reported under FATCA).
With German birthplace, citizenship and ID, it would also be very easy for you to forget about this. Just don’t renew your US passport and keep quiet around banks to avoid FATCA.
Nononymous:
If Pauly has never used his/her US citizenship as an adult, and identifies as German-only, s/he can simply forget about the US citizenship and truthfully confirm to banks that s/he is tax-resident in Germany only. No need for any “keeping quiet.”
If the passport has been renewed in adulthood, better (IMO) to renounce, if affordable.
There’s no need to allow the IRS to reduce one to lying and sneaking around and “keeping quiet” around banks!
@ Plaxy,
Yes, that’s the point I was making that whether you file or not, the citizenship loss remains in effect and the CLN, which you can show your bank, or anyone else, if necessary, remains valid. But good that you spelled it out more clearly.
I do think it is important, though, that people are aware that
IRS considers a renunciant to remain a US person for IRS purposes if they don’t filethere could be IRS consequences, such as covered expatriate status and a $10,000 fine (8854 instructions, page 10), since although that’s really irrelevant for some people (and the fine generally does not seem to be enforced anyway), it may be important to others, such as those who may have ongoing financial matters in the US.Pacifica
My understanding that this ‘still US person for tax purposes’ was under the older renunciation regime.
Under the new one, which introduced 8854, my understanding is that you are not considered a US person for tax reasons after renunciation.
@ BirdPerson,
Yikes, my brain’s out to lunch! You’re right. The tax requirements based on citizenship would end the day of the renunciation (calculated to the day before the renunciation). Not filing could result in covered expatriate status (which would be pretty irrelevant to a person with no US connection) or a $10,000 fine (which hasn’t happened to anyone reporting here).
That explains it! 🙂
Thanks, BirdPerson.
Just got the answer from the mission regarding my appointment. The only party regarding Tax is:
Please note you will also be required to file IRS form 8854 directly with the Internal Revenue Service. For additional details and to download the form, please see the IRS website.
If I receive any notice about 8854 or tax filing, I’ll let you all know.
Then I’ll use the letter to line my parrot’s cage.