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
@ Pacifica and BP
As I understand
Under the new regime not filing 8854 would ‘supposedly’ result in being labelled covered, which ‘in theory’ would qualify you for reed amendment treatment ( yet unenforceable) and your US heirs having to pay 40% on any covered inheritance ( not yet included in the 3520, report of foreign gifts)
@plaxy
While I generally agree with you on most matters, giving $2350 to the US government for a CLN is more offensive to me personally than lying and keeping quiet around banks. (One does not feel “reduced” – lying at least provides the small private satisfaction of breaking a domestic law – the IGA legislation – and sticking it to your own banks and government for agreeing to support FATCA.) But that’s my choice, and others may feel differently.
@Nony
Problem is that Pauly has a US passport and he would need to continue to use it to travel to the USA, thus leading a double life. Simpler to renounce IMO.
Nononymous:
“the small private satisfaction of breaking a domestic law – the IGA legislation – and sticking it to your own banks and government for agreeing to support FATCA.)”
Yes, that’s where we differ.
To me, lying to the bank about US citizenship would be accepting that US citizenship was something to be ashamed of and lie about. And I’d much rather shout at the bank than lie for their convenience. 🙂
We’ll just have to agree to differ.
@heidi
Pauly could easily travel to the US on the German passport because it shows a German birthplace. That would require being untruthful on an ESTA waiver application, however. (Based on my own experience, the US border authorities don’t seem to cross-reference US and non-US passports belonging to the same person.)
@plaxy
I find that lying about US citizenship is a thrilling act of defiance. (I am easily amused.) I’m personally throwing a spanner in the works and putting billions of dollars at risk!
Heidi:
“Under the new regime not filing 8854 would ‘supposedly’ result in … your US heirs having to pay 40% on any … inheritance.”
A good opportunity for your heirs to challenge the law, should the IRS try to enforce it.
Nononymous:
“I find that lying about US citizenship is a thrilling act of defiance. (I am easily amused.)”
It’s not though. Though it may give you a kick, the outcome is simply avoiding reporting while not posing a risk to the bank’s FATCA-compliant status.
“I’m personally throwing a spanner in the works and putting billions of dollars at risk!”
No, that’s what you’re not doing. You’re sparing the bank the trouble of having to try to get your SSN and a W-9.
I’m personally throwing a spanner in the works and putting billions of dollars at risk!
Oops – the repeat quote crept in unnoticed by me
@Pauly
Bird Person is absolutely right, good thinking BP!
The link you gave refers to the old 10 year tax regime post renunciation
Renunciation tax law was given a major overhaul in 2008. The 10-year tax regime was replaced with an exit tax on expatriating citizens who qualified financially.
You can read here the history here
http://web.archive.org/web/20121024053320/http://renunciationguide.com:80/Background-and-History-of-Tax-On-Expatriation.html
@ Plaxy
If my heirs are still US citizens and living in the US, then it will be a cold day in hell before my money goes into that country, I have a list of charities who will benefit.
Lying about tax-residence is what the US does.
They sign a treaty with an article agreeing tie-breaker rules to determine residence, in order to determine which country has taxing rights – then they cut US citizens out of that treaty right, in order to claim, untruthfully, that US citizens are always resident in the US where the US has taxing rights.
Heidi – that’s the spirit! 🙂
Though it would be a good opportunity to challenge the law.
Which means the IRS is unlikely to try to enforce the tax unless the deceased has signed an 8854.
Pauly. There is a simpler way. Join hundreds of thousands others. Don’t renounce, don’t file. Do what you have been doing up to the point you found out about this nightmare. Nothing.
If you choose to renounce, I agree with bird person et al. There is absolutely no need to enter the US tax system.
You have to understand how it works. We have been living through this from about 2011. My spouse renounced in 2016. She had no tax questions before or during the renunciation process.
CPAs such as IRS medic are required by the IRS to always tell their clients that they must file. This is often not in the client’s best interest. An added benefit for the CPA but not the client is they make a ton of money.
The IRS is a giant bureaucracy with very limited resources. Trust us, they certainly can not find you, hassle you, fine you, attach your bank accounts or anything else. They have plenty to do dealing with US residents. The only way they can bother you is if you voluntarily jump into the net. Otherwise, they haveno interest in you
If you decide to backfile 5 years and so on, you are in for a world of misery. Good luck.
@Plaxy
In the past my US taxes have gone to pay for too many weapons, time for the red cross or the elephants to benefit.
I just found out that on DS-4079, asks at q. 13 (e) “Do you file US income or other tax returns?”
The email regarding my appointment didn’t mention this form? But what’s the right answer here if they ask me to file the form while I’m at the embassy?
In really should stop reading 🙂
Pauly – it’s a form that’s required for relinquishment, to determine whether the person has “acted like an American” since committing a relinquishing act (such as naturalising in another country). Filing US taxes would be “acting like an American” and would probably result in the decision that loss of citizenship had not occurred.
Not needed for renunciation.
The London Embassy sent me the DS-4079, and I filled out the bit re taxes as ‘No’. I was hoping for a relinquishment, but when that was denied, I renounced. And the DS-4079 was destroyed as it was not needed.
If you’re renouncing, you’re given a different form to sign and that’s what is sent off. There’s no mention of taxes on the renunciation form.
@ Pauly
This is a great discussion and I hope our fine Brockers have brought you in from that ledge of fear. I love the comments which point to HOW the IRS pretends WHO all persons with US taint are (i.e. US persons for tax purposes with an imaginary tax home in DC) and WHAT their home country earnings and assets are (i.e. foreign, therefore treated with great suspicion and assigned onerous filing requirements) and WHERE all phantom and unrealized gains should be taxed (USA! USA! USA!). WHY they do this is of course totally illogical and against international norms but that is because the USA pretends it is exceptional, it stands alone. Oh yes, they’re the great pretenders. So Pauly, this parody is for you (hope you know the song “The Great Pretender” by the Platters).
The Great Pretenders
Oh yes they’re the great pretenders
Pretending that I live in DC
Their greed is such they pretend too much
They ignore that I live overseas
Oh yes they’re the great pretenders
Adrift in a world of their own
CBT is their game but it’s also their shame
Their tax means are theirs all alone
Too real is their dealing in make believe
Too real what’s revealed that their codes can’t conceal
Ooh Ooh yes they’re the great pretenders
They’re saying I am what I ‘m not
They want me to be what I’m not you see
I’m swearing one home’s all I‘ve got
Pretending won’t change that one dot
You are Great! So, the last thing (and really the last time I stress you guys I promise)…I read, that the embassy will send a copy of my CLN to the IRS. Isn’t that like voluntary „jumping“ into there net?
Pauly – not at all. The IRS has a duty to publish the names of renunciants in the Federal Register. It compiles the list from the stack of crumpled CLN copies. 🙂
Those who have been filing, presumably get a note on their files to the effect that they are now Non Resident Aliens. The following year, if the renunciant files a tax return and 8854, the IRS processes them.
They might. So what? At worst you might get a form letter which you could safely ignore. (We are assuming you have no significant ties to the US.)
Portland –
“They might. So what? At worst you might get a form letter which you could safely ignore.”
Why on earth would the IRS send you a form letter when you’re no longer a US citizen?
They don’t do anything. Renunciation does not initiate IRS action. If you file after renouncing, they’ll process the forms. Don’t file and they’ll do nothing.
Since my Social Security number is in a different name than the one on my CLN, I wonder how the IRS could ever tie up my non-existent tax returns with my renunciation in the first place.
BirdPerson – When I renounced, my US passport and SS account were in one name; my UK passport was in a different name. The Consulate said it didn’t matter.
I also claimed US social security during the period when I was renouncing. The Federal Benefits Unit at the Embassy took care of changing my name on my SS account and submitted the application for SS. Then they waited until I let them know that I had lost citizenship and then they changed the citizenship on my SS account, so that when the payments started coming through, everything was in the right name and the right citizenship and the right withholding rate.
Extremely helpful!
As for the IRS – I would think people who are worried about the IRS would want the IRS to know they’re no longer a US citizen.
So at the end of all that,
It’s a shame the tax advice industry has misled so many into thinking the IRS has some kind of power to inflict tax debts on them.
If you never file a 1040, the IRS cannot assess you (a non-US-resident citizen) for a US tax debt (and won’t try).
When you submit the return, you agree to accept the tax liability.
Don’t file, you’ll never hear from them.
But there are advantages to filing, for some. You can claim US tax breaks, etc.