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
@BP
Absolutely agree with you in your situation and I would do exactly the same.
Whereas I worked for over 30yrs in the US, and continued to file after I left. I have a substantial US pension fund and therefore I chose to abide by their rules file 8854 and exited 6 yrs ago with no problem. My pension fund now qualifies for the CH/US tax treaty such that it is taxed totally in CH.
I said: “the penalty for not filing Form 8854 is a $10,000 fine.”
Correction. The instructions state the penalty for a non-resident foreigner not filing Form 8854 is being treated as if subject to US tax law.
Which is nonsense.
BirdPerson:
“As someone else has written on this site, whatever you decide to do, you probably won’t be entirely happy with it.”
I think a lot if renouncers are happy with what they do.
I suspect those who have never filed US tax forms, or not filed since leaving, may be happier exiting without filing Form 8854, than those who’ve been filing up to the year of renunciation.
Anyway, it would certainly be helpful if there was certainty about the IRS’s powers to assess liability for taxes on the imaginary proceeds of an imaginary sale. But at least there’s certainty about the inability to collect (where the assets not being sold are not US assets).
Watcher:
“If the US asked me to sign a form that says black is white or pay a $10k penalty, I would do it. Of course it’s utter nonsense to do so, but resistance purely for the sake of resistance is not a profitable use of my time or energy.”
Of course not. But it’s well worth the time and energy of a person wanting to renounce, or recently renounced, to resist filing a form which requires five years US tax compliance.
As I have said before, my US pension fund is NOT imaginary and the deemed distribution and taxation of it at its US source is not a risk I was willing to take whatever Plaxy’s ‘opinion’ and her vendetta against the 8854 may be. It is not hers to gamble with.
Watcher:
“Having a US payer disregard a non-US person’s claim for treaty benefits would be one very easy way to enforce tax or penalty assessments.”
Would that be workable, I wonder?
If the foreign recipient is eligible for treaty benefits, the US must respect that. If as in Heidi’s case the US has conceded taxing rights to the residence country, they can’t just cancel that concession with respect ofba specific eligible individual, while continuing to grant the concession in respect of other eligible individuals.
Could the foreign recipient (who is not subject to US tax law) lose eligibility for treaty benefits by not signing a form agreeing to be subject to US tax law as if resident in the US?
Heidi:
“As I have said before, my US pension fund is NOT imaginary ”
No – the “deemed distribution” would be imaginary.
The pension fund is of course real, and is if I understand correctly being taxed by Switzerland, the US having conceded taxing rights to the country of residence.
“vendetta against the 8854”
It’s hardly a “vendetta” to raise the question of whether a renunciant needs to file Form 8854, or in what circumstances a renunciant might suffer undesirable consequences as a result of not filing Form 8854.
“It is not hers to gamble with.”
But Heidi, I’m not gambling with your pension. How could I???
Plaxy
I’m personally grateful to you. Comments you made to me (some months back) helped me to clarify my own thoughts about not entering the tax system or filing an 8854.
@ Plaxy
“But Heidi, I’m not gambling with your pension. How could I???”
Not with mine, with others that may come here in my position by persuading those who may be most at risk , who stand to lose the most, to disregard the 8854.
In medicine we weigh up all possibilities then take the road that will do the least harm. I think that applies to most of life.
Heidi: “persuading those who may be most at risk , who stand to lose the most, to disregard the 8854.”
No, the question I’m asking is, in what circumstances could not filing Form 8854 have undesirable consequences?
You’ve suggested (if I understand correctly) that a former citizen who has US investments, who doesn’t file Form 8854, could be treated as if the investments had been sold prior to renunciation, while the person was still subject to US law.
Whereas it seems to me that the IRS doesn’t have the statutory authority to assess a tax liability on the invested funds without the consent of the owner; and even supposing the assessment could be made, the IRS could not enforce it.
It’s all entirely hypothetical.
“In medicine we weigh up all possibilities then take the road that will do the least harm. I think that applies to most of life.”
You’re suggesting I’m doing harm by raising the question of whether and in what circumstances the IRS has power to penalise non-US-residents for not complying with US tax law as if US-resident?
@ Plaxy
I am suggesting that one treatment does not apply to all.
Now I am going out to dinner
Heidi:
“I am suggesting that one treatment does not apply to all.”
And that’s exactly the question I’m raising: whether and in what circumstances the IRS has power to penalise non-US-residents for not complying with US tax law as if US-resident.
A reasonable question to ask, in my opinion.
This debate has become Normanesque. And I say that as a frequent producer of excess commentary myself.
BirdPerson:
“I’m personally grateful to you. Comments you made to me (some months back) helped me to clarify my own thoughts about not entering the tax system or filing an 8854.”
I’m glad.
When I was FATCA-stun-gunned a few years back, my immediate thought was renunciation. It didn’t cross my mind to be concerned about the IRS, until I went online to read up about renouncing procedure. In various forums, tax advisors popped up to warn me that because of Form 8854, I would not be able to renounce without first filing five years worth of US tax forms and paying five years worth of US taxes.
That turned out to be self-serving rubbish, of course. Since then I’ve been trying to understand what (if anything) the IRS can do to law-abiding would-be renunciants, and what it can’t.
So far, fortunately, a lot of the tax-advisor scary-scary has been shown by forum posters and others to be unenforceable. There’s far less fear in the air nowadays, thanks to the sharing of experiences and research on forums like this one.
It would be nice if it turns out (as I think it will) that there’s absolutely nothing the IRS can do to place obstacles in the path of those who want to renounce.
Hotel California Breakout!!! 🙂
as some one who has been visiting this site since the page views were around 2,000,000 i went through the complete 5 stages of grief before coming to my final decision
i found non compliance and lying to the banks as for me and only me the right thing to do. i have the ability to never cross into that country to the south of me ever again as i have no need to travel there for work and now have no desire to visit on vacation.
i am a canadian citizen resident in canada and live my life as such abiding by canadian law only not some other countries attempt to impose a law on me.
were i ever to get an envelope from a three letter agency with and amerikan return address the contents would be used on the bottom of my bird cage
each and everyone of us have a different set of circumstances and these play into how we each alone choose to deal with this problem.
i saved myself $2350 and a bunch of paperwork…..although when i first was made aware of this problem the freedom rate was $450 and at that price i might have thought differently and gone ahead and bought that piece of paper for that price….for $2350 it is just not that important to me as i can much better spend that money than dumping it into the dark hole amerika has become
@Plaxy: “Of course not. But it’s well worth the time and energy of a person wanting to renounce, or recently renounced, to resist filing a form which requires five years US tax compliance.”
Indeed. But you asked specifically for a circumstance in which filing the 8854 is advisable. I gave you one. I hold US investments from time working there, and was (and still am) entirely compliant with every US tax requirement. Deliberately not filing an 8854 that when filed does not trigger any additional tax liability but has the threat of a $10k penalty for non-filing — no matter how unlikely that threat is to actually be assessed or collected — would be simply reckless.
As Heidi rightly points out, one size does not fit all here. Not at all, even though you appear unshakably convinced that it does.
Watcher – I should have explained more clearly. I meant “is there any circumstance where a US citizen who is contemplating renunciation or has recently renounced should file Form 8854 to avoid adverse consequences?”
There are very good reasons for a renouncing US citizen not to want to file Form 8854: it requires certification of five years compliance with US tax law. Trying to figure out whether there are circumstances in which it would be advisable to file five years of US tax returns, and pay five years of US taxes on non-US income, seems to me to be a reasonable question.
The obligation to file US tax returns wherever resident, is a citizenship obligation.
When a US citizen who does not want the citizenship swears the renunciation oath, the unwanted citizenship vanishes; and eternal US-tax-residence and the obligation to comply with US tax law as if US-resident, vanishes with it.
Are there circumstances in which it would be advisable for a person who is not US-tax-resident and has no obligation to comply with US tax law as if US-resident, to sign a form listing his/her worldwide assets and agreeing to go along with the pretence that everything was sold the previous year, while the person was deemed to be resident in the US and US-taxable on worldwide income?
@ mettleman
“I am a canadian citizen resident in canada and live my life as such abiding by canadian law only not some other countries attempt to impose a law on me.”
I feel like you’ve provided an aspirin for the headache I got by reading (more like skimming) the last 3 pages here. Thank you. Yesterday I thought Pauly would be able to progress to a “solution” soon but today …. well it’s hard to say. I realize that everyone’s situation is different and everyone wants to feel at least some degree of comfort with what they decide to do. After some horrible oscillations I settled on doing nothing BUT, like you, I have no desire or need to enter Mordor which does not hold hostage any of my entirely Canadian source assets (don’t even qualify for an SS pension). I also feel somewhat sheltered by my husband’s CLN, even though some tax form errors where made while trying to accomplish his “clean exit”. Found out later, for instance, that his final 1040 was supposed to pretend to be an information sheet and therefore not supposed to be signed. We figured if they didn’t like it they could let him know but not a peep from them since 2014, his year of emancipation.
This article is interesting because it specially mentions the difficulties in enforcing the ‘exit tax’–and a suggested remedy:
https://www.jrviola.com/tax-news/2017/12/08/enforcing-exit-tax-expatriates-california-state-bar-recommends-change/
@Plaxy
And my answer is still “yes”. There is at least one circumstance where filing Form 8854 protects against possible adverse consequences, and that is where the person in question is already otherwise fully compliant and up-to-date with US tax laws and form filings, and where filing Form 8854 does not incur any actual exit tax (or any other tax) liability.
Now, the above might not generally be the typical Brock poster’s case, and so here we see plenty of other circumstances where filing Form 8854 would be a bad thing to do. But that doesn’t mean that filing this form is ill-advised and so should not be done in every case, yet this is a line that you appear to have been pushing relentless for some time now.
Put simply, a clean exit will always beat a messy one where there is no financial difference between them for the individual concerned.
Embee:
“Pauly would be able to progress to a “solution” soon but today …”
Pauly isn’t in a situation in which it could conceivably be desirable to file any US tax forms after renouncing. There are no adverse consequences, for a former citizen with no US assets or other US financial involvement.
@ EmBee
you have been around here for just a bit longer than i have and we have both seen our share of people go through what we have gone through
“Yesterday I thought Pauly would be able to progress to a “solution” soon but today …. well it’s hard to say.”
i went through a good couple of years going to be thinking i had found a “solution” only to wake up with a different frame of mind.
like i said i went through (and i think we all do to some degree) the 5 stages of greif and only until we come to the acceptance stage are we comfortable with our “solution” which for all of is will be different given our own unique set of circumstances.
i am now 100% comfortable with my decision to lie to banks or who ever asks about my citizenship…it is none of their damn business….i still have “that’s a racist question, are CANADIAN CITIZENS born elsewhere less CANADIAN? I do not answer racist questions” i believe it was george that orginaly posted this hanging up in my office. i read it every morning when i get to work and every night when i leave.
for each of you reading this….read, ask questions, think about your situation, read some more, ask more questions, think, have a glass or bottle of red wine and read some more. come up with your own unique solution depending on your and yours alone situation and then get on with your life.
life is to short to be worried about what will happen if big brother to the south comes knocking…..there is little chance he will and if he does just what exactly can or will he do…..i believe to date there has not been one instance of someone being roused out of their beds in the middle of the night by jack booted thugs with the stars and stripes on their sleve’s. like i said above if that letter were ever to arrive it would promptly be opened and the contents spread on the bottom of the bird cage.
@BirdPerson
That article has been kicking around for a while. The California Bar Association proposal appears to be a think piece from a couple of lawyers, nothing more. What I like about it is the frank admission of IRS impotence:
“Once an exit tax is assessed, the IRS has authority to place tax levies on the person’s domestic accounts, but has limited authority to collect the amount owed from any property held overseas. This leaves the IRS largely unable to enforce the exit tax against expatriates without their voluntary cooperation…”