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
@fillinchen
If you renounce in 2019, you will have until June 2020 to think aboout whether to back file and 8854. So don’t get too stressed about making a decision now.
But remember the net worth test is based on your net worth on the day BEFORE renouncing. If you want to lower you net worth you could do this by gifting eg to spouse, children etc
@fillinchen
https://hodgen.com/tax-free-gifts-to-reduce-net-worth/
“If you want to lower you net worth you could do this by gifting eg to spouse, children etc”
My child is still a minor. I have read that the minor’s bank account is considered mine anyway?
“If you are not ‘over the mark’ until you inherit something, then now is the time to leave. You don’t have to worry about an exit tax or even filing. They really won’t bother with you.”
Doesn’t renouncing flag you automatically? I mean there is no more hiding once you’ve done it. Then not filing or filling in that form where you indicate you haven’t filed makes you a covered expat.
As to whether the IRS can collect in a foreign country, this (from an accounting firm website!):
“Regardless of where you live, the IRS can file a lien against your assets regardless if the assets are located in the US or in a foreign country. Just as long as you own the assets, they are subject to levy. However, the IRS is legally unable to take administrative actions against your foreign property unless there is a treaty provision.
The IRS currently has tax treaties with over 60 countries. The treaty must have a collection assistance provision that permits the IRS to take action against your foreign property. Several tax treaties have extensive collection provisions while 24 have limited collection provisions.”
So the collection agreements are there. I just don’t know where.
@Fillinchen, scaremongering. If you don’t file, the IRS have no idea of your assets so it’s pretty difficult to file anything against you.
@fillinchen
I don’t know where you are located but most counties in the world do not have collection agreements with the US, there is nothing in it for them. If you are not a multimillionaire the IRS will not waste their limited resources on you.Why would they spend thousands to gain little, it is extremely costly to try to extradite someone for tax evasion, and if you are tax compliant in your resident country you are not evading anything. Do not heed tax accounting websites, they are out for business.
compliant
@fillinchen
Tax treaties are not tax collection agreements. Tax treaties provide legal contracts as to which country have taxation rights.
I have a US pension, yet the US have waived the right to tax that pension to my country of residence and visa versa. There is no collection agreement.
@Fillinchen
http://procedurallytaxing.com/international-collection-efforts-by-the-irs-expanding-the-number-of-treaties-in-which-we-have-collection-language/
“Currently the US has only collection agreements with 5 countries, Canada France, Holland, Denmark and Sweden” and those countries will not collect if the person was also a citizen of that country when the so called tax debt was in question.
@Fillinchen
Calm down!
1. There’s no evidence we’re aware of that the IRS has ever attempted to contact someone who’s renounced but hasn’t become compliant or filed the 8854 to exit. Assuming no US assets/income, the IRS would have no information about that person other than (a) the fact that they’ve renounced and (b) whatever FATCA reporting they might happen to have (which could be nothing at all, or very little). Unless there is FATCA data indicating hidden multi-millions, there’s no ROI in sending out letters to people who would owe little or nothing and from whom they can’t generally collect.
2. How would the IRS know about your foreign assets, beyond than financial assets subject to FATCA reporting? (Not all US persons are identified and reported on; not all assets are FATCA-reportable – for example tax-protected savings vehicles in Canada, UK, France and elsewhere are exempt from FATCA reporting.)
3. The only way you could be subject to collection of taxes owing (not FBAR penalties) is if you lived in Canada, France, Sweden, Denmark or the Netherlands, AND you were not a citizen of the country you lived in when the debt was incurred, AND the IRS knew where to find you and had reason to think there was money to be made (i.e. you tried to become compliant or entered one of their horrid amnesty programs). FBAR penalties are not collectible anywhere, period, including the five countries with collection agreements.
When the US signed the original Convention on Mutual Administrative Assistance in Tax Matters the Senate included a reservation against assisting other countries with collection. So the US is unable to use the collection provisions of that treaty. They need specific collection provisions to be able to use the foreign tax agency to assist with collection. Using the Australian treaty as an example, the only collection provision is article 25, paragraph 5:
This is very limited and the US tax on the Australian source income of US citizens living in Australia would NOT be included.
I was an US citizen, moved to Canada at 9 yrs old, and became a Canadian at age 19. So dual for 50 yrs.
I renounced my US citizenship Nov 2018.
I would appreciate if someone with solid knowledge….is there anyway I could just avoid sending in 1040 and 8854 for 2018? I also owe about $280,000 US in Transition tax. I have made my first instalment but hope to stop paying now that I am totally renounced.
I have read opinions that say I should just stop paying, but if I do, I would be very leery of ever entering the states again.
There must be lots of people that owe the Transition Tax, that will not pay this ridiculous tax. Anyone aware of this happening?
I am still hoping a new law clearing us of this tax debt will be passed.
Canada will not help the US collect from a person who was a Canadian citizen at the time the alleged tax debt was incurred.
If you never go to the US again and don’t put assets in a country where you aren’t a citizen, the US can’t collect from you.
If you plan to visit the US again, you need to watch the notices the IRS sends you, and prepare for the possibility that you might have to pay.
Norman Diamond, I was hoping that there would be a movement of Dual citizens that own CDN corporations, that would just refuse to pay the Transition Tax. If no one pays there might be safety in numbers.
Your last statement about waiting to see what they send me and prepare to pay them….I thought I read on numerous previous posts that the border guards cannot or wiillnot arrest you. If I have no US assets, what could they do if I just don’t pay. ?
This is my real question…. what can they do if I don’t pay?
@ Punky,
As your question is about tax, I suggest you post it on the tax thread as more people are likely to see it there. There’s also several posts/threads specifically about the transition tax that might be of interest. You can find them listed in the Archives — that’s in the grey menu bar at the top of the page.
@Punky
For $280k I would happily not visit the US again.
If you go dark and stop paying there’s not much the US can do, even if you enter the country, but it’s possible that the border folks would have you flagged and would stop you to gather contact info so an IRS agent could have a word during your visit. And possibly they could seize your watch, so leave the Rolex at home.
Assets in Canada cannot be touched.
@Punky
You might also want to contact a lawyer named Monte Silver. He is organizing some sort of challenge in the US and has helped folks dealing with the transition tax issue.
Yes I have been in contact with Monte and have donated to the cause. Fingers crossed with his lawsuit.
Punky, Not much. In order to arrest you there has to be a warrant. To get a warrant, they have to go through the process. There are thousands who owe billions that they can’t collect.
It’s a business decision. How much does 280k mean to you? Would you rather uncle sam had it?
Any reason why you felt compelled to pay the first installment.
Another example of a person who mistakenly tried to do the right thing, complied, and wound up being damaged by the grotesque US tax system. My advice to Punky:
“……is there anyway I could just avoid sending in 1040 and 8854 for 2018?” The answer is yes, just say no.
You are no longer a US citizen. As of the day you renounced you no longer have any obligation to file forms, pay tax, or even communicate with the IRS. The IRS knows this. Skip the final filings because filing them means that you agree (under penalty of perjury, no less!) to allow them to assess any tax they deem owing. Don’t do it.
That first installment you made is water under the bridge, but assuming no US based assets the IRS can’t touch you if you never communicate with them again. Eventually State Department will notify the IRS that you are no longer a US citizen. If they even take notice they will realize that there is no point in pursuing the matter because they have absolutely no leverage. As Norman mentioned you might want to monitor any IRS letters just to keep track of what they are up to, but certainly don’t respond to them. There’s a really good chance you will never hear anything from them because their system is broken and totally dysfunctional.
Don’t expect that there will ever any certainty in any of this, except for the fact that if you try to play it by their rules it is certain you will be robbed of $280,000.
P.S: I stopped filing about a half dozen years ago and have heard nothing since from the IRS. If I did I would ignore them. I heard of a clever person some years back who bought themselves a rubber stamp that said “Deceased”, and returned IRS letters as undeliverable. Enjoy your new freedom.
Thanks so much for the encouraging note. I appreciate it very much.
I would really like to get a handle on what they can do if I cross the border.
I am happy to stay away, but only if crossing could bring me more and larger problems. You said you stopped filing 6 years ago. So I was thinking that things have really heated up during these past 6 years. Have you spent any time in the states? Does your passport list a US place of birth? Mine does.
In the back of my mind, I was thinking I would play the game for a bit longer and see if any new law might get passed, ending this.
There are so many groups in so many countries that are campaigning on our behalf. Maybe just maybe the nightmare will end.
I have several months to decide what I will do, hoping something positive develops.
“.I thought I read on numerous previous posts that the border guards cannot or wiillnot arrest you. If I have no US assets, what could they do if I just don’t pay. ?”
Border guards don’t collect on behalf of the IRS. Depending on what notices the IRS has sent you, the IRS might collect on behalf of the IRS, if you have assets in a country where you’re not a citizen, or if you visit the US.
Punky. The IrS is a paper tiger As posted earlier.
https://www.propublica.org/article/how-the-irs-was-gutted?fbclid=IwAR3TYUoVdwce1RLezgiIxCFU4fQcF6w-bHigUZHR64uDPmeIfaoYTmnDo7s
They haven the resources to go after non Americans living offshore.
We crossed the border 100 times over 25 years with a Canadian passport showing aUS birthplace.
Twice in 25 years. the border people , ia a helpful, non threatening manner, said ‘You know you could get a US passport if you wanted to ‘ There have been a few reports of the opposite attitude. With CLN you will be treated as any othr Canadian i e a 6 month stamp in your passport. You need not apply for a visa in advance.
nobody should count on this nightmare ending anything soon.
maz57:
“assuming no US based assets the IRS can’t touch you if you never communicate with them again. ”
True in most cases, but a renunciant who has filed for 2017 accepting liability for the transition tax and paying the first instalment, has presumably been assessed for the whole amount due?
If that is the case, the assessed tax debt doesn’t vanish with the citizenship.
Whether the IRS would pursue it is a different question.
@Punky.
“I would really like to get a handle on what they can do if I cross the border.
I am happy to stay away, but only if crossing could bring me more and larger problems. You said you stopped filing 6 years ago. So I was thinking that things have really heated up during these past 6 years. Have you spent any time in the states? Does your passport list a US place of birth? Mine does.”
My Canadian passport lists a US birthplace and I cross regularly and routinely with no hassle. During my last visit only a week ago I know for a fact the US officer noticed my US birthplace. He was curious which US state it was because there are several cities with the same name scattered throughout the US. It was more a conversation than an inquisition. I told him, then he waved me through. I once had a US passport but it is now expired. I immediately quit using it after I became a Canadian citizen and got a Canadian passport in 2012.
They have never actually spelled it out but I assume I am granted the usual 6 month visa-waiver entry each time I cross. I should add that this is at a land crossing traveling by auto. I haven’t flown to the US in decades.
@Plaxy.
I wondered about that myself overnight. Perhaps the renunciant has only accepted liability for the first installment (as evidenced by the fact that he paid it)?
A thought experiment: What if a 2018 renunciant who is compliant did file a final 1040 and 8854 in 2019 to officially log out of the US system? He would be able certify he is compliant for the last 5 years which would include that first Transition Tax installment. No further installments would be due until after he loses US citizenship. After he has logged out of the US system and is officially no longer a US tax resident how could he be liable for those future Transition Tax installments? I don’t know the answer and I suspect no one else does, either.
I stand by my advice to Punky: best to just avoid the question and simply go “dark”. I don’t think the IRS would bother to go after a Canadian citizen, not only because they have no means of collecting, but because it would result in some very ugly bad press.
maz57:
“Perhaps the renunciant has only accepted liability for the first installment (as evidenced by the fact that he paid it)?”
As I understand it, those with corporations affected by the transition tax were required to pretend the money was repatriated to the US in the 2017 tax year, report the necessary numbers to allow the IRS to calculate the total transition tax as incurred in 2017. And could elect to pay in eight instalments. I could well be wrong, though.
“After he has logged out of the US system and is officially no longer a US tax resident how could he be liable for those future Transition Tax installments? I don’t know the answer and I suspect no one else does, either.”
I agree.
“I don’t think the IRS would bother to go after a Canadian citizen, not only because they have no means of collecting, but because it would result in some very ugly bad press.”
I agree. I suspect they’d choose a corporation whose earnings were much higher and actually could be repatriated, if they were going to pick a fight.