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
I said:
“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.”
Should have said:
“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.”
“Perhaps the renunciant has only accepted liability for the first installment (as evidenced by the fact that he paid it)?”
No, a self-assessment counts as an assessment. The only way to fight it in US Tax Court (without prepaying the rest of the self-assessed amount) is IF the IRS sends a Notice of Filing of Federal Tax Lien or a Notice of Intent to Levy. If the IRS mails one of those notices to the last known address of the person, then the person has 30 days from the date the IRS mailed it, not 30 days from the date of receiving the notice (and not one month, you have to count days) to submit a Request for Collection Due Process Hearing. After the CDP Hearing, IF the IRS mails a Notice of Determination to the last known address of the person, then the person has 30 days from the date the IRS mailed the Notice of Determination, to petition Tax Court.
If the IRS mails any of those notices by a method of mailing that is reasonably calculated to take more than 30 days, and if it succeeds in taking more than 30 days, then the victim gets screwed. A recent example is a Mr. Atuke who lives in Kenya.
To fight it in any other court, the victim has to prepay the full amount ot the alleged liability and sue for refund. A recent example is Mr. Dewees.
Give up. Just keep your assets in countries where you hold citizenship.
@Norman.
“Give up. Just keep your assets in countries where you hold citizenship.”
Good advice.
@Norman, I appreciate the advice. It’s exactly what I am looking for.
Thank you.
Sure sounds like you know the system.
I wonder if they send those notices, and I ignore them… and never go to the states again… how are they going to make me pay?
I imagine if I go to the states, I would be screwed?
Any more info or more examples of people that are in my situation would be appreciated.
I will try to look up Mr Atube and Mr. Dewees to see what I can learn.
Often I read the quote about the Transition Tax “ futile to resist, impossible to comply “.
If there is any truth in that, there must be people that will be unable to pay.
How will this all play out?
@Punky
They cannot make you pay. If your money is safely kept in Canada, the IRS cannot touch it. There is no collection mechanism. Dewees is the perfect example of what NOT to do, worth reading up on (important point, he was not a Canadian citizen, and you are).
If you go to the US, a range of things could happen: nothing (the most likely outcome]; you are flagged on entry and contacted by an IRS agent while visiting; the IRS agent seizes your watch and phone to make a small dent in your $280k debt; you are arrested (profoundly improbable, and presumably you’d know if there’s were criminal charges).
The transition tax is very easy to resist if you have dual citizenship. Don’t comply and don’t pay. Simpler than falling off a log.
Nononymous:
“The transition tax is very easy to resist if you have dual citizenship. Don’t comply and don’t pay. Simpler than falling off a log.”
(Not referencing Punky’s situation in general but speaking more generally)
Although I agree that the IRS has limited power to enforce collection of assessed tax debts beyond US borders, I don’t think non-compliance is necessarily easy for those who were tricked into filing 5471 forms – or not easy for all.
I suspect many would have liked to continue as dual citizens, keeping both citizenships. Why else would they have agreed to file such a dangerous form? In many cases, they may be exactly the people who would find it very painful to be forced to renounce.
It’s a shame the US has treated them so shabbily.
“Sure sounds like you know the system.”
I’ve paid very expensive ‘tuition fees’ to learn that it’s illegal to write an honest declaration on a US tax return. Furthermore if you’re married to a non resident alien and the IRS has rejected your spouse’s ITIN application(s), you must fabricate a social security number for your spouse. (Though in one of my cases now I’m arguing that the US Department of Justice should have coerced my wife to fabricate an SSN for herself instead of coercing me to fabricate one for her. Do you wonder, why the DOJ? Well you see, the IRS accepted a return where I didn’t fabricate an SSN for her, but the DOJ persuaded a court to overturn the IRS’s acceptance of the return.)
“I imagine if I go to the states, I would be screwed?”
That depends on the kinds of notices the IRS sends you. Notice again, it doesn’t depend on whether you receive the notices, it depends on whether the IRS mailed them to your last known address. So if you move, you might want to send a Form 8822 change of address report by registered mail in order to be informed of what they send you (that is, if you intend to visit the US before they send you a collection notice).
“I will try to look up Mr Atube and Mr. Dewees to see what I can learn.”
Mr. Atuke isn’t well known. He received a Notice of Determination around 32 days after the IRS mailed it, so Tax Court denied his case for lack of jurisdiction. I don’t know if he proceeded to pay and try for a refund, but I hope he didn’t.
Mr. Dewees is mentioned a lot in this blog. He got tricked into submitting some forms when he discovered he was “supposed to”, so the IRS penalized him around a million dollars for his efforts. If he had not sent the forms, no one knows if the IRS would have left him alone.
Norman Diamond;
“Mr. Dewees is mentioned a lot in this blog. He got tricked into submitting some forms when he discovered he was “supposed to”, so the IRS penalized him around a million dollars for his efforts. ”
Yes, he got tricked into signing Form 5471. The IRS then assessed a penalty of $10,000 for each year he hadn’t filed Form 5471. I don’t recall where the rest of the sum came from. I think it was a quarter of a million.
If he still had his corporation in 2017, he’s presumably now getting wiped out for the second time.
Mr. Dewees made a lot of mistakes but the two biggest ones were:
1. Not becoming a Canadian citizen.
2. Thinking he could pay the assessed amount and then fight the IRS in a US Tax Court and get all his money back.
Punky is in a much better position than Dewees. He can thumb his nose at the IRS, particularly if he is mentally prepared to never visit the US again. Chances are that it will never come to that because the IRS is totally understaffed, underfunded, and incompetent.
The IRS doesn’t know what to do about this Transition Tax mess and certainly not how it would apply to one who renounces in the middle of it all. Unless he sticks his neck out by trying to comply with the impossible, they will simply lose track of him and never miss him.
I would love to fall off the IRS radar.
The other news pending is the introduction of the new bill by Congressman George Holding from NC.
He introduced a new bill yesterday that very well could eliminate our problems.
Google TFAAA or Republicans Overseas. It’s looks like a small step in the right direction, but probably has a long way to go.
maz57:
“Mr. Dewees made a lot of mistakes but the two biggest ones were:
1. Not becoming a Canadian citizen.
2. Thinking he could pay the assessed amount and then fight the IRS in a US Tax Court and win.”
I agree.
The Dewees case is odd. It doesn’t entirely make sense, to me. But it’s very instructive. A kind of grim how-not-to for US citizens outside the US.
@Punky
You will likely never be off some sort of IRS radar, since you apparently agreed to a $280k tax assessment and paid a first installment. But if you go dark there’s really not much they can do about it – if you have no US assets or income sources they cannot touch you or your money in Canada. You might still be able to visit the US unmolested.
I wouldn’t put too much hope in Holding’s bill. If and when passed it likely would offer you no relief. But it’s an encouraging first step.
Waiting for Congress to fix this mess is pointless. They’ve known all about it for years and have not only not fixed it, they’ve made it worse. After everybody’s wishful thinking as Obama left and Trump arrived, they came up with the Transition Tax and slammed expats again. They simply don’t care.
“Mr. Dewees made a lot of mistakes but the two biggest ones were:
1. Not becoming a Canadian citizen.
2. Thinking he could pay the assessed amount and then fight the IRS in a US Tax Court and get all his money back.”
Right about #1, the absolute biggest mistake.
Half-right about #2. A refund suit is either in US District Court for the District of Columbia District (where he could get a jury) or US Court of Federal Claims (where he can’t get a jury). In both of those kinds of courts, judges are even more highly prejudiced than in US Tax Court (where he can’t get a jury).
The only way to get into US Tax Court (where he wouldn’t have to prepay the assessed amount) would have been if the following sequence of events occurred:
1. IRS issues either a Notice of Federal Tax Lien or Notice of Intent to Levy
2. Within 30 days of the IRS mailing one of those notices, submit a Request for Collection Due Process Hearing
3. IRS issues a Notice of Determination
4. Within 30 days of the IRS mailing that notice, petition US Tax Court.
Count days not months (i.e. it is not one month). Count from the date the IRS mails a notice to the person’s last known address, not from the date of receipt.
One more big mistake:
#3 submitting US tax forms in the first place instead of submitting nothing at all.
Dewees seems to have made so many mistakes, it becomes implausible.
It’s almost like the whole point of the incident was for an innocent Canadian resident to be seen getting cruelly trashed by the mean old IRS and the mean old CRA and the mean old US government.
Political games, I wouldn’t be surprised.
On the other hand, it appears that US top-up tax on the non-US-source income of a US citizen could be collectable under the Canadian treaty, if the US citizen didn’t have Canadian citizenship at the time s/he made the mistake of filing the US tax return which resulted in the assessment.
Dewees didn’t owe any tax (presumably because US tax on his ‘C’ corporation was deferred and he was able to claim credit for Canadian taxes paid on his earned Canadian income?), but Canada withheld his Canadian refund to force him to pay a US penalty for not filing the US form (5471) accepting liability for deferred US taxation of the Canadian earnings of his Canadian corporation. Which is bizarre.
Canadian citizenship would have protected Dewees from collection by Canada; but never filing US tax returns would have protected him from assessment by the US; which is much better.
The real villain here is Dewees’s idiot lawyer, one Mark Feigenbaum. Do not hire this guy.
That’s what makes me wonder whether US politics might have been involved. Feigenbaum is (or was then) Chair of RO Canada.
I don’t think it’s known whether it was Feigenbaum who advised Dewees to enter OVDP. Dewees may have gone to Feigenbaum later.
Feigenbaum on Pomerantz:
https://www.feigenbaumlaw.com/corporate-tax-planning/current-developments-affecting-foreign-bank-reporting-form-fbar-filing-requirements/
Ah. Very conspiratorial.
Serendipity, rather than conspiracy. An illustrative case (from conservative Republican POV) pops up at the optimum political moment.
Maybe. Merely speculating.
Koch brothers secretly paying his fines? I’d take that deal.
That seems pretty unlikely. 🙂
I’m merely speculating that perhaps when it became clear that Dewees didn’t have a legal leg to stand on, the doomed case was brought anyway, perhaps for political reasons.
I’m not speculating about anything sinister. Just run-of-the-mill political motives for the seeming incompetence.
Interesting:
https://www.cbc.ca/news/politics/tax-canada-u-s-repatriation-fatca-1.4956687
Interesting article from the CBC, but this new bill does nothing to address the big elephant in the room…. the Transition Tax.
I would love to hear from people that are faced with this transition tax and get their thoughts on whether they are going to pay it or are they going to fight it. I do not want to pay it, and I cannot imagine anyone really complying. It’s just too much money.