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
“Even under Holding’s bill, U.S. citizens living in Canada would still have to pay tax on any income from U.S. sources.”
This journalist needs to stop stirring. Paying US tax on US income is not an injustice.
Punky – this is only my opinion:
I think the US is extremely unlikely to announce an official exemption or threshold for the transition tax.
I also think the US is extremely unlikely to do anything about expat owners of small non-US businesses who don’t pay a retroactive tax on non-existent income that the US wouldn’t have had the taxing rights on even if the earnings had really been distributed.
File nothing further, keep clear of the US for a few years, and don’t worry – that’s my advice FWIW.
Interesting article, but it just shows how difficult it is to explain the nuances of US tax rules in a piece written for general consumption. I read a few of the comments and its obvious that most readers have no clue how the Transition Tax works and why it is such an injustice. (One guy claimed “No worries, it will all be evened out using Canadian foreign tax credits”!) Nothing could be further from the truth.
@Punky. Plaxy just pretty well nailed it. If you send the IRS any more of your money, it will be gone forever just like your first installment and there is no chance of relief because neither government really cares. Even if this situation is eventually resolved, it will take forever and any money stolen from you with this phony tax will never be returned to you.
If you file anything further, you are, in effect, sticking your head up and inviting the IRS to destroy you financially. Those who try to comply with US rules get screwed. Those who ignore those rules live their lives unaffected. Don’t do it. Go “dark”. The IRS can’t touch you here in Canada. Be mentally prepared to never enter the US again but chances are they won’t even notice you’ve gone missing.
maz57:
“Those who try to comply with US rules get screwed. Those who ignore those rules live their lives unaffected.”
Yep. It’s only those who try to comply with US tax laws while living in a different country, who (sometimes) get damaged.
I left the US long ago, never filed, never even heard of such a thing. And evidently the same was true for most who left before the 80s and the Reagan tax reforms.
When corporation tax was changed, so that tax on foreign income was deferred until repatriated – that’s when the trouble started. That’s when Subpart F, and the Controlled Foreign Corporation, and Form 5471, entered the picture, turning US expats into instruments of US tax policy. And that’s when that tiny little note crept into the US passport, mentioning that US citizens always were supposed to report their worldwide income to the IRS, wherever they lived. Because Subpart F plus CBT plus 5471 is how they could keep hold of those tax-deferred corporation earnings.
Gradually, after that note popped up in the passport, word spread about CBT. More and more expats just assumed that the IRS could and would destroy them if they didn’t do as they were told and report their non-US income for US taxation – even though the US couldn’t actually tax it, if it was fully taxed by the residence country. Totally unnecessary misery for a lot of people who were simply trying to comply with US law. And serious damage to some.
That’s my take on it.
It’s to be hoped that word will spread that it’s better for those with no US income or US assets or other US financial connections to renounce or ignore, rather than to comply.
“Yep. It’s only those who try to comply with US tax laws while living in a different country, who (sometimes) get damaged.”
Why must you keep making such incorrect statements? Can’t you say something along the lines of ‘Yep. It’s only those who try to comply with US tax laws while living in a different country, who (sometimes) get forced to make payments.’?
Plenty of other types of damage not directly related to paying money to the US, which you continue to ignore.
Time for an oldie but goodie for those who have joined us recently.
fhttps://youtu.be/zekiZYSVdeQ
Nothing to do with not being seen. I was by no means invisible to the US during my decades of living in the UK while holding US citizenship.
The IRS isn’t seeking out non-US-resident individuals with US citizenship to try to impose US taxation on them. There is no radar.
“The IRS isn’t seeking out non-US-resident individuals with US citizenship to try to impose US taxation on them. There is no radar.”
No need to seek out what is reported by our FIs.
The banks certainly do have good reason to be scared of the IRS. And may not want USCs as customers. And that’s unfair to expats and can cause bank access problems.
But as far as CBT goes, the account-reporting is an example of what I’m saying: the only information that’s relevant or useful to the IRS is information about the accounts of those who have filed US tax returns.
“the only information that’s relevant or useful to the IRS is information about the accounts of those who have filed US tax returns.”
Priblem is, that it will not be only the IRS that gains access to the info shared with the IRS. A lot of info that may not be useful to the IRS IS useful to other equally unsavory characters and worse.
AEOI is an outrageous breach of the rights of law-abiding citizens. Let’s hope one or more of the three legal actions – against IGA1 (in Canada and in the EU), and against CRS (in the EU), will be successful and may initiate wider global resistance.
Let us hope.
Just reading on ISC web site about this new Bill being put to Congress on trying to change from CBT to one closer to Residence based taxation. I have an appointmen to renounce next month and wondering if its necessary now after this or does anyone think this will never go anywhere? My questions would be 1. Would one still have to file US returns ( I do now) 2. Would you still have to file FABAR? or wold this bill if it pases make no difference?
From what I’ve read about the bill, it seems you wouldn’t have to file returns (if you’ve been doing so thus far). There would be some form of self-certification that you were an overseas citizen. Looks like FBARs would still apply, as would the transition tax etc.
More importantly, depending on how you read the wording, you’d still be liable for tax on capital gains of any assets you acquired, even abroad, which accrued before you switched over to the new system. That means, for example, your primary residence and things like unit trusts (the PFIC system looks like it’ll still be in place).
I wish the bill well, but I’m still glad I renounced in September. Particularly as this bill doesn’t touch FATCA.
@Kabby
My take on the bill is at http://fixthetaxtreaty.org/2018/12/21/tax-fairness-for-americans-abroad-act/
Don’t hold your breath… this will probably take a while to be passed, and there will be amendments. FBAR is not changed in this bill, and you would have to file annual elections to be treated as nonresident. FATCA is not changed either.
If I were good at predicting, I would have tax bills big enough to pay off the national debts of several large countries (and have enough profits remaining to myself to buy up some abusive corporations and close them down).
My prediction is that some watered down version will get passed to pay lip service to the problem, but in reality it will add further to the harms presently imposed.
@Kabby. My take? Hope the Consulate staff are deemed essential services so they don’t shut down like the rest of the government. Don’t miss your appointment.
“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.”
I still agree, but I think it might be worth making one exception.
First a general rule which Punky probably can’t do. Write “PROTECTIVE RETURN” at the top of Form 1040, complete the return the way you think it ought to be (in this case, without the Sec. 965 fictional income), and submit it. I’m not sure what the deadline is for submitting an ordinary return after that. If the law changes and validates the claims in your protective return, you have timely made your claim for refund.
Punky already submitted a return with a self-assessment of Sec. 965 fictional income. However, an amended return (Form 1040X) can make a claim for refund, if submitted timely. You would want to complete the list of changed items (i.e. change the Sec. 965 fictional income to $0.00), compute what you think the tax should have been, declare the amount you actually paid, and compute the refund that you think is owing.
The thing I’m not sure about is that I have never heard of writing “PROTECTIVE AMENDED RETURN” at the top of Form 1040X. But if you’re brave, and if you hope for a refund, do it. If the law changes, you have a timely submission of claim for refund.
If you don’t submit a claim now, if you wait for the law to change, it might be too late to submit a refund claim.
This likely doesn’t affect your ability to “go dark” in subsequent years.
@Maz, I’ve heard from an Australian who renounced today (Thursday 3 Jan), so at least the consulates in Australia don’t appear to be affected by the shutdown.
@Punky – Norman has made a lifetime hobby of engaging with the IRS. Unless you share the same curious interest, I would advise you to simply go dark, not play silly games.
@N.D.
“My prediction is that some watered down version will get passed to pay lip service to the problem, but in reality it will add further to the harms presently imposed.”
Maybe like the old joke? “I’m from the government. I’m here to help.”
Will it get re-introduced – that’s the first question.
My guess is no.
Does it matter – that’s the second question.
Renounce, comply-to-renounce, ignore, file or file minimally. An assortment of tried-and-true options, for expats concerned about US taxation.
The FATCA IGAs are a different kettle of fish.
Indeed, Holding’s bill is pretty much an endorsement of minimalist filing.
From ACA’s write-up:
It’s great that a bill’s been introduced which acknowledges that there’s no need for an expat to report non-US income to the IRS. Now people who favour that option, can just carry on doing it.
“It’s great that a bill’s been introduced which acknowledges that there’s no need for an expat to report non-US income to the IRS. Now people who favour that option, can just carry on doing it.”
Except that it requires three years compliance and filing to qualify.
Expat USCs who want to file minimalist returns can do so right now, without having to “qualify” for anything. Many are doing exactly that, judging from threads on certain expat forums.
It is an option which suits some, but not all.