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
@ formerpatriot: I have been filing a Form 8965 Health Coverage Exemption Form ever since getting billed for about $US 700 several years ago. Do you think it’s necessary for a married filing singly person’s final filing?
@Duchesse: Good point. I guess I should also file Form 8965. It seems simple enough. Just fill-in Part III and, in column (c), use Code C (Citizens living abroad). Thanks for bringing this up.
@Duchesse: I just checked my wife’s 1040s for the last few years. Here’s what I found:
1. Prior to the year 2014, I do not see anything on Form 1040 regarding a Health care tax.
2. For years 2014, 2015, 2016, 2017, on page 2 of Form 1040, in the section “Other Taxes”, there is Line 61: “Health care: individual responsibility (see instructions)” with a “Full-year coverage” little box that one can check.
3. About points 1 and 2: Duh! The “Affordable Care Act” went into effect on January 1, 2014.
4. For year 2014, I did the 1040 by hand, I checked the “Full-year coverage” box on line 61 and I did not attach Form 8965. I sent the tax return to the IRS via postal mail.
5. For years 2015, 2016 and 2017, I used TaxAct online. I see that the “Full-year coverage” little box is checked but TaxAct did not produce a Form 8965.
6. From IRS Home => Affordable Care Act => Individuals and families => Questions and answers, Question # 12:
“12. Are US citizens and U.S. residents living abroad subject to the individual shared responsibility provision?
Yes. However, U.S. citizens who are physically present in a foreign country or countries for at least 330 full days during any period of 12-consecutive months are exempt from the individual shared responsibility payment for any month in the tax year that is included in that 12-month period. In addition, U.S. citizens who are bona fide residents of a foreign country (or countries) for an uninterrupted period which includes an entire taxable year are exempt for that year. Resident aliens who are citizens or nationals of a foreign country with which the U.S. has an income tax treaty with a nondiscrimination clause, and who are bona fide residents of a foreign country for an uninterrupted period that includes an entire tax year also are exempt. In general, these U.S. citizens and U.S. residents are individuals who qualify for a foreign earned income exclusion under section 911 of the Internal Revenue Code. Individuals may qualify for this exemption even if they cannot use the exclusion for all of their foreign earned income because, for example, they are employees of the United States. See Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, for further information on the foreign earned income exclusion. Individuals who qualify for this exemption should file Form 8965, Health Coverage Exemptions, with their federal income tax returns”.
+++++++++++++++++++++
Why did they send you a bill for $US 700 ?
First time, I guess I did not tick some box. Paid it.
After I filed 2017 return, IRS sent letter to say unless I could attest to substantial absence, payment was due. Note that they did not direct me to the form. I did research, located form, sent it, and never got a bill.
The Health Care Exemption is is the simplest form in the stack, as you point out.
“I guess I should also file Form 8965. It seems simple enough. Just fill-in Part III and, in column (c), use Code C (Citizens living abroad).”
Is Form 8965 a schedule for the return (Form 1040NR) or a schedule for the schedule (Form 1040)? If the former form, column (c) needs a code for non-resident aliens living abroad.
@Duchesse. As usual, the people who try their best to comply are the ones who get hurt the most. Sorry to hear that happened to you.
I eventually realized what a crock it all was plus it was virtually impossible to get everything correct. So I stopped filing totally (in 2012), and have heard nothing from the IRS since.
@ND: My understanding is that a non-resident alien filing 1040NR is not subject to the shared responsibility payment and therefore is not required to file Form 8965. Indeed, there is no “Full-year health care coverage or exempt” box to check on the 1040NR. But since there is such a box on the 1040 (dual return statement), I do check the box and I do file Form 8965. The appropriate code for Column (c) of Part III of the 8965 is Code C.
maz57: My strategy was different; I admire that you did that.
@maz57: One thing I have learned on this forum is that there are many different ways a US citizen living abroad can deal with the IRS. My wife chose full compliance + renunciation. In her case, it was simple. She does not run a business. The kids RESPs were always in my name. She does not own mutual funds. Her main income is salary from her job. She also earns a relatively small amount of interests. Simple.
When she moved to Canada, she stopped filing with the IRS. In early 2015, she filed 19 years worth of tax return. There is no typo here. I did all the forms for her. From year 1995 to year 2013 inclusively. All paper. All sent to the IRS in one big fat envelope. It was all very simple. No tax due. Not a penny paid to lawyers or accountant. Since then she has been filing electronically using TaxAct online. It’s now February 2019. We have not heard from the IRS since 1993.
Waste of time? Waste of paper? Maybe. But we have complete peace of mind (something we did not have during those 19 years of not filing). She has family in the U.S. and we visit them regularly. She will be collecting Social Security in a few years. She will make withdrawals from a 401(k) in a few years. She will inherit money from the U.S. in a few years. Peace of mind is a good thing.
“All sent to the IRS in one big fat envelope.”
That size of envelope is most likely to disappear inside Canada Post. Maybe that mailing never reached the US, let alone the IRS.
@ND: Have some confidence in our great Canadian postal service! 🙂
The package was sent via XpressPost with tracking.
It was delivered.
“@ND: Have some confidence in our great Canadian postal service! ”
I believe he was writing from experience with said postal system.
@Formerpatriot. Sounds as though your wife’s situation is not all that different from mine although I’ve lived in Canada a great deal longer. I too travel regularly to the US to visit family. I now get a small monthly cheque (direct deposit in US dollars, actually) from Social Security even though I didn’t work down there long enough to accrue the number of quarters normally needed to qualify. (The Totalisation Agreement between the two countries is one thing that actually works very well. The good folks at Service Canada offered to set it all up for me and acted as a go between with SSA.) Your wife can absolutely not worry about collecting SS when the time comes.
Because of the direct deposit and occasional mail communications from SSA I think its fair to assume that if the IRS wanted to get in touch they would have no trouble finding me. My “panic package” consisted of only 3 years of returns, all zero owing. Mostly crickets except they did send me a $300 refund check for one year (some kind of Bush tax credit)! It actually cost them money to scare me into filing for a while!
The major difference is your wife’s 401(k). That changes everything. I was so young when I left that my net worth at the time was the clothes on my back, so never any US assets to give the IRS a hook. If I had US assets I don’t think I’d be so cocky and would be far more inclined to go by the book.
Hopefully Norman’s speculation re: overly fat envelopes isn’t the case. There is apparently some way to get transcripts from the IRS to check but I’d say its best to let sleeping dogs lie, lol. As for peace of mind, I always had that in spades because most of that time I had no clue I was supposed to file! Ignorance is bliss. What a crazy system. Good luck; it sounds as if you’ve now got it pretty well nailed down.
“There is apparently some way to get transcripts from the IRS to check”
Form 4506-T can only obtain transcripts for the latest 3 years. It’s too late for FomerPatriot’s wife to use this technique, but the XpressPost report of delivery provides a high degree of confidence.
Regarding delivery reports: I’ve had some registered letters to the IRS disappear without delivery and without returning; in response to my claims at the post office USPS reported to Japan Post that the letters were lost and Japan Post offered compensation (I did not bother). My wife sent a registered letter to the IRS with a return receipt; the return receipt came back uncompleted indicating non-delivery; USPS’s web site reported delivery; a few days later USPS’s web site reported that it wasn’t delivered any more; Japan Post’s web site reported that it was delivered; in response to my wife’s claim at the post office USPS reported to Japan Post that the letter was lost and Japan Post compensated my wife (which she accepted). My sister sent US domestic certified mail to US District Court for the Central District of California in Los Angeles; the return receipt came back to my sister with a signature of a court employee; and later the court ruled that the court had not received the mail and I think the judge lied.
Regarding IRS transcripts, litigation and some other reasons can cause the IRS to dig up transcripts different from those available by Form 4506-T. For example some IRS transcripts say that my original return for 2005 was timely filed but later no longer on file, but some other IRS transcripts omit the filing and subsequent unfiling of the original return. Usually the IRS and courts choose whichever transcripts they need for whichever purpose; for example the original return existed when the IRS penalized me for writing an illegally honest declaration, but the original return did not exist when the IRS still owes me a refund for withholding minus the penalty.
When Russian courts issued two mutually contradictory verdicts against Mikhail Khodorkovsky, the second judge made it clear that he didn’t like the verdict which he was required to read, and the US’s president and secretary of state criticized Russia’s lack of due process. When US courts do the same thing, US judges jump for joy and US politicians don’t give a shit.
1995 to 2013: all sent together in one package via Canada Post XpressPost with tracking in March 2015.
2014: sent on time via Canada Post XpressPost with tracking in April 2015.
2015, 2016, 2017: sent on time electronically (TaxAct).
2018: will be sent this week via Canada Post with tracking.
They can’t ALL be lost.
Regarding XpressPost with tracking, I DO NOT require a signature because I fear that it might actually increase the chance of the letter/package being “misplaced”.
No intention of filing 4506-T.
I would not want the IRS to think “They are worried! They must be hiding something! Let’s look carefully at their tax return!”
@maz57: Speaking of SS… with retirement approaching, I will have to look into that.
My wife does have the 40 credits necessary for SS benefit without having to invoke the totalisation agreement. She will have lived in Canada less than 40 years after the age of 18 when she retires. I do not know how the totalisation agreement will work for her.
I have only 28 credits for SS benefit and I will have over 40 years in Canada after age 18 when I retire. I do not know how the totalisation agreement will work for me.
There is also this WEP thing. The Windfall Elimination Provision. I don’t know what it is and I don’t know if it will affect us.
I am not worried about these issues. I just find it a bit frustrating that it is very difficult to know in advance how much money we will get. Last time I checked, the “My Social Security” web tool was not available for people living outside the USA.
@Former: Because your wife has the required 40 quarters she will receive SS benefits based on how much she paid into the US system. There will be no US tax withheld because under the treaty government pensions are only taxable in the country of actual residence. (Residential taxation but only for government pensions! How ironic is that?) For 401(k) withdrawals I think 15% tax will be withheld at source which she can then claim as a foreign tax credit when she files her Canadian return. No 1040NR required.
She will receive CPP based on how much she paid into the Canadian system. No totalisation needed if she already qualifies but it will top up her time requirement if necessary. I think the way it works with OAS is that she will receive a lower, pro-rated, benefit due to less than 40 years in Canada. (Not exactly sure because it didn’t apply to me but its easy enough to find out.) I don’t think the WEP applies to recipients who live outside of the US. I think its a claw back which applies to high income US retirees, which your wife is not.
For you, totalisation means SSA will count time working and paying into the Canadian system to bring you up to the requisite 40 quarters to qualify for SS benefits but the actual amount of SS benefit will depend on how much you paid into their system. Probably not a lot but every little bit helps. Again no US tax and no WEP. You’ll get CPP based on how much you paid in and receive the full OAS unless you have a high enough income to put you into claw back territory.
You can each get your SS statement by applying for it by mail. For your wife I think there will be an estimate of how much her benefit will be. In my case I did that and after finding I didn’t have enough quarters I just wrote it off. It was only later when I was in a Service Canada office for something else that a very helpful woman behind the counter told me about the Totalisation Agreement and that I might qualify for SS after all. She took my information and I promptly forgot about it until six months later when she called me and told me to be available at a certain time to receive a call from SSA. They soon got me all squared away so I wound up getting US SS essentially by accident. Some parts of the two governments actually play very nicely together.
@ Formerpatriot
“Regarding XpressPost with tracking, I DO NOT require a signature because I fear that it might actually increase the chance of the letter/package being “misplaced”.”
I wonder if that’s what went wrong when I sent my I-407 application down to the USA (as per consulate instructions). There was a request for a signature receipt to be returned to me but it never came back, neither did a stamped and signed I-407 (mailed requests later were ignored too). Anyway I still have a screenshot of the tracker showing the package arrived but that’s all I got for my effort. Many months later I abandoned all hope of having something official to show I no longer had a GC, thus putting me in a sort of limbo for life.
@Formerpatriot. After posting I got curious about the WEP and found this:
https://www.ssa.gov/pubs/EN-05-10045.pdf
My understanding of the WEP was limited because it didn’t apply to my situation.
“There was a request for a signature receipt to be returned to me but it never came back”
I have used this form a lot for registered mail to the US:
https://www.post.japanpost.jp/int/question/18_en.html
A few decades ago I used it 3 times for registered mail to Canada and thought that was bad, and sometimes for registered mail to other countries, but the IRS puts the US in first place.
The closest I can find for Canada is here:
https://www.canadapost.ca/web/en/kb/details.page?article=item_not_delivered&cattype=kb&cat=receiving&subcat=maildelivery
To get Canada’s form to request a search for registered mail under the Universal Postal Union treaty, you might have to go to a post office to get the form, unless your online searches are more successful than mine.
@EmBee:
I guess I am also in a limbo. I was a lawful permanent resident (green card holder) for some years. Not sure exactly how many years. I know the date at which I got my Green Card but I do not remember exactly when it was taken away from me. It was some 25 years ago. I had been back in Canada. We went back to the US for a visit. Upon entering the US, I proudly showed my Green Card to the border agent. He asked me a couple of questions and upon finding out that I had left the US for good, he confiscated my Green Card. At the time I felt foolish. I felt that I should have hidden my Green Card just in case some years down the road I decided to move back to the US. In retrospect, I think it was a blessing that the Green Card was confiscated.
Back then, I had never heard of a sailing permit or a form I-407. Was I a so-called “long-term permanent resident”? Frankly, I do not know and I no longer care to know. The rules are so complicated. It is simpler to choose to believe that I was never a long-term permanent resident.
On the USCIS web site it says
“Use Form I-407 to let us know that you have decided voluntarily to abandon your status as a lawful permanent resident (LPR) of the United States. We will then update your records to show that you are no longer an LPR”.
I have never decided to “voluntarily” abandon my status. A grumpy border agent grabbed it from me and told me I was no longer a permanent resident of the US. Did he just shred the card? Did he fill a form? Is there a record? Frankly, I do not care.
You may be in a limbo but I think it is a pretty safe limbo.
I think there is very little reason for concern with abandoned or seized green cards if an I-407 wasn’t filed. By virtue of non-citizenship, any such person is immune to FATCA and can stay fully out of the US tax system. (Usual caveat about US assets etc. applies.)
Even if the green card wasn’t properly disposed of, it’s probably quiet safe to apply for US social security via the totalization agreement if you worked for a few years.
Agree with Nononymous’ assessment. The Social Security Administration is an extremely large bureaucracy which is conveniently disconnected from both the IRS and the State department. Their mandate (which they take really seriously) is to hand out money after doing a basic determination to make sure you are entitled to it.
I have a high degree of confidence that when the time is right and you show up at Service Canada with your SS record in hand they will help you navigate the systems of both countries to make the treaty work for you. This is one area of government (on both sides of the border) that actually provides good value for the tax dollars we send them.
@ Nononymous & maz57
I don’t qualify for SS and wouldn’t take it anyway. I actually got a letter stating I didn’t qualify for SS. (Service Canada arranged that, even though I didn’t ask them to, when I applied for CPP/OAS.) My CLN’d husband does qualify for SS but hasn’t applied for it yet. I’d rather make do with the little we get from CPP/OAS but I’m sure he will apply for SS, probably this year as he turns 70. They have proven to be so smarmy down there that I feel they would, at the drop of a hat, write new tax legislation making even CLN’d SS recipients into US persons for tax form filing purposes and I don’t want us to sink into the IRS swamp again.