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
@JapanT:
Towards the end of my years living in the US, and with the knowledge that I was definitely moving back to Canada for my career, I thought about becoming a US citizen. My thinking was that unlike the Green Card, the citizenship would be valid forever and might come handy if some day I were to decide to move back to the US, either for work or for retirement. So I started to fill the application forms. But there was this unpleasant fee of 900 dollars and at the time that was a lot of money for me. So I decided not to go through with the idea. I then moved to Canada and for many years I thought “Darn! I should have gotten that citizenship when I had the chance!” Now I realize that not getting that stupid citizenship was the right thing to do.
@Formerpatriot
Yep, very common. Luckily, you were unable to and saved the type of headache we USCs abroad have.
Sadly, most people have yet to learn of the difficulties they will have if they leave the US once they gain USCship or a green card.
The difficulties exist for those who either have assets back in the US (house kept and rented out, 401k, etc.) or who got FATCA’d because of US indicia. The second is relatively easy to deal with – tell the banks you’ve left the US, produce a copy of an I-407 if needed, that stops FATCA reporting.
Yes data security and identity theft yada yada.
If no US assets to seize then the IRS can demand exit taxes until it’s blue in the face but can’t do anything to collect them.
“If no US assets to seize then the IRS can demand exit taxes until it’s blue in the face but can’t do anything to collect them.”
Except for those who live in countries with agreements to collect on behalf of the US…and those whose countries may buckle to pressure from the US as they did insigning FATCA IGAs.
Currently there are only five countries with such agreements and none of them collect against their own citizens. I guess one could be a Brit with a green card who moves to France or the Netherlands and by some bizarro chain events winds up in the IRS cross-hairs, but I’d suggest that is an extremely unlikely scenario.
I seem to remember that somewhere (like possibly the CRA website notes on FATCA?) our own government advises that if you have a green card, you should not identify yourself as a US person if your bank asks the question. Most have probably already figured that out for themselves at this point but you never know.
I think that 8 years is the magic number for possessing a green card. When you hit the 8 year mark you then become subject to the exit tax if you leave; less than 8 years you are not. If you leave before 8 years but don’t file the I-407 that may keep the clock running and put you over the 8 year mark but there’s not much they can do about it. (Assuming no US assets.)
@ Maz57,
I think this CRA info sheet might be the document you’re referring to. Information for individuals holding accounts with Canadian financial institutions.
That statement is really weird. If you hold a green card, by definition you are not a US citizen. Of course, one should never expect clarity from a tax agency (of any country).
Now if you were to apply for a green card after you renounced but before you got your CLN……nah, the best answer is still no if your bank asks “the question”.
What an absolutely baffling piece of prose – whoever wrote it should be hired to explain Brexit. My pragmatic interpretation would be as follows:
1. If you have a green card and live in the US, you are a US person for FATCA purposes.
2. If you still have a green card but moved back to Canada, you are not a US person for FATCA purposes.
In other words, the Canadian government is telling anyone who forgot to file an I-407 that they having nothing to worry about.
There’s a significant difference between the rationale for USC US-tax-residence, and the rationale for LPR US-tax-residence.
The first is based on an immutable characteristic and the second is not. Therefore US citizens can be (and are) presumed guilty unless they can prove their innocence, but non-citizens have to be presumed innocent unless they can be proved guilty.
FATCA and CRS reflect these differences. Both seek to identify accountholders who are tax-resident in another jurisdiction, but CRS questions all (assuming most are innocent) while FATCA targets a clearly-defined, guilty-by-definition minority.
Consequently, the treaty residence test is relevant for the legality of CRS but not relevant for the legality of FATCA; the CRA is just trying to stop LPRs from laying their heads on the block without explaining why they don’t have to.
When was Form I-407 first introduced?
We can find online the first ever Form 1040. It was the year 1913.
But I can’t find the history of the I-407.
All I know about the history of green cards and their disposal is that when my parents (both Canadians with green cards) left the US in the 1960s, they trooped down to a government office to make departure arrangements, including running over to the bank to get a moderately large cheque to pay the IRS. There may not have been an I-407 at the time. I know that the physical cards must not have been seized, because a few years a go my mother infamously declared “oh look I still have my green card” while on the phone with a brokerage employee who was asking about their status in the US half a century before. (We cleaned up that small mess with a letter dictated by me.)
@Nononymous. Thanks Mom, lol.
@Plaxy. Another difference is that ending US tax residency due to US citizenship costs $2350. Ending US tax residency due to a green card is free. For now, anyway.
maz57 – true. But that difference flows from the underlying difference – the LPR can’t easily be detected, while the US-born citizen can. If LPRs had a “tell” of their LPR status on their ID documents, as in many countries USCs have the “tell” of US birth on their ID documents, the price of ending LPR status might rocket from free to $2350 overnight, and many would pay.
A Dutchman went to court recently, trying to change his age. He argued that if it was legal to change gender it should be legal to change age. It made me wonder if it might ever be legal to change birthplace.
Okay, reading some of the comments confuse me even more.
My story: I am compliant through Streamlined and file my yearly FBARs. I will be getting Danish citizenship this summer and will renounce as soon as possible and, hopefully, by the end of the year.
Have heard that I need to file an 8854 and dual 1040/1040NR. I get the 8854, but I have had absolutely no income (not one penny in interest, either) in 2018 and the same will apply in 2019. So, when I am clearly under the filing thresholds, i.e. no income, then why would i need to attach the closing tax returns ? Even my accountant firm (TaxesForExpats) says I have to file them. I read, in other places, that it´s not necessary. Are there any paragraphs that can support these assertations ? I don´t need a $10,000 fine… wouldn´t pay it, anyway.
TaxesForExpats claim that they don´t do stand-alone 8854s, so I´m considering just sending in the 8854 (filling it out to the best of my ability), attaching a statement that I consider myself compliant (even without 2018-19 tax returns due to zilch income), sending my Danish tax returns in for 2018-19 as proof, and sending it by registered mail.
Any ideas ?
Regards,
AKS in Denmark
If I could change my age, I wouldn’t go to court, I’d just do it!
Reminds me of my grandfather who over many years somehow lost count of how old he was. One day he accidentally discovered that he was a year older than he thought. He went out the very next day, quit his job, then went down to the Social Security office to fill out his application.
But seriously, I have heard the birthplace change idea advanced before. Why not? You can already legally change your name. It would sure as hell fix FATCA problems.
Hi AKS.
“I´m considering just sending in the 8854 (filling it out to the best of my ability), attaching a statement that I consider myself compliant (even without 2018-19 tax returns due to zilch income), sending my Danish tax returns in for 2018-19 as proof, and sending it by registered mail.
Any ideas ?
You don’t need to explain to the IRS your reasons for not filing. You’re correct that you aren’t required to file the final returns if you don’t have a filing requirement due to low income. It says so right in the IRS instructions for the 8854. You can just send in the 8854, filled in to the best of your ability. Should be very easy.
maz57 – The gentleman in the court case wanted to be younger, not older. He felt he would have better luck on internet dating sets if he could say he was in his forties rather than his sixties. He could certainly have just lied, and personally I’d be surprised if he hadn’t already experimented with that solution but maybe he was having trouble convincing the objects of his lust and wanted legal documentation that his claim was true.
Creatively changing one’s own birthplace wouldn’t have that credibility problem, of course. Some people (born in ‘Boston’, for instance) may be already ‘passing’ as non-USCs. I hope so.
@AKS, I would just attach a letter explaining that you have no income for those years so fall under the reporting threshold. Simple enough.
@AKS. Plaxy has got it exactly right. One part of the 8854 asks you to certify you are compliant with your US taxes for the last 5 years. You are, so you can certify with no problem. No need to justify. A Danish return would be total gibberish to the IRS, anyway. Don’t confuse them. You can easily do this yourself. You will never hear from the IRS again.
Or, you could file absolutely nothing. The result will be the same. You will never hear from the IRS again. But for God’s sake don’t spend any money on this.
AKS. We were compliant through 4 years of quiet disclosure and 1 year on time. ( no taxes owing, therefore no penalty. Also 5 years of fbars (4 of them late) No penalty.
Reliquished early 2017
For 2017 we filed 8854 but NOT 1040/1040nr. (not enough income to have to bother.)
I wouldn’t attach a letter because a letter is a flag.
We have heard bupkis in the ensuing year and don’t expect to.
“A Dutchman went to court recently, trying to change his age. He argued that if it was legal to change gender it should be legal to change age. It made me wonder if it might ever be legal to change birthplace.”
An insurance company changed my grandfather’s age. He had been brought up in an orphanage. I don’t know who made the first guess about his age, or what method they used for guessing. I don’t know how the insurance company found information about his real birthdate. Assuming he was a child while being brought up in an orphanage, if the birthdate was really wrong by that magnitude it could not have been an innocent mistake.
Courts change birthplaces. If the US wants to deport someone to Mexico and their birthplace was a border town, a court can declare the birth certificate unreliable. A US court, that is. The pot calling the kettle black.
“Have heard that I need to file an 8854 and dual 1040/1040NR. I get the 8854, but I have had absolutely no income (not one penny in interest, either) in 2018 and the same will apply in 2019. So, when I am clearly under the filing thresholds, i.e. no income, then why would i need to attach the closing tax returns ?”
Instructions for Form 1040 say what the threshhold is, below which you don’t have to submit the form unless there’s some other reason. I haven’t checked if Form 1040NR instructions say something similar but it doesn’t matter because of the next observation.
Instructions for Form 8854 say that if you don’t have to submit a return then you only submit a single copy of Form 8854 to the address where you have to submit that copy. You don’t have to submit the other copy which would ordinarily be attached to a return.
However, you should keep documentation including Danish tax documents. If the IRS decides they want to audit you, and your country has a collection agreement with the US, you will have to prove that you acted correctly.
“ If the IRS decides they want to audit you, and your country has a collection agreement with the US, you will have to prove that you acted correctly.”
While I agree that it’s sensible to retain financial records in case needed, getting audited for no reason isn’t something it’s worth worrying about. It would be weird to the point of institutional insanity for the IRS to decide to devote any of their stretched resources to auditing a former citizen who has voluntarily applied to “come into compliance”, doesn’t live in the US, doesn’t (if I understand correctly) have any US-source income or assets, and had no income at all in the last two years of citizenship. While the chances of being selected for random audit are so tiny it would be a shame to waste even a moment’s anxiety on it.