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. A couple of notes:
1. Even if for some reason down the line your son decides to report the TFSA or the RRSP, he can just report the account. There is no need to tell the IRS what is owned inside them. As for a TFSA being a trust requiring all the complicated reporting, the condors say that, but not the IRS. To date, the IRS has not issued any guidance on them whatsoever. Because they are always under the care and control of the owner (vs. held by an institution “in trust”) arguably they can’t possibly be trusts according to the IRS’ own definition of a trust. I believe RRSPs are exempted from the fancy reporting according to IRS guidelines.
2. FBARs are not even a part of the Form 8854 exit tax rigamarole so no issue there. (You certify tax compliance, not FBAR filing.)
@FP
Your son can renounce without filing at all, or just a simple 8854 that says next to nothing. Certainly no reason to be compliant otherwise, and therefore no reason not to take advantage of TFSAs or RRSPs. If he’s going to stay off the radar, it’s not a problem. He will of course not disclose US citizenship to his bank, I assume?
The only risk I can foresee, which he should be aware of, is that if he decides to move south in 10 years’ time, those investments might be a challenge to deal with when he begins filing US taxes. And I wouldn’t recommend hiding them as a good long-term strategy.
I must say though, an 18-year-old with money and an interest is saving or investing it is completely alien to anything in my life experience. Borderline perverse. Certainly not a gene I possessed or passed on.
@nononymous
For the record, I agree with everything you said.
“I must say though, an 18-year-old with money and an interest is saving or investing it is completely alien to anything in my life experience.”
Now that’s funny! When I was 18 my only interest was finding someone who was willing to cash a pay cheque, if I had one. Once cashed, the money didn’t last long. I don’t think I even had a bank account at the time. For obvious reasons, the IRS is not very interested in people that age.
Good old days…
At 18, I was either drinking beer or studying calculus and physics.
TFSA did not exist and I sure did not know what an RRSP was…
@formerpatriot.
Yes, good old days in the UK.
At 18 I was a student in London. University education was free but I was relying on a gov grant to pay my rent and cost of living expenses .
All I knew of the US was through movies and news of the ‘far off’ Vietnam war. America was a foreign country to me and still seems that way even after living and working there for 30 years!
I would think your son should keep his options open at least for the time being. At least he is cognisant of the pitfalls.
@ Heidi andFP: What you said, Heidi. Being 18 is all about keeping options open. Rule of thumb: avoid any irrevocable choice.
The Depression was never far from my American parents’ minds, so they tried to instil values about job security, avoiding any kind of debt etc. But I was a child of the times, as are anyone’s today. I try to remember this when I talk to my children.
@Formerpatriot
It’s good that you’re coming up with a list of pros and cons for your son to consider. One thing no one else seems to have mentioned is the possibility that the US goes to war and the draft kicks in. Hopefully, it won’t get to that point but he would no longer be able to renounce to avoid conscription if it does.
As for living under the radar, that’s going to become increasingly difficult and I believe soon impossible. The latest example is that facial recognition will be deployed at the top 20 US airports by 2021 for ALL international passengers, including Americans. The Concept of Operations document includes some discussion of “a data exchange” with Canada.
https://forbes.com/sites/kateoflahertyuk/2019/03/11/facial-recognition-to-be-deployed-at-top-20-us-airports-should-you-be-concerned/#703c39ef7c82
https://www.buzzfeednews.com/article/daveyalba/these-documents-reveal-the-governments-detailed-plan-for
I would not be at all surprised if the above rolls out to all airports eventually, both in the US and abroad.
The only thing George Orwell got wrong was the timing 🙁
The easiest way for a dual citizen to avoid conscription would be returning to Canada. Renouncing isn’t really necessary.
@Shovel wrote on Feb. 22:
“When it was published I didn’t see this article mentioned on Brock.”
https://thewalrus.ca/no-job-no-car-no-bank-account-what-its-like-to-be-stateless-in-canada/
I was struck by the story of a stateless young Canadian resident without papers when I read it. Why? Because back in the 1960s and well into the 1970s anyone could get a SIN on application. And a driving licence by taking the theory and road test. I was a college student in New England and I did that.
I founded a small Canadian company as a little sister to a relative’s U.S. company. The U.S. firm folded in the 1980s but I kept the Canadian one alive and remained its administrator and kept a letterbox service in Canada. For all intents and purposes I was a border commuter, but without authorisation and nobody ever asked: I went to Canada once a month and dropped off stuff we’d sold at the Post Office.
I have never lived in Canada. I go about once every year or two. But I filed tax returns (personal and company until age 65, but since then only company).
And I get a small CPP pension based on salary and administrator fees I declared over the years.
Yet I never had any immigration status and of course today could get neither a SIN card nor a driver licence otherwise than by declaring NAFTA status or getting a visa otherwise. And every few years I am summoned to take a medical exam to keep the licence. Which I do, although it’s really of little practical or legal use: it’s just proof that I exist and that one day, when I was 18, I took the theory and road test on a whim. (Actually it was my second attempt: the first time they tore up the permission slip because it was signed by my Mom and not my Dad. I emailed the DMV some time back to ask if they have since discovered gender equality and they averred that they had: my Mom could sign it today if she were still alive. But of course today the age of majority is 18, not 21.)
The company has a bank account. The only badge of American-ness on the record is a VoIP telephone number with a U.S. area code. The bank hasn’t noticed. I sold 92% of the shares of the company to non-U.S.-citizen or -resident family members a couple of years ago. The company has never made a profit: all its revenue has always been paid out as salaries. So no Transition Tax and no GILTI. Even if i hadn’t got rid of most of the shares so that after 40+ years I could stop filing 5471s and FBARs.
I don’t live in North America. But I visited Canada a couple of years ago (for my DL medical) and was hanging around the border to use the public library’s free WIFI (the library was closed). A militarised U.S. border cop got testy with me: but he was on the U.S. side of the white line and I wasn’t. When my B&B was scheduled to open its doors I got into my rental car and drove over. And suddenly a RCMP car was behind me. Guy stopped me in the B&B driveway for “interrogation”. I have a bunch of valid driving licences for countries in which I’ve lived and he picked up the top one, a pictorial Florida one, and my 2 passports. Went back into his car and played with his computer. Came back and said, “Don’t you have a Canadian driving licence too?” Which I then gave him. 5 more minutes on the computer and he seems to have realised that there aren’t many terrorists in their mid- to late-70s, gave me back my papers and took off.
I thought perhaps the rental car company database had told him of my Canadian licence but they said no: so it must have been name and DOB. He never asked for my car rental contract.
BTW that was on or about 3 December 2016. The next day I was in Montreal; I arrived early and returned the rental car. Good thing too: https://www.cbc.ca/news/canada/montreal/montreal-beaver-hall-snow-slippery-1.3881744 (I had, unusually for me, paid for CDW which would have come in handy if…)
I just got a letter from my bank. Tax Residency Self-Certification for INDIVIDUALS. It wants to know my tax residency.
B1 Are you required to file a tax return in the U.S.?
-Yes. Provide your U.S. Social Security Number.
-No.
C1 Are you required to file a tax return in any country other than the U.S. or Canada?
I was born in the U.S. to Canadian parents, so have U.S. indicia. I am currently a European tax resident so I will answer “yes” to C1.
Should I lie and answer “no” to B1?
I haven’t renounced yet. Still on the fence/gathering the required funds. But it seems to me there is no other way out?
@Fillinchen
Are you in Canada? I’m inferring that you are from the question, but please correct me if I’m wrong.
Why would the bank have any US indicia – did you once have a US address or phone number on file? Normally Canadian banks don’t record citizenship or place of birth.
It’s quite safe to say no to question B unless for some reason the bank already knows that you’re a US person.
Your situation sounds much like mine. I currently have no compelling need to renounce, since lying to the bank takes care of the FATCA problem and there are no consequences to US tax non-compliance.
@fillinchen
I believe that the banks ask these questions because they are required by law to ask these questions. They probably prefer that you answer “No” to the questions pertaining to US citizenship and US tax obligations because if you answer “Yes” it’s more work for them.
Fear of being “caught” not telling the truth? Well, if some day down the road someone from the bank says “Wait a minute, you are an American citizen! You lied on this form!” you can always say “I am in the process of renouncing my US citizenship” or “When I filled that form I really thought that I was going to renounce my US citizenship”. But the banks are probably very annoyed with all that FATCA stuff and they probably prefer that you say “No”.
@Nonomynous
@ formerpatriot
Thanks for your answers.
I am a Canadian citizen but currently a European tax resident. The U.S. indicium is my U.S. place of birth. I assumed they would have it, but I actually don’t know. Maybe I’m wrong. I’ve lied on enough forms now, don’t know how much longer I can take this.
A Canadian bank would almost certainly *not* have your place of birth recorded, as that was never part of the data set associated with accounts (though for safety’s sake always use a drivers license instead of a passport for ID when dealing with financial institutions). In that case it’s likely just the general CRS/FATCA question they ask of anyone opening a new account, and which they may periodically send out to current account-holders as part of their general compliance efforts.
In other words, nothing to be alarmed about, go ahead and answer “no” to question B, and answer correctly “yes” for question C. The lying gets easier with time, has been my experience.
If you have European bank accounts, that may actually present more risk to you, so be careful. I have an ING account in Germany that I opened using a Canadian passport with US birthplace, but fortunately I did this prior to the FATCA rules coming into effect in 2014, and I appear to have gotten away with it. I’m sure if I tried to open an account today I’d have to deal with the US citizenship problem.
On British passports, only the city of place of birth is listed. I was born in California, so the city of my place of birth has a Spanish name (and isn’t one of the well known ones like LA or SF). I have heard of someone born in Georgia, USA who only had ‘Georgia’ on his non US passport so could claim it was the country of Georgia.
I don’t consider it lying. I don’t consider US laws as applying outside of US borders, whether that be the side of the road on which I drive or US taxes.
The description of the form resembles something that I think a Canadian bank was supposed to mail to me. I think they mailed it more-or-less to every customer who resides outside of Canada. Question C1 surely relates to the residence address and I can’t imagine how a truthful answer could hurt anyone.
Question B1 is there because the two questions are combined into one letter. Obviously a truthful answer could hurt. We haven’t seen any reports of anyone getting hurt by giving a false answer to this question, when the bank is in Canada. I answered truthfully because I renounced and my answer is no.
In my case though, I found the questions on the bank’s web site, when the bank wrote a letter castigating me for not having answered at all. The letter was so badly misaddressed that it really shouldn’t have reached me. I have to guess that there was an earlier letter asking these questions, and it was so badly misaddressed that it didn’t reach me.
“(and isn’t one of the well known ones like LA or SF)”
https://www.geodatos.net/en/homonymous-cities/los-angeles
https://www.geodatos.net/en/homonymous-cities/san-francisco
@BirdPerson – city only, what luck 🙂
@Nononymous – the water seems to be getting hotter in Europe. I think it’s only a matter of time until I will be forced either to comply or renounce.
@Norman Diamond – I hope you are right!
If you try to comply, you will end up renouncing.
@BirdPerson – Yes I kind of figured 🙁
I’ve renounced without filing a single tax return, and I won’t be filing any. It is a valid choice, so long as you don’t have any assets or income in the USA>
Fillinchen –
Are you resident in Canada but also tax-resident in a European country, or are you Canadian citizen resident in Europe? (In other words, where do you live and where to you file taxes?) Your comments left it a bit ambiguous, and Norman’s response has different implications depending on your exact situation.
Also, when you say your choices are comply or renounce, don’t forget there’s a middle ground: be identified as a US person by your bank (easily avoidable in Canada, less avoidable in Europe if born in the US) so that there is FATCA reporting, but remain non-compliant with US tax and reporting requirements. Obviously it’s preferable to stay completely off the radar by sidestepping FATCA, but I suspect no harm will come to anyone who’s reported on but non-compliant. The IRS won’t go looking for you unless it sees eight-figure balances in your FATCA data (seven figures isn’t what it used to be).
BirdPerson wrote:
“If you try to comply, you will end up renouncing.”.
That is a bit of an exaggeration. There are a lot of US citizen permanently living abroad (i.e. outside the USA) who have chosen to comply and who, for various reasons, have not renounced and do not plan to renounce.
It’s a valid choice even if you do have US income, as long as the correct amount of US tax is being withheld by the US payer.