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
If US renunciations continue at the same rate, my calculations put them at 4x the rate of Canada’s renunciations.
…and I have to add that it takes into consideration that the US has 9x the population of Canada’s.
Wondering –
Calgary 411 has just provided the clincher open loop supplement to the story. It’s all well and good to feel that Canada right now will not enforce against a noncomplier backdated CLN. Fine and dandy. – § – That means the US-Canada border has potential to become a new Iron Curtain, with virtual sign overhead for noncompliers: All Hope Abandon, Ye Who Enter Here. Then you can sing on about how “freedom’s just another border for fools to try to cross.” (1) First variable: what is the schedule for the US to install corridors between its silos (notably State and Treasury) and begin consistent enforcing? Remember their recent study on use of passport (even place-of-birth data in foreign passport?) for enforcement purposes. (2) Second variable: Hodgen’s future gunk in the open loop. (3) Third variable: New agreements of and positions taken by comprador Canada. [Hodgen: What works now might not work in future.] – § – As to the “free entry” of Petros. (a) He may enjoy a rare too-big-to-fail status. (b) It could be happy accident for this time only. (c) The US demon may just want to mess around with the expectations in your head. (d) Maybe the gotcha silo connection goes live tomorrow.
Backdated CLN + No closure on tax paperwork = Perpetual uncertainty
Do the math. Sauve qui peut.
@ usxcanada
Until this goes to court or the IRS issues a definitive statement, there will be a big question mark. However, I refer everyone back to Michael Miller’s paper noted at Brock
http://isaacbrocksociety.ca/tag/michael-miller-exit-tax/
My paternal grandmother left me an inheritance, but specified that I would not receive it until age 25, and only if I did not marry a Catholic. At family gatherings, a lawyer brother-in-law told me and my parents not to worry about it, as it would never stand up in court.
Being young, and naive, with no thought of any negative repercussions, I married my live in boyfriend before age 25 on pressure from my mother who was aghast that we were not legally married. My husband’s mother was Catholic, but for the most part he did not participate in the Catholic church, and even regularly attended a non-catholic church. However his last name was French (my grandmother did not like French people either), and when my aunt (an executor) heard my husband’s last name immediately assumed he must also be Catholic, so took me to court.
Although, my lawyer brother in law was right, and we won the court case with the official settlement coincidentally falling on my 21st birthday, most of the inheritance was spent on legal fees and executor cuts.
I guess what I am saying is, honesty is not always the best policy, and it is best to avoid courts if you can.
@WhiteKat, I enjoy being honest but have often found that it has caused many problems. Sometimes, it is best for others to remain silent or keep secrets. Many people have a hard time dealing with the truth.
Here’s the latest news (nothing new):
Rise in Swiss binationals giving up US citizenship
http://www.gulf-times.com/opinion/189/details/363634/rise-in–swiss-binationals-giving-up-us-citizenship
We need to keep all aspects of the possible consequences (the big question mark) in mind in making our individual decisions.
One thing that’s exceedingly clear: Expats live in fear — and that’s, as in other US ways (like the fight against terrorism and one war after another), just what the US Congress plan is for us — save a few brave souls. How dare we move from the homeland?
I can’t find it now, but a few weeks ago somebody posted a link to a letter written by an IRS or Treasury official. In it he explained a loophole where people would take on other citizenship and stop filing US taxes but continue to use benefits of US citizenship (passports, etc). Then decades later they would apply for a back-dated CLN and not pay current taxes. The IRS closed this loophole by setting their date to the date you notify the DoS of you relinquishment, not the old date of the act.
Of course, this presumes everyone is is guilty of abuse, makes no provision for people who clearly did not renew passports, etc. Also, who knew 30 and 40 years ago that a CLN would be needed for any reason?
The letter was at least 10 years old, and read as if the IRS dating was being suggested (not in practice yet). It also contained what looked to me like the suggestion of the exit tax.
@Hazy makes a great point. As Michael Miller’s paper describes, it would take an absurd interpretation of the law for people who relinquished prior to 2008 (or certainly 2004), and subsequently got a CLN (most because FATCA came along and they need it to preserve banking relationships or to facilitate border crossings), to now be retroactively be scooped up in a tax net. As Miller notes, how far does the IRS want to go back? 1910? DO they want to dig up and resettle old estates? While the language in the 2008 is apparently unclear, it certainly makes no mention of undoing prior legislation (i.e. 2004) and it would be indefensible if it tried. Miller’s paper is worth a re-read by all:
http://www.robertsandholland.com/siteFiles/News/03-05-13_Expats%20Live%20in%20Fear_MJM.pdf
On a happy note – we just found out that our Australian citizenship ceremony is next week – we’re thrilled 🙂
(Cue “Advance Australia Fair” in the background)
If I’m understanding people here correctly the date of relinquishment is only when the state department decided to give us a CLN? I would think it should be the actual date of committing the expatriating act.
Or is there a difference between the DOS date and the IRS date?…
@shunrata, as I understand it, the IRS date is the actual date of committing the expatriating act, but only if 8854 was filed. According to Hodges, the CLN date is the actual date of committing the expatriating act.
@shunrata, no, whether you relinquish or renounce, the date that you actually did the act is the date that will be on your CLN. That’s why many people here with backdated CLN’s don’t have any requirements to file tax returns. They may have only applied for a CLN in the last couple of years, but did the actual act many, many years before their application. So if a naturalised Canadian citizen only applied for a CLN in 2012, say for their expatriating citizenship act in 1972, the date on the CLN will be 1972.
Thanks for the clarification, I think the tax blog confused me on that. Not that that’s hard to do, these days…
@shunrata,
I received my CLN in 2013. The expatriating act was ‘committed’ in 1972. My CLN states that ‘said,, expatriated herself in 1972’. However the date on the CLN under the seal, is the date in 2013 when I attended my 2nd meeting at the consulate. I believe what Mr Hodgen means by his post, is that the IRS will use the 2013 date for tax obligations.
However, as has been posted by Michael Miller and others, it is unlikely they will act on expatriations prior to 2004.
Only time will tell!
This Editor of Yahoo Finance looking to talk to Americans who are giving up U.S. Citizenship
https://twitter.com/timsprinkle/status/372042359883575296
@Tiger
In reviewing Mr. Hodgen’s post a few times, it seems to me that he is confining his comments to the law as it is presently constructed and not making any real comments about situations such as yours. In other words he seems to be discussing the renunciation/relinquishment options and situation as if it is being considered NOW, not decades ago like 1972. I think Michael Miller is correct to assert as you say “it is unlikely they will act on expatriations prior to 2004.”
Actually, when I look at Millers article, it looks to me more like he is saying it is unlikely the IRS would be able act on expatriations prior to 2004 and have it stick. On top of that, in a case such as yours, there is the additional barrier to such action by the fact that you expatriated before 1994 and thus have/had no obligations to report your expatriation (http://isaacbrocksociety.ca/2011/12/16/did-you-relinquish-before-february-6-1995-then-you-did-not-have-to-inform-the-state-department/).
Finally, when I went back and checked Hodgen’s post again, I see there is a new comment from Michael Miller informing Hodgen that for expatriations prior to June 3, 2004, Section 877A does not apply. Hodgen seems to acknowledge that, in the subsequent comment and thanks Miller for the information.
In light of all that, I don’t think you really need to wait for ‘Only time to tell’. While nothing is really guaranteed in life, it looks like a mighty strong bet to me.
I posted this in another thread, but I meant to post it here:
How does a person who gets a back-dated CLN prove to anybody (such as a boarder guard) that he is done with the IRS? For that matter, how does anybody, even a tax-compiant person who renounces, files the 8854, the whole 9 yards?
Your hypothetical person doesn’t have to prove to anybody that he is ‘done with the IRS.
@WhatAmI, as KalC says you don’t have to prove that to anyone at present. All a border guard needs is to see a copy of your CLN to prove you’re no longer American. He has no right to question you about your tax status, it’s none of his business!
There are vague proposals to make re-entering the States conditional on being tax compliant, but I think it would cause too much chaos and be so unwieldy that it would be unworkable. As you say, how can you prove you’re tax compliant? Unless the IRS can provide an almost instanteous decision that someone’s compliant straight after they’ve filed and issue them with a document saying so it would simply be impossible to tie it in to re-entry as far as I can see. Of course, if they decide to use the Reed Amendment and ban all ex-citizens, the point is mute anyway. Don’t worry about it, it’s not going to happen in our lifetimes.
Thanks Medea & KalC; I’ll go back to worrying about how to get a CLN back-dated to 1974.
So if I expatriate in 2013 and only get a CLN dated sometime in 2014 I have to file taxes for 2014?
The pre-2004 rulings obviously don’t apply here.
@shunrata
If you renounce in 2013 your CLN will be dated in 2013, i.e. the day of your consulate appointment. You will have to file taxes up until the day of your renunciation as a US citizen, e.g. Form 1040. Form 8854 and FBARs also apply to 2013 only.
If you have no US source income, that’s it, you’re done. If you do have US source income you will have to continue to file as a non-resident alien beginning with the day of your renunciation, e.g. Form 1040-NR. IMHO, it’s best to sever all financial ties with the USA if possible!
Just Me says
August 26, 2013 at 10:18 pm
This Editor of Yahoo Finance looking to talk to Americans who are giving up U.S. Citizenship
https://twitter.com/timsprinkle/status/372042359883575296
@notamused
As I am relinquishing not renouncing I would think it will be the date of the relinquishing act (that makes sense to me but since when are these things logical?).
As such I am ‘merely’ informing the US govt of an action which was taken in order to be provided with a CLN. I’m hoping that they won’t be too difficult about it…..
Did I read somewhere that it’s a myth that you can’t renounce (or in my wife’s case, relinquish) your US tax cancer without making tax peace with the IRS bully first? Aren’t the INS and IRS two different departments? If so, I’d do this in a heartbeat….well right after I withdraw my IRAs at a 30% withholding first.