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
Thanks, all. I think we’ve been lucky with our bank here as we really haven’t had any problems to speak of regarding our accounts. Apart from the hiccup when sorting out the mortgage we’ve had none of the letters requesting signatures to release details as others have had.
To be honest I don’t really feel much at all. Which tells me that, deep down, I’ve not considered myself to be Amercian for a long time. Understandable as most of my life has been spent in Britian, but I hadn’t really realised how much my thinking had changed over the years until FATCA reared its head and I started thinking about citizenship and its privileges/responsibilities. The first couple of trips back to the US after I moved to the UK with my parents I felt like I was coming home, but the later more recent visits I am there as a visitor. I feel alien because I don’t fit into the world of my family anymore. They do things differently, their interests are different to mine. The last time I was there I was so appalled and saddened by how run down everything seemed to be it was a real shock, and that was before the economic situation worsened. I dread to think what it’s like in my ex-part of America now.
Kermitzii:
re ….” I have the best family who would never move the the USA.”
Many of us here likewise. I grew up here, and my non-US family would never ever consider living in the US. I was torn because I was afraid that my US relatives would need me, but the US Treasury has forced me to make a choice, and I have chosen.
I wonder how the State Department can approve of US citizens being forced by the IRS and Treasury to renounce US citizenship in order to keep their family intact. Apparently they do – tacitly or otherwise. And, they’ll happily charge us an extortionate fee to do so. The 450. fee was provisional, but it was recently confirmed and made permanent.
@ Medea
Congratulations Medea, glad all went smoothly.
Can I ask you if you can recommend a US tax preparer in Switzerland? We have always used one in the US but she has no expertise in expatriation or 8854’s. Thanks
Sorry Heidi, I can’t as I’ve yet to tackle that end of things. However, someone on the English Forum site here in Switzerland suggested contacting ACA (American Citizens Abroad) as they needed to sort out their tax and ACA put them in touch with someone. So I’m going to drop them an e-mail to see what advice, etc, they could give me for getting things up to date and clear. This is their web address:
http://americansabroad.org/
They’re also fighting hard to get FATCA repealed and the taxation law changed from citizen based to residency based.
Heidi, where are you in Switzerland? There are a few recommendations on the English Forum site, especially if you’re based around Geneva or Zurich so it might be worth looking there. The website’s http://www.englishforum.ch/forums and go into the Finance/Taxation section. It has lots of general info on individual tax problems too.
Sorry Heidi, me again! Here’s a list of the PTAC (Professional Tax Advisory Council) for ACA and it has several people dealing with tax matters listed. You might try contacting some of them for advice.
http://americansabroad.org/about/tax-advisory-panel/
God, I keep literally. Waiting for the embassy to call for my first appointment which will be conducted over the phone…they could call anytime between two and three pm today…fingers crossed that they keep their appointment!!! I worry they’re not even going to call…so much nail biting going on: /
Thanks Medea, am in the Geneva area. We’ll all have to have a Swiss party (like those Canadians) when all this is behind us!
Monalisa1776, any news – good or bad? Did you get your call?
Heidi – sounds like a good idea.
Hi, Medea,
Monalisa was pleased to have had a good phone conversation, as reported on another thread — http://isaacbrocksociety.ca/relinquishment/comment-page-1/#comment-213512.
Thanks for that calgary411. Just went over and had a read. Good news all round then.
@Medea, can I ask what the implications of renouncing are before settling your tax affairs? Or did you relinquish and thus didn’t have to complete the 88 whatever form?
No I renounced Jetlag, but I’ve no idea of what the implications might be from doing so before the tax is sorted out. As far as I know, if you’re not tax compliant it doesn’t make any difference as far as the IRS are concerned as you still have your tax obligation regardless. I assume my details will be passed on to the IRS, but I’m hoping that I can get the necessary tax returns done quickly so that side can be sorted out so I’m finally free.
@ Jetlag,
You don’t have to be tax compliant on the date of renunciation and your tax status has no bearing on the loss of citizenship itself (although loss of citizenship has no bearing on pre-existing tax obligations).
You have until June 15th of the following year to file your 8854 exit tax form, on which, to avoid being a covered expat, you must state that you are in tax compliance for the five previous years. Quite a number of Brockers have renounced and then backfiled. So, if you renounced this year, you’d have until June 2014 to file your previous five years and your 8854.
The consulates rarely mention taxes at renunciation meetings, except to inform you that renunciation will not relieve you of your tax obligations. That’s the extent of their mandate (and generally, of their interest as well, as they have enough on their plate without trying to do another department’s work). In general, a person is not asked about their taxes and it just comes up in the context of the Statement of Understanding of Consequences, Form 4081, where you swear/affirm, in item 10, that you understand that renouncing “… may not exempt me from US tax obligations …”
@jetlag
However if you think you may be a covered expatriate ie have more than $2,000,000 in assets with more than 651,000 in unrealized gains, which may include a tax deferred pension fund, then you should seek a tax professional before renunciation as there are ways to deal with this by dividing your assets with spouse or giving to family to avoid the exit tax.
Hey there,
Has anyone renounced and then not bothered with the tax forms?
Just wondering…
Lyoba. At last. A very insightful and important question. You have indeed hit the nail on the head. For a great many people the question is why bother?
@Lyoba @KalC
I guess if the forms are not filed they probably would not know that you had expatriated, unless they match up the CLNs that they receive from the State Dept. So, you would probably become a non-filer and could potentially be contacted years down the track.
@KalC
Insightful… I hope so (though this question has not yet generated much traffic). Seems to me that much of the posting that goes on at this excellent forum is about and by people who either 1/ are renouncing but have been filing to date, 2/ are renouncing but have every interest in backfiling (US assets, source income, planned inheritances).
My situation: lost the birth lottery, left US when 3, never went back, no close family there, no US assets, no US source income. Have never filed (never knew I had to until a few years ago).
So there is a group 3/, namely people for whom USP status may become troublesome in the future (denial of banking services, FATCA disclosures) but who would like to shed USP status because of the liability that it is becoming. For this group, the cost of becoming tax-compliant is huge and many simply do not have the resources (or don’t want to spend the heard-earned savings on tax preparers, attorneys and bogus fines) to get clear, tax wise.
Is this an over-simplification of the situation?
No . It’s perfectly reasonable and probably applies to a great many people.
Lyoba, I’ve renounced and thus it doesn’t make any sense to file, but since I’m a nice dude, I’ll still file for the period that I was a US person. 🙂 I’d say that it is the US government who is at fault, not the innocent, and compliant folks renouncing.
@SwissPinoy
As you say, no one is at fault apart from US gov’t. But while a $ 450 renunciation fee is probably within the reach of most budgets, the full cost of compliance may not be… Tax compliance may therefore be a luxury that some simply cannot afford…
Lyoba, I think a lot of people have renounced and then not bothered to file. The IRS can penalise you, but if you have no income, assets, etc, there isn’t a lot they can do at present unless you’re foolish enough to travel back to the US, where you’d likely be arrested.
But because of the new FATCA law it’s making that scenario more difficult. FATCA here in Switzerland means that if a bank’s client (me) isn’t tax compliant then the bank could have a 30% withholding tax on income from US financial assets held by the bank applied. They obviously don’t want this to happen so the Swiss banks have basically been dumping their American clients. Of the few that still have/accept Americans you have to sign a waiver to say that they can give your bank details to the IRS, and also that you are tax compliant. If you’re not or refuse to allow them to pass your details on then they will close your account/s. This isn’t something I want to risk so that’s why I’m filing my returns.
The situation is different for different countries, depending on who’s signed agreements and who’s fighting against implementing this US law so it’s worth checking what your country is doing regarding FATCA.
Also, does anyone have an opinion on whether renouncing before becoming tax compliant puts you at an advantage or a disadvantage with the IRS? This is assuming that you will owe back taxes.
TIA
I’d say that puts you at a disadvantage. Chances are they don’t know about you yet. But if you renounce, you’re waking up the proverbial bear, and they are likely going to see you haven’t been filing and come after you. Before getting their attention, I would plan ahead.