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
@A J, though they’d probably be fine, you’re right that they should plan ahead. When I first knew of my issues, I believed that my up to then incomplete filing would look worse than not to have been filing at all; now I believe the opposite is potentially more serious. They seem to be taking a much harder line and are becoming more suspicious of Expats claiming they didn’t know they had to file, especially wealthier ones whom they’d expect a proficient accountant should have inforMed.
While someone with unintentional under-reported income (such as from sale of principle residence or P.F.I.C. taxation) could be exposed to a longer statute of limitations, this would normally be six years at most. On the other hand, someone who’s never filed could theoretically be investigated forever.
Up to a few years ago, non-filers were regarded quite leniently because it was a different political climate and also assumed that few would owe any U.S. tax; but with many possibly owing PFIC taxes on mutual funds or even pension funds and sales of real estate, the IRS are taking a stricter stance.
…..They seem to be taking a much harder line and are becoming more suspicious of Expats claiming they didn’t know they had to file, especially wealthier ones whom they’d expect a proficient accountant should have informed……
@ Monalisa ….I am sorry I have no clue where you taking that information from . Generalization is always a tricky argument and I certainly could not disagree more . I hear that they are taking a much harder line against QD`s now especially the ones from the “not so wealthy“ .
@Mike, my apologies, I see your point. I do generalize too much and base some of my statements on my impressions without being able to back it up with facts. I need to stop doing this. Did you hear anything about QD’s or am assuming you’re just trying to prove a point?
I also believe that some of the tax attorneys and accountants use scaremongering to drum up business and where I’ve gotten a lot of my Paranoia from. I am only admittedly adding to this by expressing my worried impressions and thus inadvertently helping them in their unsavory job. *slaps myself* 😛
@monalisa ……. no you are save 🙂 – I was just making a point. Nobody realy knows not even the overpaid practioneers from Caplin&Drysdale and that brings me to my favourite subject : the $20,000 retainer circus a.k.a. scaremongering revenue enhancer
further I still cannot find any evidence so far that the U.S. government has brought any civil lawsuit in federal court to collect assessed FBAR penalties against Minnows.
We know after “Williams I“ that the Tax Court lacks jurisdiction to address FBAR issues at both the assessment stage and collection stage. A federal district court would have jurisdiction over such FBAR case under Title 31. Almost 9 years have elapsed since the enactment of the Jobs Act (2004) and still not one reported decision from a federal court in regards to the validity of non-willful penalty. The lack of cases prosecuting the non-willful penalty seems to indicate the Goverment`s unwillingness to put the Section 5321 penalty to a judicial test.
@Lyoba – The answer partly depends on what your relationship with the US is – if you never plan to cross the border, you can probably safely ignore the whole thing. The situation you don’t want to get into is if you buy a vacation home in Arizona and suddenly become a delinquent taxpayer with assets that can be seized.
@Lyoba, re http://isaacbrocksociety.ca/renunciation/comment-page-6/#comment-216165
I put my reply on the ‘Expatriation as an act of self-defense’ thread http://isaacbrocksociety.ca/2012/02/03/citizenship-renunciations-soar-under-obama-renoucing-u-s-citizenship-as-an-act-of-self-defense/comment-page-2/#comment-216897 because I judged it was too long for here, but in short, I agree with KalC that there are probably many who renounced but never back filed.
We do know that in the past, when the rules for the POST renunciation filing period included the 10 years after renunciation, not many complied after the fact.
As A broken man on a Halifax put it, as long as people avoid US jurisdiction then it shouldn’t be a problem to ignore US policy. However, the US has been known for taking hostages outside of its jurisdiction or murdering people in other nations. Thus, those individuals who ignore US policy might want to avoid nations which are strongly under US influence or targets of US military operations.
I have only just recently discovered the tax/FBAR obligations of being a USC abroad, and have spent the past few days reading as much as I can about the subject. I echo the feelings of extreme stress and frustration that so many people here have already expressed.
I was born in Canada in the 80’s to a USC(Cdn PR) parent (other was Cdn cit by birth). Fast forward to 2009, when in casual conversation with a US CBP officer into the states, I mentioned my American parentage. He stated that I was considered a US citizen, and should be entering the US on a US passport.
Wanting to comply with the rules, and not fully (or at all) researching the obligations that would come with it, I applied for and received my US passport in 2009. I also checked off the box on the passport application to receive a US social security number.
I entered the US on my US passport perhaps a dozen or so times between 2009-2011. (Shopping day trips and short tourism).
Until last week I was unaware of the specific requirements of the IRS. I had heard that Americans were supposed to file, but also believed (incorrectly) that the FEIE was the limit to file, rather than an exclusion of tax.
Suddenly, I find myself trying to figure out what the best course of action is.
I have no idea how the bureaucracy of the US works. I believe I am completely unknown to the IRS. However, the DoS issued me my passport, and has my details (including former address). I don’t know what the communication is between these departments, and if the DoS would ever furnish a list of US passport holders (particularly those recieved from consulates abroad) to the IRS for compliance checks.
None of my banking information has anything to do with my (late) American citizenship. Again however, I do not know what the full ramifications of FATCA will be. A concern I have is that the DoS gives info to the IRS, who in turns starts flooding banks for info.
I really would prefer to be compliant. I committed an expatriating act by taking a position with the federal gov’t last fall, with the intention of relinquishing my citizenship. I have not yet informed the Embassy or filed a DS 4079. This is complicated by the fact that I worked for the Federal gov’t in a different position prior to (and after) applying for my passport. I obviously cannot say I had intent to relinquish from my initial job years ago (since I didn’t even know I was a USC), but I hope that my recent job (with new letter of offer, movement to Ottawa, different security clearance, etc) could be articulated.
Finally, I note new Streamlined filing compliance procedures: I am below the threshold for the FEIE 2555 exclusion every year. I had 3 mutual funds (total value ~18K) that during the 2009-2011 tax period “made” money, around 3K a year. These were phantom gains, just recooping loses from years previous, but if I understand correctly, they would be considered income, correct? I have no idea how much tax would be owed on this income, and if it would bump me above the $1500 “low risk” threshold. Is there a way for me to discover this without committing to an accountant to file back taxes (and potentially paying thousands only to find out I’m over the streamlined?)
I am really at a loss. I do believe in compliance with law, even when I don’t agree with it. However, part of me really wants to lie low, since my place of birth is Canada, and I’ve lived and worked here all my life. My time in the US can be measured in weeks. It is the uncertainty of not knowing all the variables, or the best course of action that is causing me so much stress!
I forgot to mention another concern which I have not seen addressed online yet.
If I relinquished and decided to take my chances on not filing a 8854 (in the hopes that a CNL alone with no previous activity and a Canadian CoB would not attract too much attention), I would be a “covered expatriate” in the eyes of the US.
Do I read the exit tax correctly that Canadian pensions (ie. Federal gov’t pensions) are taxed at 30% on their distribution? How can this be? I could work for the next 30 years, after having spent 3 knowing I was a USC, and have to pay out of my pension?
This is the main reason why the idea of being over the “low risk” threshold of streamlined compliance stresses me out… it seems like this is the alternative (since I don’t want to criminalize myself into the OVDI).
Any other thoughts on the pension aspect / exit tax?
A proper cross border accountant should be able to tell you your exposure without committing to file back taxes. There are good ones and bad ones out there. Caveat emptor. Stay clear of OVDI. The streamlined program might be OK. You need good professional advice on that. My reading of the instructions makes me think you are considered low risk. Once up to date you can renounce. Then you file 8854. You would not have to meet the income or net worth tests because you were born a dual, live and work and pay taxes in canada. In your case, 8854 is easy enough to do yourself. Then you would be home free. Might take about a year and cost about 5K
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This from Geneva Lunch:
Others have simply gone underground, not renewing their passports and not admitting to US citizenship, two people recently told GenevaLunch. One is an American who has been in Switzerland since her university days, when she made too little to declare taxes. Once she began to earn money, she paid Swiss taxes, not realizing util two years ago that the US expected her to file as well. “I’ve never filed US taxes and now it is too complicated to do so, which means I can’t renounce my US citizenship,” she says angrily because of her fear of traveling to the US on a Swiss passport to visit her elderly parents.
Such a common scenario. My own US connection is even more tenuous!
I have been lining up the documentation required for a renunciation but haven’t requested an appointment yet as there are still one or two more items I have to resolve. I was using the list of documents requested of London renunciants in the consulate report directory (page 81) one of which was:
2. Copies of all Certificates of Naturalization or Certificates of Citizenship for any country, including the United States (if applicable).
I will be retaining my Swiss citizenship. Are there any Swiss renunciants who had to provide something other than a copy of their Swiss passport? If so, where did you get this document?
Hi folks, I’m just trying to sort out a tax preparer for dealing with my US tax returns and came across this comment from a company called “Taxes for Expats” while perusing the net:
“You always have the option to give up your U.S. citizenship – by following proper IRS and State Department procedures you can surrender your US citiznenship and therefore cut off your obligation to file U.S. taxes in the future. You must surrender the Citizenship for non-tax avoidance reasons and then can usually only return to the U.S. for no more than 30 days per year for the subsequent ten years.”
Has anyone ever heard of this ten year rule, and what happens after 10 years? I’m just curious as I’ve never come across this comment before.
Medea –
I think that 10-year stuff is superseded by HEART 2008. Ergo, crap web site.
Dig into this: http://usxcanada.wordpress.com/2012/04/01/2012-april-dentino/
See if you can latch onto this somehow: http://usxcanada.wordpress.com/2009/10/01/2009-oct-kwong/
usxcanada, Considering I found it from an advert on the American Citizens Abroad website, that’s not particularly good.
Edelweiss, if you’re Swiss born or a national via your parents, you just need your Swiss passport.
Has anyone seen this article? If it has been posted on IBS somewhere, and I missed it. March 5th, was the day I went fishing and have been catching up ever since. I just posted at http://bit.ly/XGaGnt
Expats Live in Fear of Malevolent Time Machine
By: Michael J. Miller and Ellen S. Brody
On Brock somewhere. Data scatter. Multiplication of postings, proliferation of words. More becomes less. The inverse square bites back – double the size of the file and quadruple the difficulty of retrieval. Several recent cases of “I’ll just post this here because I can’t figure out anything else.” So untidy. The bright side? Surveillors will have a hell of a time making any sense of this accumulating mess. Entropy rules, and the best tool becomes the capacities of your own wetware.
Thanks, Just Me! USCitizenAbroad made a thread for it on March 5th, “Michael Miller Paper on the Exit Tax — Applies Prospectively” so you can catch up on the comments about it there. This article is of vital interest to long ago relinquishers, so thanks for keeping an eye out and making sure we didn’t miss it!
Expatriate – Are you Awake? — Renounce Tyranny NOW!
Well, the deed is done. I was not allowed to relinquish. I was so exceptionally angry, that I renounced. Yesterday cost me $1,200 to do so, because the US lied to me in 1992, when it was convenient for them to deny people citizenship. Now on to tax filings. Can anyone direct me to clear instructions as to what needs to be filed, and the deadline, for a former dual with Canada? I’ve read so much, that I’m lost.
@Mom, why weren’t you allowed to relinquish?
@The Mom,
Your case is one with the most unjustice – having been born in the US (by accident of birthplace) but a Canadian only through and through. This is where you were raised and live and seems you should have no US connection (except for your accidental place of birth). When you say “I swore the oath on Thursday”, what did that involve? As we can again see being born in the US, you were born a dual citizen thus renunciation was the only method of losing US citizenship for you — as UNFAIR / UNJUST as that is.
Being born a dual, you will not be subject to the Exit Tax, if you comply with US tax requirements and submit Form 8854 by June of next year to not be deemed a “Covered Expatriate”. If you want the ability to travel to the US, which you have indicated you do, it seems this is your path to that.
2012 Instructions for Form 8854. For expatriation in 2012, you will have to complete Parts I, IV and V — http://www.irs.gov/pub/irs-pdf/i8854.pdf or http://www.irs.gov/instructions/i8854/ar01.html (easier to follow) / and the Form 8854 — http://www.irs.gov/pub/irs-pdf/f8854.pdf
Can this change for you with what Canada decides to do in view of Peter Hogg’s involvement in our plight, I don’t know. Hopefully, there will be interesting times ahead.
@The Mom –
What expatriating act were you trying to use to relinquish?