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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

 

10,433 thoughts on “Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part Two”

  1. @Carrida

    Thanks for reminding me of Ambassador Jacobson’s advice that we should “sit tight”. Definitely conflicts with what IRS Commissioner Shulman was telling hundreds of thousands of us at the time about OVDI, when he said that “the situation will just get worse in the months ahead for those hiding assets and income offshore. This new disclosure initiative is the last, best chance for people to get back into the system.”

    Had the ambassador’s words not come a few days late of our having to commit to entering OVDI, I too would be “sitting tight” right now waiting to see what happens.

    What person in their right mind WOULDN’T be confused about what to do with all of the conflicting messages coming out of these jokers?

  2. @Carrida
    Posted previously but maybe worth repeating in view of your concerns…

    These are widely accepted as facts:
    No foreign state – including the US – can collect taxes in Canada. Only the Government of Canada can collect taxes from Canadians in Canada.
    No foreign state – including the US – can place liens, seize assets or garnishee wages in Canada.
    Canadian courts will not enforce a foreign tax claim against Canadian citizens in Canada.
    Only the Canadian Government can assist foreign governments in collecting taxes in Canada, provided there is tax treaty.
    Under the Canada-US tax treaty, the government of Canada will not collect US taxes from any Canadian citizen, unless the tax claim predated their date of citizenship. Because collection of US taxes from Canadian citizens is prohibited by the Tax Treaty, it is very unlikely a Canadian court would do otherwise.

    A modest suggestion:
    Do nothing rash. Do not liquidate your assets, mess with your kid’s RESP, etc.
    Has ANYONE from the US government sent you a personalized collection letter?
    This is campaign of fear. There is lot of noise and smoke and fog. The first and best move is to not be provoked into rash action.

    If your bank asks “are you a US person?” tell them you are a Canadian. Tell them their question is confusing, since you are a Canadian living in Canada. If they persist ask them if they are inquiring about your national origin for the purpose of unlawful discrimination. Ask them if they also want to know your religion. Tell them to ask you if you are also a Chinese or Italian person. Threaten to lawyer up. If this outrageous invasion of privacy and violation of the Charter comes to actually comes to pass, there will probably be class action lawsuits you can join in.

    Things to do: complain relentlessly to your MP and Finance Minister Jim Flaherty. CC the NDP, especially Murray Rankin and Peggy Nash. And the Liberals, especially Ted Hsu, Irwin Colter and Scott Brison. CC the Canadian Civil Liberties Union. Write a letter to the editor. Call a reporter.

  3. What scares me is that that it sounds as if the banks in Belgium and Switzerland (and who knows where next) are becoming unofficial agents of the IRS. if they can block accounts until one can prove he or she is US tax compliant.

  4. Carrida, I hope you are still here and listen to Skeptical’s advice. We are all behind you. Every step in the “Things To Do” will help you know you are fighting this in the best way possible. We are all scattered around the world; we need to be together as a big force to fight this FATCA/US citizenship-based taxation law absurdity so punitively affecting us. I know your state of mind right now — it is horrible to see others go what many of us here have already experienced.

    Those steps of grief apply here:

    I have a new phase that I am in: Never give up; never give up; never give up.

  5. @carrida… for what it’s worth, your credit union likely shows nothing about your citizenship. Financial institutions don’t care (right now, anyhow, unless it’s an investment account). My husband and I met with reps from our bank, our credit union, and our financial planner under the guise of an annual review of our financial accounts and a ‘privacy tune-up’. We told them that with all the privacy breaches in the media, we were checking what kind of information was held on us. All were very happy to show us what they had, pulling up the computer screen and paper files. For normal saving/chequing accounts, neither RBC or Coast Capital even has the ability (right now, anyhow) to collect or track citizenship info. Only our financial planner had our citizenship noted… Canadian only. If I’m ever asked for ‘proof’, I plan to provide my citizenship card only. Unless I feel particularly recalcitrant, then I’ll use the passport and remind whomever about my Charter protections regarding national origin. And jump on the class action lawsuit that is surely to follow. (Gawd bless the RBC bank teller that refused to accept my US passport as ID back in the1988 when my husband put me on the account! Boy, was I angry then! I had to wait about a week till my driver’s licence came in the mail. Gawd bless him!)

  6. My insistance that the consul send my relinquishment to DC, even though he would not recommend it, seems to have encouraged a few readers to do the same. Although I was ultimately successful, it did take 18 long months for my CLN (backdated to 1994) to arrive. From what I can tell, it was probably the longest wait time recorded in the data on this site. As stated many times on this thread, there are so many individual scenarios, and it’s best not to rush into a decision. And, the many hundreds of hours I spent on this site, learning from those who had knowledge and advice, was time well spent. It was reading posts on IBS that got me through the long wait. Bottom line: knowledge, patience and perseverence, folks!

  7. Thank you all for the kind words. I have received nothing at all from the US government, but again I understand any letters etc would have gone to my last know irs address, which was 15 years ago? So I’m not surprised I haven’t received anything. What also concerns me that I had no idea existed until I went on this google frenzy, is the fact that the IRS can generate a return FOR you, If you haven’t filed. This would of course be filled in as to the IRS best interest.. With no deductions for the actual taxpayer. Its called an SFR.

    Never have I experianced so many levels of worry.

    Thanks fifi for posting about you annual bank checkup.. That info does ease a few concerns in the interim.

  8. Just to make it clear. If you do eventually renounce, and have over 2 million in assets, the exit tax of 15% only applies to UNREALIZED gains, that’s any gain that you have made from your property or investments on which you have made a profit. The first $645,000 per covered expatriate is not taxed. So you could be a ‘covered’ expatriate and not owe them anything as long as your gain is not above this sum. The rest is taxed at 15% (for now).

    My understanding is that RRSPs (Canada) are treated differently. They can NOT take advantage of the $645K exclusion and are taxed on the *whole* amount (not the gain) as ordinary income (not the 15% cited above). This would represent a crippling blow to any renunciant who was covered and was depending on their RRSP for their retirement.

    Is this consistent with what others understand the situation to be with respect to RRSPs?

  9. I know that a covered expatriate with RRSPs (from the USA) has to have a 30% with hold on any payments from their retirement plan and cannot take advantage of any lower tax rate in the country in which he now lives.. He also is obliged to continue to send a tax return to the US every year while those retirement funds remain in place. The only answer to that is to gift some of it to spouse, or children to bring you below the covered threshold before renouncing. BUT, I do not know how this question relates to Canadian RRSP’s. Perhaps Phil Hodgen writes about it or could answer that question for you?

  12. tdott says:

    My understanding is that RRSPs (Canada) are treated differently. They can NOT take advantage of the $645K exclusion and are taxed on the *whole* amount (not the gain) as ordinary income (not the 15% cited above). This would represent a crippling blow to any renunciant who was covered and was depending on their RRSP for their retirement.

    Is this consistent with what others understand the situation to be with respect to RRSPs?

    The article that badger helpfully pointed to says re Canadian Individual Registered Plans:

    There is no guidance on Canadian retirement plans that are specific to an individual (RRSPs, registered retirement income funds, life income funds, and annuities into which these plans may be converted). US tax law treats such plans as distinct from pension funds or plans, which are group retirement arrangements.

    Individual retirement plans are not “deferred compensation items” (discussed below) because they are not “foreign pension plans.” They have previously been described as grantor trusts in earlier guidance unrelated to expatriation. (114) For this reason, the difference between the tax basis and the fair market value of the assets would be taxable.

    The taxpayer has “basis” in the underlying assets, because they were purchased with after-US-tax funds. On expatriation, the exit tax would apply only to the unrecognized income and gains, not to the entire value of the plan.

    The basis is usually equal to the contributions. This is the result where (as is usually the case) the taxpayer has always elected to defer income recognition inside the fund. (115) If the taxpayer did not make this election, the basis would be increased by net gains and income recognized over the time that the RRSP was held.

    So according to the article, only the “unrecognized income and gains” in the RRSP are taxed, and it *seems* the $645K exclusion *can* be used.

    This stuff gives me a headache.

  13. I am a bit confused because quite often “relinquish” and “renounciation” are used in the same phrase and seem to mean the same thing but I have been told that they are not the same thing. Can anyone help clear up the confusion or give me a link which will help me understand if the 2 are the same or if different explain to me what the differences are? Thanks in advance.

  14. Michael Jones,

    I think this will help. Read then ask any further questions. http://isaacbrocksociety.ca/2011/12/12/relinquish-dont-renounce-if-you-can/

    But first, some explanations: Renouncing is one of seven ways to lose your citizenship. It requires swearing an oath in front of an official of the US government and it now has a $450 fee attached to it. Relinquishing does not require a US government official, for it is one of several acts that a US citizen can perform that can result in a loss of citizenship, provided the person intends to lose it. Then, the former citizen must only inform the State Department, not so as to validate the relinquishing act, but to make sure that the US government understands what your intent was when you performed it.

    It has become clear that there are several advantages to relinquishing over renouncing:

    (1) Relinquishment takes the act of losing your citizenship out of the hands of the US government. This has two benefits. (a) There should be no fee because it doesn’t require a US government official–it doesn’t take place in a US Consulate–you only go to the consulate to inform them of a fait accompli, and it only takes one visit, unlike renunciation which usually take two visits. (b) This saves you $450, or it should, because you are not requiring the services of the Consulate–you are there only to inform them of your intention when you committed a potentially expatriating act such as making a pledge to a foreign power.

    (2) Relinquishment is usually a positive act which cannot be confused with an expatriation to avoid taxes. You do it so that you can take part in foreign government or to vote in the country you live in, not so that you can avoid US taxes.

    (3) Relinquishment is not a renunciation of your citizenship, so much as a positive act vis-a-vis your new home and country. It is not a repudiation of your country but an acknowledgement that dual citizenship is an unworkable absurdity. Thus, relinquishment comes with less stigma, potentially.

    Finally, a caveat is in order. Don’t do one thing and say another. That is don’t relinquish your citizenship then travel on US passport, pay tax in the US, register your children born abroad as US citizens, or take up a residence or a job in the USA, except as one holding a legitimate permit to reside or work in the US as an alien. If a person does any of these things, the State Department may not accept your relinquishment. Those who desire to lose their citizenship but who have done such things after the relinquishing act, may need to renounce their citizenship after all.

    http://isaacbrocksociety.ca/relinquishing-acts-performed-prior-to-2004/

  16. Here’s a link I hadn’t seen before: http://en.wikipedia.org/wiki/List_of_former_United_States_citizens_who_relinquished_their_nationality

    Notes

    ^ INA 349(a)(4) (8 U.S.C. § 1481(a)(4)) states that “accepting, serving in, or performing the duties of any office, post, or employment under the government of a foreign state or a political subdivision thereof, after attaining the age of eighteen years if he has or acquires the nationality of such foreign state” is one of the acts by which a U.S. national may lose nationality, if the act is performed voluntarily and with the intention of relinquishing U.S. nationality.

    and, of course:

    ^ As stated in the U.S. Department of State Foreign Affairs Manual: “Potential renunciants may also express the intention to continue to reside in the United States or its territories and possessions without documentation as aliens. Since this right of residency is a fundamental right that U.S. citizens and nationals possess, potential renunciants who wish to retain this right do not possess the intent necessary for an effective renunciation. Consular officers must not take renunciations from any individual who seeks to retain the right to reside in the United States or one of its territories or possessions.” “Renunciation of U.S. Citizenship”. Foreign Affairs Manual. United States Department of State. 2012-06-29. Retrieved 2012-07-18.

  17. Thanks for the great feedback. I have lived and worked outside of the US for 29 years. I became a French citizen over 10 years ago. At that time I didn’t even know it was possible to relinquish my US citizenship. I knew I had no intention of going back there to live or work but as I just mentioned I had no idea I could give back my US citizenship so I kept using it to go into/out of the US because I knew that US law required me to enter and leave with my US passport since I still had US citizenship. If I had known I would have gladly given it back. The US “chapter” of my life was behind me except for wanting to occasionally see family and friends and giving my daughter the chance to see her American family. Just because I no longer wanted to live or work there didn’t mean I should deny my child the chance to see the US. So it would seem that I may not be eligible to relinquish my US citizenship as too much time has passed since I became a naturalized French citizen. Any comments from anyone out there?

  18. @Michael Jones, it’s not so much a question that it happened so long ago – people have obtained a CLN via relinquisment as far back as the 60s and 70s – as how much you’ve since used the privileges of US citizenship. Like travelling on a US passport, voting in US elections, filing US tax returns, etc. Here’s the form that the consular staff will use to determine how close your ties are to the US.

    http://www.state.gov/documents/organization/97025.pdf

    If you obtained French citizenship with the intention of losing your US one then you can certainly try for a relinquishment. The consular staff will assess everything on the form plus any statements you might like to include like you only used your US passport because you knew it was US law and you didn’t want to be hassled by border control for not having one. If they assess everything and say no they don’t think you have a case for relinquishment, then you can ask them if you can renounce straightaway without having to make another appointment.

    No one question is a deal breaker as far as relinquishments go, it’s the overall balance from all the answers you give to the questions that matter.

  19. Thanks very much MedeaFleecestealer. I shall try to down the relinquishment path and see where it takes me.

  20. @Michael Jones, use the form to make your own assessment. If for example the only question you can say yes to is having a US passport then there’s a very good chance you can relinquish.

    Also research, research, research on what the procedure is supposed to be and how things are supposed to work. Many embassies/consulates don’t always know how to proceed as they often haven’t had to deal with either a relinquishment or renunciation. You might like to have a read here:

    http://isaacbrocksociety.ca/wp-content/uploads/2014/01/Consulate-Report-Directory-2013.01.25.pdf

    about various people’s experiences when renouncing or relinquishing. Unfortunately there isn’t much listed for France, but a quick skim through some of the other reports will give you an idea of both how good and how bad an embassy/consulate can be.

  21. I’d appreciate any input/advice on my particular case, especially from someone in a similar situation.

    I was born in Canada and never lived, worked or owned property anywhere else. I gained US citizenship through my mother who left the US in 1946 at age 18 and lived in Canada for the rest of her life as a landed immigrant. She was proud of her US heritage and proudly accompanied me to our local US embassy to get my first passport. I only barely qualified as a US citizen. I was young and naive and I did it as much for her as anything else. It’s turned out to be one of the worst decisions of my life.

    I have no significant ties with the US and it wouldn’t be a great hardship to never step foot in the country again. I used my US passport once crossing into the states and it caused so many added questions and hassles for me that I never traveled with it again. I stupidly renewed it several years ago in the hopes of being able to vote in a presidential election (Obama fever) but my attempt to register to vote was rejected by the electoral board due to lack of residency. And like many dual citizens, I didn’t know until very recently that I had any obligation to file taxes yearly with the IRS despite never living or working there.

    So now I wait like thousands of others with FATCA’s sword of Damocles hanging over me, confused about what course of action to take. I’ve never had a US social security number or entered the tax system so I’m pretty sure the IRS doesn’t know I exist right now. Renoucing would put me on their radar. Doing nothing risks my bank ratting me out eventually, depending on how thorough they are about flushing out US customers.

    Any helpful thoughts? Right now my plan is to do nothing and just react as necessary–let the fight come to me, if it ever does. The uncertainty over how this all plays out is very confusing.

    Thanks

  22. @pukekonz,

    Apparently the Americans will be filtered out and reported to the IRS on at the back-end, but I have strong suspicions that this central DB gives GCHQ and by extension the NSA a central database to query containing full transaction histories of everyone’s accounts.

    Governments, individually, have all information on their residents and are the best resource the IRS or whomever would value the most (since their own records arent nearly as accurate for expats). If there is a central data base for query between nations then this is the worst case scenario, re this issue.

  24. MattyL, listen to KalC – you are in great shape, you have a Canadian place of birth (most of us here would kill for that!). The banks are unlikely to ever find out about your mother’s citizenship
    (you certainly will never tell them) or your previous US passport. Your Canadian passport with a Canadian place of birth makes you look like any other Canadian unaffected by FATCA.

  25. @MattyL, KalC has it completely right. Don’t bother to do anything except chuck that old US passport, suitably shredded, in the bin. You’re Canadian through and through and the US can’t/won’t bother you. Live your Canadian life and forget any American connection.

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