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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. Cabina. It helps a little. The USA still considered you a US citizen. You need to decide if you wish to be a US citizen or not.

    Let’s assume you don’t- good choice. Now you have several options. 1. Do nothing. This is not as bad as some people will tell you. Mainly,when you cross the border, a border guy may tell you you need a US passport.

    2. Renounce. Now you have 2 options. a). Don’t file any US returns. Probably the worst thing that would happen would be a nasty letter from the IRS. b). Back file 5 yrs of returns and the exit tax form 8854. This is the only place where being a dual citizen from birth is helpful. On the exit tax form you don’t need to worry about the net worth test. You are, however, supposed to certify that you have been tax form compliant for the previous 5 yrs.

    Have you ever worked for the federal or a provincial government? In that case you might have already relinquished US citizenship.

  5. For the sake of anyone new reading this and thinking 2a (renounce, do not file returns) is perfectly safe, I’ll be the downer:

    There is no statute of limitations on those unfiled returns, because they’re unfiled. So that will hang over your head for the rest of your life.

    By not filing returns, you have probably moved into the wilfully non-compliant category. I don’t know what the ramifications of that are, but I don’t see how it could be a good thing. FWIW, if you don’t file 8854, then you’re subject to a $10K penalty, and 8854 specifically asks about those 5 years of returns.

    Unless you like to live dangerously, travel to the US is out – that would include plane connections though any of the major hubs. For some people, not a big deal; for others, a very big deal. And, you’d always be concerned when flying over the US to, say, Mexico if you’re a risk averse type of person, due to the (admittedly unlikely) possibility of the plane making an unscheduled landing in the US. Note that increased inter-agency and inter-country data sharing means there’s a reasonable chance that in the future US border people will be aware of all former USCs’ tax status.

    The US-Canada tax treaty will protect you (at least in Canada) from the IRS if you were Canadian at the time the liabilities were incurred. I don’t see how there is any guarantee that the treaty could not be changed for the worse in the future. And although it would clearly be unfair if the changes were retroactive, nobody has ever accused the IRS of being overly fair (and the FATCA fiasco has indicated how much we can expect the Canadian government to stand up for fairness).

    So, IMO, you would have to have a really, really good reason to not file those returns. One concern people often have about filing those returns is the cost of getting someone to do it for them. A possible route is to DIY and just do the best you can. I’ll leave it to you to determine what “best you can” involves given that you’re almost certainly not a cross-border tax professional. At any rate, at worse you could be audited later and assessed some $$. If it’s a large amount of $$ that you are unable or unwilling to pay, you could then invoke your treaty right and not pay up; leaving you in more or less the same situation as having not filed. OTOH, at best you did a bang-up job on the returns that can withstand any amount of scrutiny, or, more likely, you can expect the IRS to not have the resources or inclination to worry about your piddly returns, leaving you home free (at least after the SOL runs out).

  6. @tdott

    You’ve done a superb job of playing devil’s advocate here. Sobering thought for some trying to predict the consequences of their actions for the rest of their lives, but for many, entering the US system would be certain financial ruin. For many, choosing to not file is the lesser of two evils.

    I’m interested to hear why someone would choose 2a, when it would most certainly put you on the IRS’s radar.

  7. tdott –

    Thumbs up! Nothing is simple, nothing is easy. Even doing the utmost drudgery cannot bring certainty when the counterparty is the IRS. Meanwhile desperate US persons irrationally fixate on magic straws as they wildly grasp to remain mentally afloat. Straws probably left behind by those who sucked up some lethal dose of koolaid clarity. Among degrees of uncertainty, blowing off SOL (what a hahaha for ambiguity that one is) has to be one of the insaner voyages into neverending limbo. Sauve qui peut.

  8. You’re SOL on the SOL for un filed tax returns:

    “It’s not something you want to think about, but old taxes can come back to haunt you. This is especially true of returns you’ve never filed. The statute of limitations—that legal egg timer, normally set to three years—never starts to run on unreported activities. And there are cases now of the IRS going back decades, collecting big money—plus penalties and interest—on form-filing failures, accounting errors, and innocent mistakes by unwary people.”

    http://www.nestmann.com/no-statute-of-limitations-for-failing-to-file-u-s-tax-returns#.U08jaCe9KSM

  9. @bubblebustin,

    Staying out of the system completely seems a lot less risky to me than voluntarily stepping into the system for a moment, only to snatch a coveted CLN, but not long enough to pay for it by filing the requisite tax forms.

    I don’t sleep well now, but I don’t think I’d sleep at all if I took the ‘half way there’ route.

  10. Risk of option No. 1 – somehow you get exposed to the IRS by your bank (hopefully low probability but the concern increases proportionally to the amount of financial assets that you have) – now the IRS has your private account info. in addition to your name, DOB & address (which I assume is all they get from option 2a)

    Benefit of option No. 2a – a CLN will hopefully protect you from the IRS ever getting your account info. (and therefore may be less likely to pursue someone with an unknown net worth)

    If you get exposed by your bank with option 1 wouldn’t all of tdott’s concerns about 2a also apply?

    A few thoughts about option 2b: file incomplete bare bones returns (no FBARS, no investment income etc.) with only simple T4 employment income – ie keep it as uncomplicated as possible – however according to bubble’s comment this will also have the SOL forever hanging over your head
    – you committing a US crime by filing false returns but options 1 & 2a are obviously similar crimes.

    I have no moral qualms about filing no or incomplete returns as the whole thing is a sick joke of institutional injustice – obviously none of us rightfully owe the IRS anything.

    And I would only consider “entering the system” when I was no longer officially a US citizen (ie. after relinquishment), ie choosing option 2b.

  11. After my recent experience in trying to close my deceased mother’s bank account in the US with a Canadian issued death certificate and being told that I need to have it notarized at the US consulate, I don’t feel a great deal of confidence that Canadian financial institutions will be eager to accept another government’s document without the same kind of verification – especially when so much is at stake. The theme when dealing with potential USP’s will be to error on the side of caution, I suspect. After all, once any qualms about discriminating against any group of customers becomes a thing of the past, what’s to stop them from doing anything they feel like doing to save their own butts?

  12. I have worked for most of my career for the government in Canada. But again is it worth the risk and hassle of getting a cln backdated to when I started working for the government? If I do that I am putting myself on the radar..I have nothing to do with the usa..no family there..I visit once in awhile as a tourist.
    According to John Richardson there is no such thing as a backdated cln..he didnt seem to think it was very useful..the IRS only accepts when they are notified of you relinquinshing your citizenship. Which means I could still be on the hook for taxes all thos years even though I never worked in the usa, nor studied there, nor had a us passport..I mean its ridiculous.

  13. Sounds like you have already decided. Actually you are entitled to a CLN dated from the time you began to work for the Gov’t. If you check the links to the right, you will see that there is no need to file anything if you relinquished before 2004. The choice is yours. Good luck.

  14. I think I am free and clear, this is what my bank rep emailed me a couple days ago (below). I was afraid that I used my US passport when I first opened my account in Toronto but I moved to Vancouver and that information was lost probably. Like I didn’t have a BC drivers license until I moved to Vancouver. Kind of like changing your name, eh? But I think the bank rep does not know the USA will tax you to your grave no matter where you live. At least I have my CLN. After reading that link of bubblebustin, the new (or explained) FATCA regulations, I realized I chose the wrong career — I should have been a tax lawyer.

    —————-
    RBC response to whether I have USA indicia:

    Hi, Kermitzii,

    Yes, I am aware of the FATCA and I have the attached article that I usually send out to clients who could be affected.

    We usually look at client’s (1) current address, (2) residence tax code and (3) identification to determine if we were meeting with a resident of Canada or a resident of a foreign country.

    When I look up your personal profile on our system, you have your address in Canada, a BC residence tax code and we only have your BC driver’s licence and Social Insurance Number as pieces of ID for verification. This is sufficient to confirm to me that you are a Canadian resident and not a resident of a foreign country in your banking relationship with us.

    Hope this helps.

  15. @cabina, you didn’t say where you were born. If you were born in Canada to US parent(s), it’s unlikely your US citizenship will be detected, but if you were born in the US, your Canadian passport will indicate that, and US border officials will notice that if and when you visit the US again. Then they might ask questions about your tax status.

    Also, you said: “According to John Richardson there is no such thing as a backdated cln..he didnt seem to think it was very useful..the IRS only accepts when they are notified of you relinquinshing your citizenship.” As @KalC indicated, a lot of us are counting on that IRS rule not being applicable retroactively from when it was legislated in 2004. For details, see
    http://isaacbrocksociety.ca/2012/06/19/if-your-expatriation-date-is-before-2004-the-rules-are-different/

    So, if you started working for the government in Canada before 2004, it should be safe and may be useful to apply for a CLN, especially if you were born in the US.

  16. @cabina, I’m sorry. I missed your earlier post where you mentioned that you were born in the US. So adjust my comment above accordingly. If you began working for the government here before 2004, it would probably be safe and useful to get a CLN for present purposes of banking and travel. I suppose it’s possible that the IRS could go after you for failure to file paperwork before you relinquished citizenship. None of us know how far back in time the IRS are likely to pursue that against those of us who relinquished US citizenship before 2004 and have not lived or worked there since. To me it seems unlikely, because of their limited resources and the bad publicity they would receive for hounding people who, according to the US State Department, gave up US citizenship long ago.

  17. @Kermitzii, sorry but that criteria is absolute rubbish for determining whether you’re also a US citizen. Using the same criteria I could almost get away with it here in Switzerland – the only giveaway is that my Swiss driver’s licence says I was USA born. The fact that you are a resident of Canada and can also be a US citizen isn’t addressed at all. Be prepared for more stringent checks, once they realise what’s facing them – because I don’t believe they’ve grasped how big a problem this is going to be for them.

  18. Well it just seems that a lot of people are speculating..nobody knows..even someone like John Richardson said more or less the same thing. So basically advice from lawyers is not reliable and frankly from anyone else. I have crossed the us border many times and never have been asked why I dont travel on a us passport but I know some people have. Maybe in the future this will be more of an issue..I dont need to travel to the usa so I really dont care.

    There is a lot of interpretation on the rules..what I have read suggests that the IRS doesnt care about the date of the CLN but when they are informed you are no longer a us citizen. So thismeans that you would still have to likely file a bunch of tax returns with them which I just find ridiculous given my circumstances.

    I went to one of the information sessions and frankly was disapointed at the lack of real answers..the only clear message was dont participate in the ovdi which I already understood. But if even seasoned lawyers dont have a clue what is going on then how we have any hope..to me we are all speculating..

  19. @cabina

    I think the outcome of all of this is going to be entirely dependant on how the US is going to react to the onslaught of information they’re going to get from FATCA, and how other known and unknown factors come into play. All we know is that it’s going to get ugly, and how the US responds to that ugliness is entirely dependant on which way the political winds are blowing in Washington. What we know is that now Washington is in a pillaging and raping mood right now.

  20. You’re right, cabina. Of course, a lot of people are speculating. You’re right; John Richardson is right. That’s the point — no one knows.

    Everyone needs to make decisions for themselves and their families based on the best research they can accomplish — before jumping into some “solution” that they might regret later.

    IF you don’t have to travel to the USA, then that is one consideration for your own decision of not filing a bunch of tax returns with the US. That decision will not be the same for others.

    Realizing that there will be NO SOLUTIONS GIVEN and NO ACTUAL LEGAL ADVICE for your “US citizenship” situation, there will be discussion on pro’s and con’s for considering one avenue for you and your family compared to another. I hope that many in Alberta will be able to take advantage of a one-time opportunity of discussion on this important topic for those deemed “US Persons”:

    Calgary Information Session, TOMORROW, Saturday, April 19th, 2:30 – 5:30 p.m. (Calgary details)
    OR
    Edmonton Information Session, Sunday, April 20th, 9:30 a.m. to 12:30 p.m. (Edmonton details)

  22. So let me get this straight. If I work for the federal government, I’m considered to have relinquished?? I thought you had to INTEND to relinquish in order for it to count.

  23. @usxcanada

    Why do you ridicule the idea of back-dated CLNs and the notion that one would then be free of the IRS? I think you even called this a “loophole”.

    @Peacheykeen

    Yes, only if you did it voluntarily and with the intention (at the time) to relinquish.

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