The U.S. Department of State has published a change to their Consular Fees: they are now charging the same amount of money for relinquishing U.S. nationality as they are for renouncing it:
Documentation for Loss of Nationality
The Department is expanding the application of and renaming item 8 in the Schedule of Fees to “Administrative Processing of Request for Certificate of Loss of Nationality.” The fee will be applied to cover not only services to U.S. nationals (i.e., U.S. citizens and non-citizen nationals) who relinquish nationality by taking the oath of renunciation under 8 U.S.C. 1481(a)(5), but also to cover services to U.S. nationals who relinquish nationality under 8 U.S.C. 1481(a)(1) to 1481(a)(4) or any earlier-in-time relinquishment statutes administered by the Department of State and request a Certificate of Loss of Nationality. Currently, the fee is paid by those taking the oath of renunciation under 8 U.S.C. 1481(a)(5) at the time the oath is sworn. The fee would be collected from an individual claiming to have relinquished nationality at the time that person requests the Certificate of Loss of Nationality (that is, after completing Form DS-4079 and signing before a consular officer Part II of Form DS-4079 entitled “Statement of Voluntary Relinquishment of U.S. Citizenship”). The Fiscal Year 2012 Cost of Service Model update demonstrated that documenting a U.S. national’s relinquishment of nationality is extremely costly whether the service is for a relinquishment under 8 U.S.C. 1481(a)(1) to 1481(a)(4) or a relinquishment by renunciation under 8 U.S.C. 1481(a)(5). Both require American consular officers overseas to spend substantial amounts of time to accept, process, and adjudicate cases. The cost of the service is not limited to the time consular officers spend with individuals prior to and at appointments. The application is reviewed both overseas and domestically to ensure full compliance with the law. The consular officer must determine that the individual is indeed a U.S. national, advise the individual on the consequences of loss of nationality, and ensure that the individual fully understands the consequences of loss, including the inability to reside in the United States unless properly documented as an alien. Through documentary review, consideration of the individual’s circumstances, and careful interviewing, the consular officer also must determine whether the individual is seeking loss of nationality voluntarily and with the requisite intent, as required by U.S. Supreme Court case law and by statute (8 U.S.C. 1481). This determination can be especially demanding in the case of minors or individuals with a developmental disability or mental illness.
The consular officer must also ensure that the commission of an expatriating act was as prescribed by statute, which is often an issue in non-renunciation relinquishment cases. The loss of nationality service must be documented on several forms and in consular systems as well as in a memorandum from the consular officer to the Department’s Directorate of Overseas Citizens Services in Washington, DC (“OCS”), in the Bureau of Consular Affairs. All forms and memoranda are closely reviewed in OCS by a country officer and a senior approving officer, and may include consultation with legal advisers. This review entails close examination of whether the requirements of voluntariness and intent are satisfied in the individual case. Some applications require multiple rounds of correspondence between post and the Department. The final approval of the loss of nationality must be done by law within the Department (8 U.S.C. 1501), by OCS, after which the case is returned to the consular officer overseas for final delivery of the Certificate of Loss of Nationality to the individual. In addition, every individual issued a Certificate of Loss of Nationality is advised of the possibility of seeking a future Administrative Review of the loss of nationality, a time-consuming process that is conducted by OCS’s Office of Legal Affairs.
Currently, nationals who renounce nationality pay a fee of $2,350, while nationals who apply for documentation of relinquishment of nationality by the voluntary commission of an expatriating act with the intention to lose nationality, do not pay a fee. However the services performed in both situations are similar, requiring close and detailed case-by-case review of the factors involved in a request for a Certificate of Loss of Nationality, and both result in similar costs to the Department.
In the past, individuals seldom requested Certificates of Loss of Nationality from the Department to document relinquishment. Although the Department was aware that an individual relinquishment service was among the most time consuming of consular services, it was rarely performed so the overall cost to the Department was low and the Department did not establish a fee. Requests for a Certificate of Loss of Nationality on the basis of a non-renunciatory relinquishment have increased significantly in recent years, and the Department expects the number to grow in the future, causing the total cost of this service to increase. At the same time, the Department funds consular services completely from user fees. The Cost of Service Model continues to demonstrate that such costs are incurred by the Department when accepting, processing, and adjudicating relinquishment of nationality cases; therefore, the Department will collect a fee from all individuals seeking a Certificate of Loss of Nationality. Taking into account the costs of both renunciation and non-renunciation relinquishment processes, the fee will be $2,350.
This means that it costs ALL American nationals thousands of dollars to change their nationality. Of course, this affects primarily the middle class and less wealthy. However, even if you make the assumption that this is an exit tax for the wealthy expat trying to avoid U.S. duties, this fee doesn’t discourage or hurt them. A tax dodger that the U.S. IRS is interested in most likely wealthy, and even if they qualified for the relinquishment instead of renunciation, a $2,350 fee is nothing for them. Accidental Americans, referring to people who don’t live in America yet acquired U.S. nationality involuntarily (such as through birth) and never use it (or weren’t even aware they possessed it until recently), give up their U.S. nationality not because they don’t wish to pay U.S. taxes, but rather because they fear the fines and/or legal hassles associated with making a mistake when constantly filing the annual (or more frequent) paperwork to the IRS. Making a mistake is easy to do, because living overseas with foreign income and assets (possibly mixed with domestic assets) makes error-less filing much more difficult.
The prose above gives a lot of reasons for the price increase, claiming that the processes for the consular officers is time and cost consuming. I, however, having relinquished my U.S. nationality (for the purpose of naturalizing to another country — that doesn’t allow dual nationality — where my family, career, and home have been for decades) at the Tokyo Embassy, have experienced the process first hand. My experience? I was less than impressed with the amount of work it entailed. In particular, I did a lot of the work (proving my U.S. nationality) myself, not the consular staff. And a lot of the other work was done by the State Department in the U.S., not the local Embassy staff. You can read about my personal relinquishment experience here:
- Relinquishing U.S. citizenship in Tokyo (part 1 of 4)
- Relinquishing U.S. citizenship in Tokyo (part 2 of 4)
- Relinquishing U.S. citizenship in Tokyo (part 3 of 4)
- Relinquishing U.S. citizenship in Tokyo (part 4 of 4)
I am willing to bet that a lot of other procedures that the state department performs, such as registering a U.S. birth or marriage overseas, require many of the same procedural checks (such as verifying U.S. nationality) that losing one’s nationality requires, yet the fees for other services are nowhere as near as high.
I also wonder, if by charging an exorbitant fee, America isn’t running afoul of the spirit of the U.N. Human Rights agreements that it agreed to and signed off on. The United Nations’ Universal Declaration of Human Rights, Article 15 states:
- Everyone has the right to a nationality.
- No one shall be arbitrarily deprived of his nationality nor denied the right to change his nationality.
One could possibly argue that by charging an exorbitant amount to “change” one’s nationality (change meaning not just acquiring a nationality, but losing one’s nationality voluntarily as well), America is attempting to prevent most Americans in the situation where they need to change their nationality (most who do so do it for family and personal reasons, not exclusively for tax avoidance reasons) from doing so.
The document about this change is asking for comments. I recommend posting your (polite and civil) comments to the document if you think that the fee is excessive.
in your situation i think you are justified sitting on pins and needles give the IRS is involved in your life.
i furthermore don’t envy you HAVING to travel to see parents and loved ones.
the IRS has no idea who or where i am and i have zero reason to set foot in that country.
each and every one of us has slightly different tales and soley based on those tales is what we have to make a decision what is right for us given our situation.
my situation was a fairly easy decision to never involve my self with amerika. i do not envy at all those of you who HAVE to cross into amerika for family or work. your decisions are going to come at a much higher price than mine.
@Mettleman, to be fair, I am painting the worst-case scenario; I have already revisited the States four times since filing my quiet disclosure way back in 2011; in reality, my accountant put me into offshore Streamlined before it was officially called that.
She explained that as an Enrolled Agent, she already has longstanding contacts within the IRS and that they would have realized that all my PFIC mess and lack of awareness about having to file FBARs we’re both unintentional; they would be aware of situation because it was rather unusual. However, she was quite optimistic that a QD would suffice.
OVDI so would have cost me over $300,000 but even my QD was still painful, costing me over $10,000 in taxes to the IRS plus approximately another $25000-$30,000 in accounting fees. It seemed the only way I could resolve the huge mess, especially as I soon realized that I’d need to become fully compliant to be able to certify five years compliance so I could renounce with a clean break.
It’s still been the scariest thing I’ve ever had to deal with in my life though….in the beginning, I wasn’t sure if my family would forgive my decision or even if they would fully believe that I considered myself innocent.
I had naively believed that I would be fully protected from double taxation by the tax treaty, especially as I’ve never had a high income. I certainly had been oblivious to PFIC taxation when investing in UK-based mutual funds which are quite vanilla in an ISA account here in the UK. My mistake was not seeking financial advice from a dual-qualified planner and accountant before becoming a DIY investor.
so there is $35,000ish dollars that you spent to be a “free” person….YOUR MONEY that should have gone to your family not a foreign gov’t and accountants.
my accountant who is a close 20 year personal friend had been pushing me to rise up and go through the system and get a CLN. he has estimated his fee’s for freeing me to get a cln would be in the $40-50,000 dollar range. money that i don’t have readily available to me.
i made him a deal…when the day comes that we have exhauseted all legal challenges here in canada will be the next time we talk about FATCA and what will be my next course of action. he is finally in agreement with me and it has been over 6 months now that we have spoken of FATCA. we speak to each other at leat 2 or 3 times a week about other business matters though.
until such time as we have a definative legal answer in the courts i am living my life as i have only with no travel to amerika something my wife and i used to do at least 3 or 4 times a year. it has been a good decision so far as i have seen more of my province in the last 2 years than i did in the last 20 by traveling to amerika rather than staying at home.
Another poor Accidental on the BBC the other night.
On Who Do You Think You Are this week, this week’s celeb meets a cousin of his who still owns the family land in Northern Ireland.
Poor Betty Ann McNichol admitted that (probably in her 70s) she was born on Long Island, NY and still held a US passport (and said it with a bit of pride). Her pride will evaporate once she finds out about FATCA.
So this cousin of Mark Gatiss probably has no idea that her bank in NI is going to track her down. She had a thick Northern Irish accent, and I think she said that she left the US when young.
What right does the US have to this lady’s banking data?
@Mettleman, yikes!! Your situation must also be quite complex to require such high accounting fees of +$40,000-$50,000 to get sorted enough to be able to expatriate… and hope I don’t sound horrible but would like to think he would charge you far less if he were such a close personal friend. 😛
believe me we have had lots of conversations before that number was arrived at and yes that was at the high end but he wanted me to be prepared for the worst. i believe it is an honest number given where i am at in my life and how close of a friend he is. he is not a compliance condor out to rip me off.
i am comfortable for now with my situation of being a self relinquisher and waiting to see how the legal challenges play out both here and in amerika.
only then and not before will i take another step in this journey that a foreign gov’t has foisted on us.
@Mettleman, I see what you mean but the thing that really strikes me is how much of a racket this all is. It’s artificially-created complexities plus the fear factor that’s forcing people (and banks) to flock to compliance condors or go into hiding. Many accountants and tax attorneys must be rubbing their hands in glee…
I am optimistic that I will be OK but am aware that things are going to get even harder for those coming behind me. Though heart-wrenching, I’m so relieved that I’ve already renounced but hope the law suit will ultimately make it so that others won’t have to.
Mona Lisa, you won’t see this on
Norman Diamond said:
August 29, 2015 at 4:39 am
I think I can answer Mona Lisa. The person is subject to US tax LAWS, which in this case means the person is required to file their final return (1040NR with a 1040 attached as a schedule) and 8854, until the date they file their 8854.
Actual TAXATION of non-US sourced income (on the 1040 that is attached as a schedule, usually $0.00 in tax because of 2555 and 1116) ends the day before renunciation or the day before the person notifies the Department of State of a relinquishing act, no matter how many years pass before the CLN is delivered.
Caveat: I haven’t checked if things changed after 2011.
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Hmm, if a person joins an enemy military during time of war, they can lose US citizenship without paying $2,350, right?
Maybe that’s why Americans are joining Islamic State.
@Norman Diamond, though I may be misinterpreting things, my understanding from John Richardson’s new thread is that: if one has renounced from 16 June 2008 onwards and even received a CLN but has not filed 8854, then the IRS will continue to treat him or her as a U.S. ‘tax citizen.’ Never mind that said person no longer has any other citizenship rights, only tax obligations!!
I fear for those who’ve renounced but not submitted 8854.
Another thing that is concerning is that none of us who have actually filed 8854 get official confirmation from the IRS that they’ve registered receipt of this hugely important document. They could in some cases misplace it and try to impose covered status, especially if they subsequently receive FATCA data in error and mistakenly assume that said person should have still been filing!!
“if one has renounced from 16 June 2008 onwards and even received a CLN but has not filed 8854, then the IRS will continue to treat him or her as a U.S. ‘tax citizen.’”
That’s my understanding too, but I think that during that time the US “tax citizen” has to file 1040NR each year not 1040. For those who timely file an 8854 with their return for the year of renunciation, the form definitely is 1040NR, and an unsigned 1040 is attached as a schedule for the portion of the year before renouncing.
Come to think of it, at the time of filing an 8854 with 1040NR, I think the person is legally eligible for an ITIN. If the person is filing late 1040 returns for earlier tax years, I think the person can attach W-7 to those returns as well because the person is legally eligible at the time of filing. The person might not need to get an SSN.
(When the IRS told me to apply for ITINs, with generic instructions on Form W-7 telling me not to but with personally addressed instructions on Form 6401 telling me to apply, I did apply. When I finally attached a certified true copy of my Canadian passport, notarized by the Canadian embassy that issued it, the IRS finally accepted it too. Anyway my 1040NR and 8854 were timely and were also accepted.)
Where did you get the info that filing an 8854 carries a 6yr statute of limitation? I thought the IRS were limited to 3 yrs recently in a court decision, but the SOL was unlimited on unfiled returns?
To the best of my understanding, years spent outside of the US don’t even count against the statute of limitations. Aside from me trying to compel the IRS to audit me and the IRS refusing, the IRS would be allowed to audit me for as many years as they wanted.
Think of all the famous expats who have that American taint. I can’t help think that the s**t will really hit the fan when they are ratted by their banks. Perhaps then there will be some really press coverage. Or perhaps they are all compliant?:-)
How far back can the IRS go to audit my return?
“Generally, the IRS can include returns filed within the last three years in an audit. Additional years can be added if a substantial error is identified. Generally, if a substantial error is identified, the IRS will not go back more than the last six years.
The IRS tries to audit tax returns as soon as possible after they are filed. Accordingly most audits will be of returns filed within the last two years.
If an audit is not resolved, you may be asked to extend the statute of limitations for assessment tax. The statute of limitations limits the time allowed to assess additional tax. The statute of limitations is generally three years after a return is due or was filed, whichever is later. There is also a statute of limitations for making refunds. Extending the statute will allow you additional time to provide further documentation to support your position, request an appeal if you do not agree with the audit results, or to claim a tax refund or credit. It also allows the IRS time to complete the audit and provides time to process the audit results.
You do not have to agree to extend the statute of limitations date. However, if you do not agree, the auditor will be forced to make a determination based upon the information provided.”
More information related to extending a statute of limitations can be obtained in Publication 1035, Extending the Tax Assessment Period, or from your auditor.
Probably associated with our favourite law. As well as all of its other corrosive effects, FATCA extended the SOL from three to six years for a range of ‘offshore’ compliance issues, including omitting as little as $5k in income from a return. As far as I know it’s not specific to 8854 — that has a set of timing problems all of its own! — but rather to all of the other stuff that would normally accompany the 8854 (8938 especially?).
“The IRS tries to audit tax returns as soon as possible after they are filed.”
They sent a letter soon after I filed a return, threatening to audit me and threatening criminal prosecution. I invited them to proceed. They refused. In court I tried to compel audits and tried to compel criminal prosecution, but they still refused, and courts denied my motions.
Their publication that talks about statutes of limitations also gives 800-phone numbers where they say you can call toll free, right? They don’t have time or money to say how things might differ for people outside of the US. They only have time to penalize us.
(The reason for trying to compel an audit is that it will allow me to demand a Notice of Deficiency, whereupon I’ll be able to petition Tax Court, whereupon Tax Court will acquire jurisdiction to determine an overpayment and order a refund of my withholding. The reason for trying to compel criminal prosecution is that they would have to reveal what their reason was, and they would have to provide discovery of documents. The IRS doesn’t dare, because evidence would come out that Monica Hernandez isn’t their only embezzler.)
You wrote “Anyway my 1040NR and 8854 were timely and were also accepted.”
Can you tell us how you determined your 1040NR and 8854 were accepted? You must have had to take some steps to determine that, right?
You should file two Forms 4506-T every year. File one to get a transcript of your account and one to get a transcript of your Forms 1099, 1042-S, etc. The transcript of account is similar to the assessment that CRA sends each year.
4506-T can also be used to get a copy of your return, but that costs money.
I learned about 4056-T by accident in year 2013. The IRS will only provide transcripts going back three years, so I couldn’t get the most important ones. But I was able to verify that my 1040NR had been processed for my final return, tax year 2011. The IRS also revealed that they had no records of my Forms 1099 and 1042-S even for tax years after Monica Hernandez was arrested.
About 8854, you’re right to ask, I can’t be completely sure that it was accepted, but they haven’t complained.
Poor Betty Ann. I am not even sure that the type of help she needs exists in Northern Ireland, so I doubt that her affairs are in good order. I was really disappointed to see that American Citizens Abroad is holding its UK meeting in London on tax planning this year without any streaming, since outside of London the availability of such expertise is pretty much nonexistent. I get blank stares if I mention FATCA at my bank.
If she left when young, her heirs may not be U.S. persons and that would have major inheritance tax implications. Old people in the U.K. are obsessed with passing on their property.
Has there been any progress on this matter or clarification at least?
Are you asking if there is progress or clarification on determining whether the new Department of State US$2,350.00 fee, now for both renunciation and relinquishment (by a former act like taking citizenship in another country, government employment, etc.), is excessive / appropriate, etc. or are you asking if there is progress / clarification in something referred to in one of the comments to the post? The new fee is certainly in effect for both and, as far as I know and as far as I expect to see, there will be no answers forthcoming on that question. But, who knows, I and many others could be wrong.
I’ve just been asked to completed the CLN and not having renewed my US passport since 1967 (when I left the US) I was staggered I’d have to go through the process and pay such an exorbitant fee. In my eyes I’d already relinquished my US citizenship by applying for a UK passport.
So just wondered if the fee is currently being upheld (which it sounds like it is for Relinquishment) or any progress in getting it removed all together.
Paul, unfortunately, I know of no progress — the fee is in effect, latest as of January 28, 2016…
i.e., the fee is for the actual official CLN we will eventually receive after renunciation or relinquishment (if Washington, DC agrees) — that CLN our *foreign financial institutions* (our own countries’ local banks down the street from us) now need as proof (even way back decades ago when many of us were told that we were losing our US citizenship by our new citizenship in other countries). Yes, it is unbelievable and part of the reason for the Canadian litigation we hope will go forward – http://www.adcs-adsc.ca/. Join us if you can.
Extra-territorial bullying, arm-twisting, getting that CLN part of it, signed onto by our own countries as US FATCA law is implemented abroad.
We’ve had this discussion re Canada’s IGA We have had at least one person who successfully argued that he was no longer American and wasn’t about to produce a CLN.
The language of the Canadian and UK agreements is the same
Your financial institution is supposed to accept a self-certification- aW8-Ben for example- along with a reasonable explanation. A reasonable explanation would be ‘I relinquished my US citizenship in 1967 when I became British; at that time there was no US requirement to inform the state dep’t or to obtain a CLN”
I’m not sure if you want to argue with your F.I. or not. let us know how you make out. P.S. The fee for a CLN is not going down. Currently $US 2350. and a 6-12 month wait (or longer). good luck.