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
tdott There is a growing consensus that RESPs and TFSAs do not require 3520 or 3520-A forms.
Hi guys
can anyone tell me if they have renounced and recieved a CLN without being tax compliant I know that is not required but am hearing that to contrary. no CLN, if not compliant.
thanks.
@lynn, absolutely no need to be tax compliant before renouncing. In fact they’re not even allowed to ask you your tax status. All they can do is tell you you may have US tax obligations you need to deal with. I renounced in March 2013 before I did anything on the tax side and got my CLN in mid-April 2013. If it’s a tax advisor telling you this, ditch them asap!
An individual can’t be categorized as “compliant” or “non-compliant” by the IRS, the State Department, or any other agency/department of the USG.
They may know what you have filed, they may know what you haven’t filed, but they can’t know whether that equates to what they would consider “compliance”.
SKL (the firm I believe tdott is referring to) still states that one needs to be tax compliant to renounce. I asked them to correct this weeks ago, but they haven’t.
http://www.skltax.com/services/give-us-citizenship/
@Fn0 @PatCanadian
Professor Allison Christians thinks the renunciation fee can be challenged legally. Maybe she has some ideas about how to pursue this.
@Duke of Devon
Thanks!
@Bubblebustin
Thanks, Allison Christians has been a supportive voice on these matters.
@DofD
I’m aware that arguments are made about TFSAs not requiring 3520 and 3520-A forms, but RESPs seem to be a different matter. What’s the rationale for a RESP not being a foreign trust and thus requiring the above mentioned forms?
@lynn
I renounced in December 2014 and received my CLN several months later. I filed back taxes and form 8854 shortly after receiving the CLN. Whether or not one ever hears from the IRS probably depends on whether or not the IRS hears from tax authorities in one’s home country which in turn have heard from the banks regarding accounts and US personhood. I haven’t heard anything at this point.
@Bubblebustin
That’s disappointing re SKL stating you need to be tax compliant to renounce.
At any rate, SKL is indeed who I was referring to. I’ve run into a couple of people (in addition to a couple of Brockers) who made use of them.
@PatCanadian
Why did you file back taxes and the 8854 AFTER you received your CLN? I thought getting the CLN was the goal, after it nothing mattered. Or so I thought.
@PatCanadian
You are correct that getting a CLN is a goal. I am sure this has already been explained elsewhere, but it’s the first of two goals. The second goal is to square things with the IRS so that they do not expect further tax returns and taxes for years following the year in which you renounce, or the year you received a CLN confirming relinquishment. Of course ongoing filing may still be required if you are a “covered” expatriate or have taxable US-sourced income. A final dual-status US tax return may be filed before or after receipt of a CLN depending on the date you renounced, where this happened in the tax year, and when you got the CLN. It would be nice to be able to renounce on 31 December to avoid dual-status filing for the tax year. The filing of back tax returns is necessary to avoid being a “covered” expatriate.
The rationale is the same for both. The IRS has given no guidance. Both are registered and FATCA exempt. Therefore treat them the same way.
@fn0
Thanks, I forgot the order. Was thinking that getting cleared by the IRS was neccessary to obtain the CLN. Either way, it seems both are needed.
@Japan T, no you can do it either way. Become compliant first and then go for the CLN or get the renunciatiaon out of the way and then do the tax side. Of course whether you do the tax side or not is up to you. If your bank is happy with a CLN and you will never, ever go back to the States you could always say sod it to filing the returns. It’s a question of how easy you sleep at night, live with yourself, etc, regarding filing or not. Most people do because they want to leave cleanly and not have any worries, but others have refused to file and are quite happy not to have done so.
Most people living outside the U.S., who are deemed by the U.S. to be “U.S. persons” (i.e., “U.S. tax-citizens”), are not “IRS compliant” and will remain non-compliant for 2016. However, some (a relatively small number) IRS-compliant U.S. persons have chosen (or will choose) to begin the process of formal renunciation of U.S. tax-citizenship status in 2016 per IRS rules.
They may wonder whether IRS form 8854 “Initial and Annual Expatriation Statement” for the year 2016, which they are likely to fill out on their own, is substantially different (more punishing) than that of previous years.
I don’t have the answer, but the new IRS 8854 draft version for 2016 looks to me to be the same as that for recent years (please correct if I am wrong) — although recognize that it is still only a draft and the new 8854 instructions could always be more onerous:
ftp://ftp.irs.gov/pub/irs-dft/f8854–dft.pdf
You can also tell IRS what you think about the 8854 draft by going to:
https://www.irs.gov/uac/comment-on-tax-forms-and-publications
— This comment is NOT meant to be a recommendation to feed the beast (see Petros Principles).
Stephen, It’s the same. Only the dates have been changed. It is still called ‘and annual ‘ even though it’s only filed once. Still confusing in that those under the thresholds don’t need to complete page 3 section B. Page 4 section C is rarely required and most important, the capital gain calculation on page 5 is not required for non-covered ex-pats.
It’s a bullshit form which seems deliberately designed to confuse.
@Japan T
“Why did you file back taxes and the 8854 AFTER you received your CLN? I thought getting the CLN was the goal, after it nothing mattered. Or so I thought.”
I’m sure you’ve got this from the other comments but filing back taxes and the 8854 can end one’s “relationship” with the IRS. Very lucky in my case as I owed nothing and am not a covered expatriate.
Thank you all for the replys .
Renouncing form and consolate askes for a ssn when you fill it out, this is the reason for my asking. what does one do it they have a ssn but do not know the number.?
my daughter was compliant and and recieved her CLN after only 3 months. she knew her ss number. ithought maybe there was a conncetion to her recieving hers for fast.
@lynn, I said I’d forgotten my SSN, but they found it from a previous US passport application form of mine so they simply added it to the renunciation form details. But as said, you don’t need to be tax compliant beforehand and they’re not allowed to ask you about your tax status at all, only warn you that you may have US tax issues that need to be dealt with.
@JapanT
You forget that different countries have different arrangements. It seems that Canada has promised not to collect for USA on duals. So those CANADIANS who have renounced without paying back taxes just wont travel much anymore afterwards.
fn0 – “On another thread, once everything is wrapped up I will be looking to see if we could find any lawyer out there might be interested in a class action lawsuit to try and get back some of the $2350 fee for as many of those who paid it as can be identified (through the register list?). I think it could be shown that the State Dept’s claim that it costs them $2350 to process a renunciation and CLN is an unreasonable exaggeration. ”
It should be easy to redesign their CLN-vetting procedure to demonstrate that it can be done efficiently and cheaply. One would need to know the details of how the current procedure “works”. I wonder if this could be got through a Freedom of Information enquiry. Do the Americans have a Freedom of Information right?
@DoD: “It is still called ‘and annual ‘ even though it’s only filed once.”
Not for covered expatriates who renounced before HEART and the ‘exit tax’ in 2008. These folk have to file an initial 8854 on expatriation and then an annual 8854 for each of the ten tax years following the date of expatriation. So we should see the “and annual” dropped starting with the 2018 or 2019 versions, then.
@iota
Yes we do have a right to information but as one can easily find many many cases of Freedom Of Information Act (FOIA) requests going unanswered for years, it is just another right the USG routinely ignores. A very recent one was for Clinton’s emails. DoS said it would take something like 70 years to comply with the FOIA request.
Thanks JapanT. Probably not worth bothering with it then.
There’s only a limited range of relevant actions they could possibly present as “necessary” anyway. Can’t possibly cost $2350 and take six months.