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
To anyone doing the final paperwork:
Here are some random tips I picked up from scanning the comments and the IRS website. In not particular order:
As Watcher mentioned, you have to send TWO 8854s out into the wild — one is attached to your tax return, and the other is marked “COPY” and sent to Department of the Treasury, Internal Revenue Service, Philadelphia, PA 19255-0049, USA
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Assuming that you didn’t relinquish on January 1, your final return will be a dual-status return, meaning that it covers both a period during which you were a resident and a period during which you were a non-resident. A dual-status return takes the form of a tax return (1040 or 1040NR) with the other one being attached as a statement. The tax return is the one reflecting your status as of December 31. In other words, you would prepare a tax return on Form 1040NR and attach Form 1040 after it. You would write “DUAL STATUS RETURN” at the top of Form 1040NR and “DUAL STATUS STATEMENT” at the top of Form 1040.
Form 1040NR covers the period when you were a non-resident. If no income from U.S. sources—at all—the Form 1040NR will be reporting zero income for that time period. Essentially, the Form 1040NR is only there as a carrying mechanism to transport the income information to the IRS for the time period of January 1 through the day before renunciation. See IRS Publication 519 for how that’s done.
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Phil Hodgson recommends filing form 4868 to get an extension to October, but there’s a trick question in Part II #8 — it says chek here if you’re “out of country” and a US citizen. Well, I’m not longer a US citizen so does that mean I can’t apply for this extension? Anyway, seems to me that it would be tempting fate not to get the 8854 in by June 15th. After all, that would mean risking covered expat status and that’s the last thing I want, since I qualify for non-covered (i.e., I’m broke).
@WestCoaster –
The accountant that helped me with my final return has filed many of these final returns, they specialised in helping people renounce. I filed my final returns in February for the year 2016. You do date the form 8854 on the top Jan 1st to your expatriate date.
There are no dates on either the form 1040NR or the Form 1040 statement. The 1040NR is for the whole year and is signed. The Form 1040 is only a statement that covers your US citizen period and is not signed. However if you were to sign both or date the form 1040, it wouldn’t cause any bother.
Other assets does go on form 8854 line 19 however attach a statement explaining what they are or that they are personal property. My statement simply said “Part V Balance Sheet and Income Statement
Asset Line 19 – The total value of other assets not included on Lines 1-18 includes my personal property.
The Fbar you only report the high value for the period you were a US citizen, after that it’s none of their business anymore. However there are no dates that go on the Fbar.
Also filing the form 8854 late does not make you a covered expatriate, it could get you a possible $10,000 fine but like you I would rather not take that risk.
WestCoaster
Form 8891 is no longer used.
Since you are not a covered expatriate, you do not have to calculate your phantom capital gains. I.E. you can leave columns b,c,&d of Part V Schedule A blank. OTOH, if you feel more comfortable filling them in, it won’t hurt.
Why bother with household goods and car? Or make up some number that’s reasonable
Finally, FBARs are only up to the day you renounced.
I have a question. if someone has no US source income after the renunciation date AND is well under any conceivable threshold for total income before that date ( OAS and CPP only), is it necessary to file 1040 and 1040NR at all? Can this person just file a 8854?
One more question: On the 1040NR, it asks what country or countries were you a citizen or national of during the tax year. My accountant only put down Canada, but shouldn’t I also mention that I was a US citizen until Mar 14? Or is the “tax year” for the 1040NR defined by the date range filled in at the top of the form?
Regarding due dates and extensions, Publication 519, Tax Guide For Aliens, says this:
“Extensions of time to file. If you cannot file your return by the due date, file Form 4868 or use one of the electronic filing options explained in the Form 4868 instructions. For the 2016 calendar year, this will extend the due date to October 16, 2017 (December 15, 2017, if the regular due date of your return is June 15, 2017). You must file the extension by the regular due date of your return.”
It seems that NRAs get the same extensions as RAs and US citizens — as long as the 4868 is sent in “by the regular due date of your return”.
https://www.irs.gov/publications/p519/ch07.html
@UK Rose
Thanks for answering my questions! Actually, there is a date range to fill in on the 1040NR as well as the 1040; if left blank, the default time period is all of 2016. (You have to squint at the form, it’s in tiny print.)
I very much appreciate the reassurance about not becoming a covered expat if I miss the deadline for the 8854! That said, $10k is a huge amount of money to me so I plan to get it there by the June 15 deadline!
@DoD
Thanks for clearing that up re: 8891 — I was getting worried, having looked back at old returns and discovering none after 2013. (And by worried, I mean having a minor heart attack. I’m treating myself to a fancy box of chocolates and a good book once I get through this hellish paperwork!)
As for your question, I personally think it’s still worthwhile filing the 1040 and 1040NR. Why? Because then there’s a limit (5 years? 6 years? I forget) by which the IRS can follow up with you once you file. If you don’t file, they can hassle you forever. Some would argue that it doesn’t matter if you never plan to set foot in the US again, but personally I’d rather just bite the bullet and make a clean break. After all, you’ve already cleared the big hurdles — getting the CLN, filling out the 8854 — so you may as well go the distance. (At least, that’s my approach because it’s the one solution that will let me sleep at night.)
@canoe
Thanks! Am still wavering whether or not to file for an extension. Part of me just wants to get it done by the June 15th deadline, so it’s no longer hanging over me. Not sure there’s anything I can do differently (other than find a better accountant, but they’re hard to come by and usually incredibly expensive) even if I got the extension.
I keep comforting myself that this is the last year — touch wood! — that I have deal with this craziness.
@WestCoaster — File the 4868 extension even if you don’t plan to use it. Then it’s there just in case. Things happen. I’m pretty sure that was Phil Hodgen’s advice.
Another thing to send in with the final 1040 and 1040NR, etc. — a copy of the CLN.
@canoe
You’re right about the 4868. I’m seeing the accountant tomorrow, so I’ll get him to do it.
I’ve only given the accountant my CLN, but I also gave him forms DS-4080 and DS-4081 to include! Better safe than sorry is my motto when it comes to the USG!!
@WestCoaster
Re the dates on the forms 1040NR and 1040 statement, the time period is the whole year 2016. There are no partial year filings unless you die. So the final tax return is for year 2016 (full year). we file the form 1040NR because we are none resident aliens on the last day of the year.
The form 1040 statement is just a statement like any other attachment. doesn’t need a date. Your form 8854 has your expatriation date on it.
I included an explanation sheet with my final filing that showed the time periods where income was earned so it was clear that after my expatriation date there was no other US source income. My accountant ported the taxable income numbers over from the 1040NR so I wanted this statement so it would be clear.
But as I said previously there have been so many ways people have filed and in almost all cases, there has been no correspondence from the IRS. I certainly haven’t had any and mine for sure have been processed by now.
On my form 1040NR for the question “Of what country or countries were you a citizen or national during the tax year”, i wrote United Kingdom and United States because for the tax year 2016, i was a US citizen during some part of that year.
@canoe
Yes Phil Hodgen did say to file an extension regardless and non resident aliens can file for an extention too. I didn’t bother because I filed mine so early.
@UK Rose
OMG, really?! That makes no sense, which is on par for the IRS. Yes, if it’s for the whole year then I will put down that I was American for part of the tax year.
My accountant used Jan 1 to Mar 14 on the 1040, and Mar 15 to Dec 31 on the 1040NR. I will have to add this to my list of things to discuss tomorrow. I will take some Tylenol with me, because I’m sure both of us will have headaches by the end of the appointment.
@WestCoaster
I would not stress too much about the dates or lack of dates as long as the numbers are correct.
Many have filed with the dates with no issues. IRS is only concerned about the numbers being right and probably ignore any dates except on the form 8854.
re the citizenship question, where it asks further down “Have you ever changed your visa type (nonimmigrant status) or U.S. immigration status? This is where I checked yes and wrote the date I renounced US citizenship and that I had renounced US citizenship.
Basically I prepared my final return myself to save costs but had it checked over by this reputable firm that deal with expatriation returns on a regular basis. I had put dates in like you described, the only changes they made was take those dates out (explaining what I just explained before about the full tax year) and port over the AGI figures from form 1040 statement over to the form 1040NR. Other than that, i had done my return correctly.
I doubt the IRS reads anything except the numbers
@UK Rose
I’m sure you’re right and I’m stressing unnecessarily. But I can’t seem to stop.
I wish I could do what you did with your paperwork. I’m practically doing all the heavy lifting in terms of verifying what to fill in, but finding a knowledgeable accountant that I can afford is beyond me.
I’m going to tell my accountant what you said about the dates, but may not be able to talk him into changing the date ranges on the 1040 and 1040NR, because there seems to be no documentation verifying what your accountant did (I’m not saying they’re wrong, it’s just I can’t find it and clearly my accountant hasn’t either).
At this point, I think the main thing is to get the papers in. Personally, I don’t have enough money for them to have any interest in me so hopefully any minor errors won’t matter as long as the numbers are accurate.
@Karen
Thanks! What about the 8938 (which deals with FBARs)? Should that be Jan 1 to Mar 14?
@ WestCoaster
My husband split his final filing year into before (1040) and after (1040NR) becoming a non-citizen of the USA using the date given on his CLN as the transition point. It’s been over 3 years and not a peep back from the IRS. Sure it was all DIY but from some things I’ve read the so-called experts don’t do much better. Not splitting the filing doesn’t make any sense to me either. For that bothersome citizenship question how about putting down UK/US from x to y and UK from y to z?
Oops. I guess by UK I mean Ur Kountry. 😉
@EmBee
Thanks! I have to admit that your husband’s approach makes sense to me. Honestly, it is almost impossible to figure all this stuff out as a lay person when the so-called experts contradict themselves! That said, I think UK Rose took the right approach in hiring true experts and I’ll take her advice if I can talk my accountant into it.
I’ll err on the side of caution, and put down that I was Canadian all year and a US citizen from Jan 1 to the day before the CLN. It can’t hurt and they can just ignore it.
@ WestCoaster
Remember the IRS just likes numbers. You give them numbers. They file them away. I doubt they even know all their own ins and outs for reporting those numbers. Good luck to you … the end is near.
@EmBee
“Remember the IRS just likes numbers. You give them numbers. They file them away. I doubt they even know all their own ins and outs for reporting those numbers.”
Ha ha, you are so right! Yeah, the end is near. I keep reminding myself of that over and over and over again. And over again.
Incidentally, it has NEVER made sense to me that I had to file 1040s all these years, despite never having lived or had any income from the US. The whole dates on the 1040/1040NR would be a moot point, if all any of us had ever had to file was 1040NRs, but I guess that would be too straightforward!
@WestCoaster
There is no place online that says exactly how to file an expatriate return which is part of the problem. And many things are just a matter of interpretation. there is just no logic to most of this,
There is information about a dual status return and reading the publications, I can’t see anywhere that it says to date the forms either. There are people having the reverse situation, they become US residents on the last day of the year, they file a 1040 with the 1040NR statement. We are doing it the other way around. if they wanted dates on the form, it would think it should be written in the publications.
My previous 5 years were filed with another accountant but when I knew that the final tax return had no bearings on the covered expatriate status I decided to give it a go myself and find a firm that dealt with expatriation to check them over. The firm said I did well.
@ UK Rose, About what you said, “I included an explanation sheet with my final filing that showed the time periods where income was earned so it was clear that after my expatriation date there was no other US source income.” Thanks for that note. It reminds me of something Phil Hodgen said, that they prepare a summary statement to attach to the dual-status year 1040 & 1040NR to help orient the IRS folk as to what’s what. (That’s my wording, based on remembering something in one of his posts.)
@canoe
That’s right and that’s exactly why I did it, I had seen what Phil Hodgen’s wrote
What my sheet looked like was on the row top I divided the two time period in two columns with the dates on top, per-renunciation US citizen period and post-renunciation non resident alien period
On the rows underneath I wrote the line number and the amount that corresponded to each time period under it’s column
the Form 1040 statement period had figures and the form 1040NR period was all zeros
then i wrote a brief explanation in text underneath explaining about the two different time periods. basically stating that FORM 1040 Statement was prepared solely for the purpose of calculating the taxpayer’s income for the pre-renunciation part of the year.
@DoD, I filed FBARs only under Streamlined and my accountant put the following on the document:
“Although a Streamlined questionnaire is being submitted, the taxpayer is not filing tax returns because she has no income to report.”
You could put something similar with your 8854 to say you’re not filing tax returns because you’re below the threshold for reporting. It’s also clear on the 8854 that you’re not above the threshold because you have to put down your US tax liability figures for the 5 tax years before your date of expatriation. I only filed the 8854 and a final FBAR. My 8854 form had nothing but zeros for those previous 5 years.
@DoD:
“I have a question. if someone has no US source income after the renunciation date AND is well under any conceivable threshold for total income before that date ( OAS and CPP only), is it necessary to file 1040 and 1040NR at all? Can this person just file a 8854?”
Yes. Those were my circumstances and that’s what I did. There is no problem about the Statute of Limitations, since there are no conceivable grounds for prosecution.
I sent one 8854 to Philadelphia, in accordance with the instructions.