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
@Iota, I don’t know. I believe she just assumed she could claim the standard deduction, though I now think I got mixed up and that it was, in fact, that the IRS rejected her making use of foreign earned income exclusion. I could check but it’s all under a pile of papers, etc. Sorry about the confusion!
Thanks for getting back to me about which address you used for the 8854. Sounds like my best approach is to use Canada Post with tracking, the quickest speed I can get! (Am off to see my accountant later today after going over the revisions, so hopefully this will all be finished and ready to mail off by end of day.)
@Medea Fleecestealer
” So it’s no wonder Fedex/UPS can’t/won’t deliver as it gives no street/number as part of the address. I used the above with no problems though so you should be fine using your local postal service’s tracking system.”
I was hoping to use a courier, but I guess that’s what I’ll have to do.
@iota
” I sent the 8854 to the address the 8854 instructions said to send it, because I wanted to be able to prove that I had sent it to the address stated in the instructions and had been notified of delivery by the USPS. That’s all that matters – fine with me if the dog ate it or it got thrown in the bin.”
Good points!
@DoD
“Please do NOT rely on the street address I posted. It may be outdated. Mea Culpa.”
I was hoping that someone would confirm successfully using the street address lately, but I think I will err on the side of caution and use the official address given in the instructions. Bummer.
@mona – Gosh, sounds like she had good reason not to send in that invoice! 🙂
Glad it worked out ok in the end.
@Iota, I had already paid her around £12,000 so I was relieved that she let me off for the final year’s work. Yes, I realize now that it was the IRS not accepting my claiming the FEIE. We already realized I wouldn’t be allowed to make use of the standard deduction.
I renounced in March 2013 so would imagine I’d have been audited by now, though believe they have another three years before all my statutes of limitation are fully closed!
And WHY, may I ask, can you not pro-rate the standard deduction for the final year? You are a USC (virtually considered to be a resident of the USA too … for tax purposes) until your expatriation date and the CLN says you are not. Is there something buried somewhere in the labyrinth of regs which says renunciants cannot use the standard deduction or any part thereof? I apologize for not follwing this thread too carefully lately so I may have missed somthing that explains why.
@Embee – possibly you can. Logically, it should be available.
But then, logically, a former USC shouldn’t be required to pretend that everything they own was sold the day before they became a former, and hand over to a now-foreign government 30% of the proceeds such a fire sale might have realised if it had been real even though it wasn’t real,and the proceeds do not exist.
@EmBee
I was told the standard deduction is not available to people who have been a non resident alien for some part of the year. it explains more in publication 501 who can and can’t take the standard deduction. there are a couple of instances. Not sure how the come up with these rules but it’s in that publication.
@WestCoaster
Others gave the address (but i looked up the address my tax solicitor gave me and it’s
Department of the Treasury, Internal Revenue Service, Philadelphia, PA 19255-0049. United States of America
regarding the street address when i called the IRS, they gave me the market street address and i see another street address has been given here, so a bit of confusion there.
@monalisa
not sure what your tax accountant did but if any reference is made to the form 2555 on the Form 1040NR, the form 2555 will be rejected. The form 2555 is not available to a non resident alien. that’s why i said before in this thread that FEIE income gets reported on the form 1040 statement only and then it’s exempted by the form 2555 and those figures do not transfer over to the form 1040NR. good it was pro bono for you
@EmBee
What UK Rose said. It appears to be an extrapolation from the case of resident aliens becoming NRAs.
Publication 519 says:
See: https://www.irs.gov/publications/p519/ch06.html#en_US_2016_publink1000222529
Isn’t all this kind of like trying to play chess on a Monopoly board with a baseball bat according to Australian football rules?
I just glad the IRS told me back in 1990 that I didn’t need to do all this.
@UKRose – Just realized – Publication 501 does say:
“If you are married filing a separate return and your spouse itemizes deductions, or if you are a dualstatus alien, you can’t take the standard deduction even if you were born before January 2, 1952, or are blind.” (p.25)
but the IRS website says:
“You are a dual status alien when you have been both a U.S. resident alien and a nonresident alien in the same tax year. Dual status does not refer to your citizenship, only to your resident status for tax purposes in the United States. In determining your U.S. income tax liability for a dual-status tax year, different rules apply for the part of the year you are a resident of the United States and the part of the year you are a nonresident. The most common dual-status tax years are the years of arrival and departure.”
https://www.irs.gov/individuals/international-taxpayers/taxation-of-dual-status-aliens
I would interpret that as meaning that a renunciant is not a dual-status alien during the year of renunciation. The renunciant doesn’t change residence – only citizenship.
So I would claim the pro-rated standard deduction if I were filing 1040/1040NR.
the thing you have to remember is that these publications aren’t written from the point of view of people renouncing citizenship. the stature (I gave the treasury regulation numbers earlier in this thread) puts us in the same category
Taxation of individuals for taxable year of change of U.S. citizenship or residence.
and the rules are the same, dual status, change of us citizenship or residence
I followed by tax accountants advise, no standard deduction, it was safer. also the form 2555 is prorated and has a section in that form that asks for qualifying days and tells you how to compute the allowance, no such thing exists for the standard deduction so it;s a case of yes you qualify or no you don;t
Maybe someone has successfully claimed it but I didn’t want to take that risk. and yes it’s like a game of monopoly or more like a maze or walking through a mine field.
@UKRose – yes, everyone has to make their own decision. I took the view that certainty wasn’t necessary, as long as I could give a reasonable justification of my position, if called on to explain. (Not in respect of the standard deduction, as I didn’t file 1040/1040NR, but in respect of decisions about what to report on the 8854, how to calculate net worth, etc.)
@ iota
That’s what I thought. We are talking about US citizens changing citizenship status while obviously not actually residing in the USA, not aliens (i.e. non-USCs) changing their residence from inside to outside (or visa-versa) of the USA. There is no arrival and departure for renunciants … they’ve already, like Elvis, left the building. If renunciants could claim the standard deduction in years prior to their final year with USC status then it doesn’t make sense to totally disallow it just because it’s their final year.
@Embee – I agree. And similarly, during a year in which an alien becomes a citizen, they would be entitled to the pro-rata standard deduction for the part of the year during which they were USC.
@ iota
Of course we are applying Logic here and that, like Elvis, has left the building where the US government and the IRS are concerned. Sometimes I even wonder if Logic has left the whole planet.
@Embee – yes, it would be folly to rely on the IRS being logical. But I suspect one can rely on their stretched budget to make it unlikely that they would do any more than possibly write a letter. They surely can’t afford to kick up a potentially expensive Foreign Fuss over minor issues.
@embee and iota
yes what ever makes people sleep at night or comfortable. i didn’t want to give the IRS anything to write back to me on.
i don’t disagree with you at all. I would think that while you are a citizen you should be able to claim all citizen allowances however it does say in the statue that you are allowed the personal exemption and allowable deductions. and the important thing to remember is that we end the year as non resident aliens. it doesn’t matter whether we were US Citizens or Resident Aliens prior, we are at some point in the final year a non resident alien. that’s the only way i was able to make sense of it.
OTOH, tax residency status for non-resident renunciants does indeed change in the year of renunciation, just as in the case of a resident alien becoming a NRA. And, tax residency is what the IRS cares about. So, it’s not illogical that since a resident alien becoming a NRA (thus changing tax residency) cannot make use of the standard deduction, then a non-physically resident (but still tax resident) USC becoming a NRA (and also thus changing tax residency) can also not make use of the standard deduction.
Can’t seem to find a Phil Hodgen reference for this, but he does talk about the situation of a green card holder here: https://hodgen.com/tax-residency-starting-termination-dates-for-green-card-holders/
Put the word ‘tax’ in front of ‘resident’ everywhere in the excerpt, and you would be talking about renunciants.
@tdott – yes, I agree it could be interpreted as “tax-residence”. I came down on the other interpretation because the IRS page I cited specifically says that “dual status” refers to residence not citizenship.
But who really knows – it’s probably never going to be tested in court so it’s down to the individual to decide how they think it should be interpreted.
Just wanted to update my timeline, because I arrived home today to find my CLN in the mail! It was *not* accompanied by a form 8854, so I’m on my own for that next year. I’m very happy that I had planned a good dinner for tonight (steak and vegetables on the grill) because it’s going to be a celebration : ) .
:: Early May 2016: requested appointment by email to U.S. Consulate in Calgary
:: Next day: reply letting me know that scheduling/prelim paperwork now centralized at the consulate in Vancouver and that I should redirect my request to the Vancouver email address
:: Same day: sent email to U.S. Consulate in Vancouver, had reply requesting documentation to be sent them by email, which I did the next day
:: Early Sept 2016: email with notification of appointment in late April 2017
:: Late April 2017: appointment at Calgary consulate
:: Mid-May 2017: receipt of CLN (it was shipped by Canada ExpressPost from Vancouver 2.5 weeks after my appointment)
My pet theory is that they are stamping and sending CLN’s quickly because there is little else to do in Rexxon Tillerson’s State Department, and that the “team of lawyers” I was threatened with has probably been deployed to the White House to assist there with the growing mess/morass!
Pacifica, would you like me to write up something specifically for the Consulate Report? Just let me know.
We go back to Calgary next month for the last kid, and then we’re all done. I’m off to staple the CLN into my Canadian passport now!
@ Rebecca
Great news! Congratulations! Don’t put the original in your passport though … keep it under lock and key in a very safe place. A copy is all you need to cross the border and maybe not even that since they seem to have a computer entry there which indicates your emancipation is official.
Hopefully, this is my last question: Do you also send copies of the 1040NR and 1040 to Philadelphia? My accountant thinks yes, but it seems to me that they only want the 8854.
What did you all do?
@WestCoaster
IIRC it’s only 8854 that gets the special treatment.
Ask your accountant to point to the specific instruction that says that 1040NR and 1040 should also go to Philadelphia.
@ WestCoaster
Sent original 8854 and 1040/1040NR to Austin. Sent copy 8854 to Philadelphia (no tax forms). Used Canada Post tracker on both. Questions are good … everybody learns from them.
@Rebecca
Wow, that’s a very quick turnaround! Congrats!! When my CLN arrived, I did a little dance — no kidding, I really did. And then I immediately scanned it so I had a digital copy for my records. (At that point, I might have done another dance, ha ha.)