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
Did you ever ask yourselves why-O-why does it have to be so darn complicated? Saying sayonara to the IRS is like walking through a signature no signature, date no date, pro-rata no pro-rata minefield. Every tentative step forward, if not perfectly placed, could end up getting you a letter from the IRS blasting you for not following form protocol. (Wonder if penalties come with that. Seems like the letter alone is enough punishment.) Of course the IRS does not provide a clear map of that minefield. If such a map exists, it is kept in pieces, hidden in various places, and it’s up to the fearful final filer to find them all.
@fn0
Thanks for confirming how you filed. That may be one reason for getting the forms back. For a dual status return, there is a controlling document, for last day as a non resident it’s the 1040NR as the controlling document, it’s the other way around if you become a resident it’s the 1040 controlling document. It’s the controlling document that needs to be signed and it is for the full year.
In your case, the IRS could be treating your form 1040 filed jointly as the controlling document rather than having to transport figures twice to two separate 1040NR
But who knows, it could also be lack of staff training. At least you know they are dealing with your returns and it will get sorted out.
All this rigamarole is proof enough we are well out of this.
@Embee – on the other hand, the final filer has the advantage that the IRS can’t do much about it if the FF never files at all, or files only a “minimalist” 8854. 🙂
Every IRS form is in essence a self-incrimination opportunity. “Tell them nothing they don’t already know” is a good motto, IMO.
fNo and all,
Here is my recent, still ongoing, experience/saga trying to renounce my U.S. tax citizenship by filing different forms with the IRS. Unsure whether any of this information will be helpful to readers.
On March 6 2017 I sent to IRS-Austin three forms all in one package: 2016 year 1040, 1040NR, and 8854 and a copy of 8854 to Philadelphia.
On May 1 I receive an April 11 letter from IRS-Austin saying that they need more information to process my return, and if I am filing dual status, I need to submit a signed copy of 1040NR with all of the necessary forms etc. In other words, they appear to have requested the form that I had already sent.
That day (May 1) I fax IRS a letter saying that I already sent them the 1040NR signed (with a 1040 and 8854) and remind them that I had zero income on the 1040 NR return because I was not a US citizen at the time and had no U.S. source income.
Today (May 18) I thought more about this and decided to give IRS a call to find out what was going on. Figured that I must have made a mistake.
By phone IRS told me that (even though I submitted all of the forms — 1040, 1040NR, 8854 — together) Austin received the 1040 NR on March 31 and separately the 1040 on May 5.
IRS advised me that they would correct my account to state that I have in fact filed dual status.
I then asked whether Austin or Philadelphia received my 8854. Nope. I explained that IRS will throw a lot of penalties at me if my 8854 is not received and processed. IRS then told me to send a copy of my already submitted 8854 to Philadelphia with a note of explanation (I will add the id number of the IRS agent) with an explanation. She did not want me to send again the 8854 to Austin.
Plan to call IRS back in a month or so.
What this seems to demonstrate is that even though you send all of the required forms together, they are not processed (“received”?) at the same time so that they can talk to each other, and this can result in problems and one of those IRS letters demanding a response in “30 days”.
Probably a good idea that I had filed a 4868 extension early in the year.
@Stephen Kish
My sympathies on your hearing from the IRS. Best that you followed it up. Although I never heard from the IRS following my renunciation and filing of final tax forms, I know from prior experience not to ignore any correspondence from them. At the IRS, the right hand doesn’t seem to know what the left hand is doing. You will be free soon from US tax citizenship.
Must be disconcerting to see a letter with IRS on the envelope. It also demonstrates the folly of going back to correct minor mistakes you may have made in the past. It also demonstrates why, if they are not in the system, most people should do nothing.
I just spoke to someone who may have the answer:
The fault might have been mine. I received from my accountant a 1040 and a separate 1040NR for 2016, which I filed. I was now told today that I should have filed only a 1040NR with the 1040 embedded in the 1040NR (I did not do this). However, I may have misunderstood this advice so please do not act on it.
The absence of any confirmation of receipt of my 8854, sent over two months ago, is a separate matter.
DoD makes a good point: I can be harmed by a filing mistake because I choose to be in the system.
@ Stephen Kish
I guess one would have to add to that minefield that final filers walk through the good possibility that when the IRS receives those papers (1040, 1040NR, 8854) they will divvy them out to different players and that some or all of them can be lost in the shuffle or just go walk-about for awhile. So, so aggravating … hope your BP isn’t going up too much.
@ Stephen Kish
I don’t understand “embedding” of a form. You sent everything … bits appear to be missing or not to their liking … that’s not your fault … it’s theirs. A lot seems to depend on who is on duty on the day your package arrives. You did your best and this will all get sorted out eventually but you must be wondering WHEN it will be over. Maybe you could send this message to the IRS …
@UK Rose
Peace of mind is worth investing in! I would’ve done likewise, but the few firms experienced with US expatriations were simply out of my price range. That said, a lot of the stress I’m undergoing now is due to procrastination; I really should’ve tackled all this back in February.
Interesting that your accountant concurred with the IRS helpline, but your tax lawyer didn’t. Hopefully, it’s not a sticking point!
I was starting to calm down, but now I’m stressed about the recent reports — which I appreciate hearing, because forewarned is forewarned — about the IRS rejecting the way some people did their forms.
My next — and hopefully, final, touch wood — appointment with my accountant is tomorrow afternoon. He sounded a bit dubious about the lack of dates on the 8854 and 8938, but said he’ll do some research before we meet.
@fn0
“It’s good you were able to have the IRS recommend signing the 1040 to avoid the chance of it being returned.”
Yes, indeed. Thanks again for telling us about your experience; if it weren’t for that, I would’ve sent it off unsigned.
“What you were told by the IRS about the date range to use at the top of forms echoes what I posted earlier but I cannot see on the website.”
Thanks for the link re: date ranges; I will print it off for tomorrow’s meeting with my accountant. Touch wood, it’ll be my last appointment and the papers can be sent off afterwards!
@ Stephen Kish Good grief. This separating of the forms after they’re received in Austin is alarming. I don’t understand “embedding” of a form either. All the instructions for people exiting seem to say label the 1040NR as “Dual Status Return” and attach the 1040 labeled “Dual Status Statement”.
@Stephen Kish
I am so sorry — and quite horrified — to hear about the issues you’re having with your final return. I’m starting to think that I should also file for the 4868 extension, regardless of whether I get confirmation the envelopes arrived in Austin and Philadelphia. I never in a million years would’ve thought they’d claim one part of the contents would be missing if they all got sent in the same envelope!
In any case, thank for sharing. As much as it stresses me out to hear about the problems people are having, forewarned is forearmed.
“I was now told today that I should have filed only a 1040NR with the 1040 embedded in the 1040NR (I did not do this)”
What do you mean by ’embedded’? Do you mean that you didn’t write DUAL STATUS RETURN on the 1040NR and DUAL STATUS STATEMENT on the 1040? Or are you referring to something else?
Maybe embedding means transport the figures from the 1040 to the 1040NR. it seems that in the past one could send a form 1040NR all blank and a form 1040 statement with all the figures and it was accepted but now it seems that some returns are coming back. if this is what they mean of course.
When I brought my forms for review to the accountancy firm, I had done the same as others here, zero form 1040NR with the figures on the form 1040 statement only, the firm transported the numbers over
they explained why, i am filing the form 1040nr as the tax return for the full year.
still even if this was the explanation, forms should not be separated from each other and it should be clear to them that all income is included somewhere.
renunciations are up and it looks like they can’t even cope with processing these final forms now.
Hope it all gets sorted quickly for everyone.
If the IRS wants things done precisely according to their protocols they could create a specific, single, simplified 1040 form for those who transitioned from US citizen to non-US citizen in the past year. Easy? We don’t do easy. That must be their motto.
WestCoaster,
Please do not consider anything I say here or what I was told as sound advice, because these forms are a mystery to me and I am no expert.
I am taking a few sentences on the subject from Hodgen — who may be right or wrong:
“The basic tax return is a Form 1040NR. You look at what you your status is on 31 December 2015 and that’s the tax return you file.” and
“The way you pipeline your “income earned while I was a citizen” to your Form 1040NR is a bit cumbersome. We prepare a summary page (on a piece of paper) to attach to the Form 1040NR to give guidance to the IRS so they can see where the numbers came from. We also attach a Form 1040 for that part of the year, where the actual computations are made. Then the numbers are ported from the Form 1040 to the Form 1040NR with, of course, the helpful little guide to the inquisitive IRS agent who wants to know what happened and why.”
https://hodgen.com/step-by-step-tax-filings-for-a-noncovered-expatriate/
In my filing I had a 1040 separated from the 1040NR. Perhaps that caused the problem.
@ Stephen Kish, after your earlier posts, I was thinking of Phil Hodgen’s summary page, too. And I think it was UK Rose who mentioned doing the same. In addition to including a summary page, I’m thinking of using lots of staples.
Thank you for your posts on this, good head’s up for the rest of us in the same boat. And I want to say thank you, too, for all the work you are doing for us, often behind the scenes, in the court cases and the hearing.
Well I’m not surprised. A typo in a SS number (my fault) on 3 years filed together resulted in 3×7 IRS letters over 9 months before they finally digested the correction I had immediately sent in. I actually got 21 letters from them. They were becoming more threatening and 3 were registered mail costing them $15 apiece. But in the end they sent me 2 checks. With interest. And now they just sent another form so I could declare the interest as income.
Totally confused now about final filing so I’ll just say that since my husband only had 2 numbers to give them they might have just overlooked all his form transgressions … but then there are still a few years left on his SOL time. 🙁
@all
Yes I included a summary page. the firm didn’t suggest it. I had read the phil hodgen’s blog suggesting it.
I had my name and social security number printed right at the top. this was done on a spreadsheet and I had the different periods, separated in colomns, line numbers down the side, description next to it and then the figure under the relevant column
I wrote some foots notes (see below) which I am happy to share here.in case it helps others. i inlcuded about the foreign income exclusion so they would know how i figured tax.
NOTES:
FORM 1040 (STATEMENT)
The Taypayer was a US Citizen for the period 01/01/2016 to 08/16/2016 and renounced US citizenship on 08/17/2016. Please note that the attached FORM 1040 Statement was prepared solely for the purpose of calculating the taxpayer’s income for the pre-renunciation part of the year that the taxpayer was a US citizen. Line 38 AGI and subsequent lines were brought forward to the FORM 1040NR Dual-Status Return controlling document.
FORM 1040
Line 21
The Foreign Earned Income Exclusion FORM 2555 was claimed for foreign wages for the part of the year the taxpayer was a US Citizen and qualified under the Bona Fide Residence Test of a foreign country prorated to the 229 qualifying days in 2016.
FORM 1040NR (CONTROLLING DOCUMENT)
FORM 1040NR was prepared for the Taxpayer’s Non Resident Alien post-renunciation period 08/17/2016 to 12/31/2016 and contains no US source, NEC income or any other new reportable taxable income for this period. Line 38 AGI from FORM 1040 statement and subsequent lines were brought forward to the
FORM 1040NR Dual-Status Return controlling document and the Tax Line 44 figured out on the Foreign Earned Income Tax Worksheet.
@ Fred (B)
Well that beats the 4 page letter they sent my husband because his DOB was inadvertently left out on an FBAR one year. Strange they couldn’t figure out his DOB was the same as on all the previous years’ FBARs. Wonder why it even mattered to them.
also i didn’t owe tax however my exemption that was allowed did not cancel out all my taxable income. i have other passive income. the form 1116 was prepared and the foreign tax credits were entered on the form 1040NR (and the form 1040)
basically my 1040NR second page was a duplicate of my 1040 statement
@Rebecca I have had to show my scan of my CLN twice now when crossing from New Brunswick into Maine.
@ UK Rose, Thank you again for information and ideas; very helpful in thinking about the 1040 & 1040NR, and what seems transportable and what doesn’t.
@Stephen Kish
I’m still not quite sure what you mean by ’embedding’ but I’m starting to think I should skip filing the 1040NR/1040. I was unemployed in 2016 so I had nil income and fall below the threshold for filing. Considering all the drama about whether or not to sign the 1040, plus your tale of woe, makes me want to keep things as simple as possible.
I called the IRS help line to see if there were any disadvantages to not filing my taxes this final year, and the guy I talked to was totally unhelpful. Even though it’s the number to call for non-homelanders, he claimed none of them were trained to help with the 1040NR/1040/8938. Plus he was really rude about, pretty much implying I was an idiot for even expecting help. He referred me to the IRS website and that was the end of it.
Thanks to UK Rose, I have verification that I don’t have to file taxes last year so I’m just going to submit the 8854. (I might include a note along with the 8854, explaining that I was below the filing threshold so this is actually the original.)
The FBARs have been electronically filed, so that’s out of the way. Am still uncertain whether I have to file the 8938 (one of the questions I asked the IRS help line person, and he didn’t even know what that was) since it corresponds with the FBARs.
If any one of you know, please share!