Review of Moody’s Seminar, Calgary, 23 June 2018
By Ron Henderson (formerly Nononymous), 24 June 2018
Alex Marino (youngish US tax lawyer hired by Moodys to work in Calgary) doing his regular two-hour dog-and-pony show. Very charming and funny guy, under different circumstances someone I would absolutely enjoy having a beer with. Audience of 40-50, mostly skewing older; based on questions asked I think a good percentage were Americans who’d moved to Canada (some becoming citizens, others not) rather than Accidentals. Some were compliant and looking to renounce; others non-compliant. Most looked anxious and/or pissed off, as you’d expect.
I have the printed slide deck and attempted to record audio, in addition to my notes.
Some key themes:
Scary, scary, scary! Even when he’s willing to admit that there are limits to US power, he always makes everything sound so big and bad and scary, tremendously complicated, with terrible consequences for any little mistake. Of course he does.
The internet is not your friend. He constantly warns against finding advice online. I think this has less to do with Brock (never mentioned any such groups by name) but rather places where you will learn that all your US tax problems are automatically solved if you performed an expatriating act in 1983 and you need do nothing further, or ads for other less competent practitioners.
Slagging the competition. Lots of funny stories about the expensive messes he has to clean up due to bad advice given by inept lawyers and accountants. On this he’s probably quite right, even though it’s part of the sales pitch. Immigration lawyers without US tax expertise can be very dangerous. (In particular, watch out for anyone claiming to be an attorney in Massachusetts or a CPA in Illinois, because those states will give you a credential after a multiple choice “ethics” exam only – don’t have sex with or steal from your clients, basically.)
He claims that Moodys clients now constitute 9-13 percent of yearly global renunciations. Fair enough, the total numbers are kept artificially low. It’s a global practice with clients everywhere.
Estates, inheritances, executors, beneficiaries. Death and taxes. Always returning to the problems you will leave for the next generation if you don’t renounce or aren’t compliant. Low on specifics, but high on the fear and guilt.
I tried to listen with an open mind, as best I could. One concern I have is that I (and others here) live in an echo chamber, in the resistance bubble. Moodys actually works with clients who renounce and submit tax paperwork and communicate with the US government. They deal with this every day. So when he makes a claim I find questionable, I have to admit to myself that he has direct experience that I do not. In which case all I can do is shut up and report back.
He seems very familiar with skeptical or defiant questions from the audience. If you pin him down on a finer point of the rules, he admits that you are right, but asks if things won’t change for the worse in the future. Historically, he has a point.
Presentation highlights:
Boris!
Of course there’s a Boris Johnson slide right at the beginning, about how he shot his mouth off and “had” to pay US taxes. I put my hand up and asked a question:
“Boris was an idiot, on this we agree. But if he hadn’t been a political figure, with US income from book deals and speaking fees, how specifically would the US government have forced him to pay taxes, as a UK citizen living in the UK with only UK assets?”
“It’s like you work for Moodys. That’s the subject of my next slide – FATCA.”
“FATCA is about collecting information, not collecting penalties. How exactly could he have been compelled to pay?”
“I get this a lot from Australians. They like telling the US to pound sand.”
God bless the Aussies.
I pushed the point, and raised it again later on in the presentation, and he did willingly admit that under current rules the CRA will not collect on behalf of the US against a Canadian citizen, and that the US cannot put a lien on or otherwise touch Canadian assets. But he did mention something new to me that I need to follow up on, an “article 27” of the tax treaty providing for more extensive collection assistance, which was passed but has not been invoked or enacted or something like that. (I used to think that any attempt by the US to grab money from dual citizens would be met in Canada with great public outrage, but now after reading the comments on the recent CBC pieces, I suspect not, a large slab of the electorate is either too dumb to figure it out, or thinks it’s “fair” and has no problem with it.)
Random highlights
He insists that if you are “caught” by FATCA, you will receive a letter from the IRS, and at that point you cannot go into any sort of amnesty program. I have never heard of anyone receiving such a letter. But this is an area where I have to defer to his experience, because he is a working tax lawyer and I am not. Maybe this never happens and he’s making it up. Maybe it happened once or twice to very wealthy clients and he uses the example to scare up new business. Maybe it happens all the time and we never hear about it. (My hunch is number two.)
Untruthful answers to FATCA questions from banks are “perjury and tax fraud” – I suppose one day I should look up those definitions. He talks about banks asking for place of birth. That doesn’t typically happen in Canada, although it might when you get into the seven figures, but of course he has a global client base so that is true elsewhere.
He did however give a disturbing example of a Canadian client attempting to publish a book on Amazon who was asked not only for her place of birth but also her parents’ places of birth, presumably as part of Amazon’s own procedure to determine whether she needed to complete a W8 or W9.
He made some absurd claims that if you renounce without coming into tax compliance, you will “have a big target on your back” and will get all sorts of attention from the IRS, the attorney general, the FBI, pretty much everything short of a drone strike. This I suspect is scaremongering horseshit, unless maybe your last name is Manafort.
On the other hand, he gave the perfectly sound advice that if you have a taxable event coming up, renounce immediately because you have 12-18 months to get the tax paperwork in order, all past returns plus the 8854 and so on. Don’t wait. He has at least one client who was told by “an Illinois CPA” to enter streamlined (so only three years of returns) then wait two more years to file and get up to five before renouncing; they were of course caught by the transition tax surprise (which he calls the “one-time screw-you tax”) and are now writing a very large cheque to the IRS, and suing the accountant for giving crap advice.
On passports and travel, the interesting point was made that while it is illegal for a US citizen to enter the US with anything but a US passport, the US must also admit any and all of its citizens. You cannot be denied entry if you show up at the airport or border with a Canadian passport alone, or with an expired US. While there is no known punishment for violating the passport law, they will very likely detain you long enough to miss your flight or otherwise cause great inconvenience. Also, as of October 2017 it’s no longer possible to get a US passport without an SSN – you can’t enter all zeros if you don’t have one.
Renouncing
Lots of talk on the mechanics of renunciation. Apparently Calgary and Toronto are the only two US consulates that allow a US lawyer to be present during renunciation. Even better for his business model.
Moodys thinks you need a lot of expensive coaching to get through your renunciation interview without blowing it and having yourself barred for life from ever setting foot in the US. Of course they do. He claims that if you tell the consul that “I never owe US tax but I’m getting really tired of all the paperwork every year” that will be enough to trigger a “disbarment letter” and you can never cross the border again. (Then a scary slide about the Reed-Schumer Amendment.) I think this claim is ridiculous but again, he’s working on the coal face, he deals with renunciations all day, whereas I am just a crazy person on the internet.
When he was talking about the interview, the woman sitting next to me said quietly “Oh my god, that’s stressful.” I quietly replied “It’s not. I’ve been to one. It was perfectly easy and polite. This is a sales pitch.” She did not reply.
Depending on complexity, Moodys will charge you from $7-8k at the low end to $15-20k at the high end (Canadian dollars I assume) just to assist with renunciation – tax compliance not included. Plus the US fee. My jaw dropped. What the hell? It’s not that complicated.
He talked briefly about the challenges of mental competence (he advises you not to lick the glass during the interview) and the tragedy of people paying tax on an RDSP without being allowed to renounce. Of course, one only pays this tax if one is compliant and chooses to report the account and the income. At this point I put up my hand, and the exchange went something like this:
“As I understand it, under the current regulations, the IGA, all RDSP, RESP, RRSP and I think even TFSA accounts are not reported to the US under FATCA.”
“The US considers them taxable and they need to be reported on FBARs” etc.
“Right, but they are not reported under FATCA, so if you are partially compliant you can simply not report them and not pay that tax.”
“I don’t understand your point, they are reportable.”
“I am suggesting that you cheat.” Laughter in the crowd.
“I hope nobody from CRA is in the room.” Nervous laughter in the crowd.
“Why? This has nothing to do with paying your Canadian tax.”
Other random stuff
Don’t wait for things to change, they will likely only get worse. Sending petitions and letters to US politicians is a complete waste of time (on this I agree).
He has heard from someone in the State Department that the renunciation fee will go up to $4-5k in the next year of two. The express purpose being to discourage renunciation by younger people. I have no idea whether to believe this.
When a non-compliant US person dies, they pass on the problems to the executors, who are legally obliged to bring the estate into US tax compliance even if it means complete liquidation. I doubt that happens very often, and I’m not even sure that it’s true.
Much discussion of the exit tax, and how to avoid it. After renunciation, he claims there is a high likelihood of an 8854 audit, and that all renunciants’ returns are carefully checked. I suspect this might be true for high net worth individuals who are either paying or are close to paying an exit tax.
Conclusion
It’s all about the fear. Non-compliance is not an option. The IRS will find you, and will find a way to collect from you, and you will never be allowed into the US. Even if you don’t have a US birthplace. Unless of course you hire Moodys to take care of this for you.
I wanted to hang around to talk to people afterwards, but I was in two-hour parking and there was a soccer match about to start, so I fled. Whenever there’s a chance I think we should try to have others go and politely ask difficult questions, in addition to pure intelligence gathering. He’s fine with it, he’s seen it all before. It might help some of the folks in the room but I doubt it, they either have a good grasp of what’s going on already, or are far too spooked to listen to the heckler in the back row.
My balanced, open-minded view is that if you have a complex situation – you are worth a lot of money, you have a cross-border business, or you worked for many years in the US before moving to Canada – then it is probably worth your while to seek good, competent professional advice. I’m sure you will get that from Moodys, though it’s not cheap. But if you’re an ordinary sort of person with a modest income and uncomplicated financial affairs, either go the DIY route or just ignore the fearmongering and get on with your life.
I’m sure I could say more but we’re over 2000 words and I’m done here…
1000 for the first hour. Nice little earner they’ve got going. No wonder they want to frighten people.
My UK bank has never approached me about FATCA. That might be because I opened the account back in 1986, but even so…
Yes, I felt like I’d been dragged through slime after sitting through the Zoom presentation.
Did he once again make the claim that Archie Harrison Windsor wasn’t given a title so as to avoid the tax implications of the value of a royal title? Whereas in truth Archie is not entitled to one, at least not until his father has moved up in the line of succession.
I am an Accidental American. I attended a Moodys webinar recently, had a follow-up consultation and am still confused.
I know I won’t be able to escape covered expatriate status. The proposed plan is to file just 3 years under the Streamline procedure and then renounce and pay the exit tax. But is it not always 5 years of filing if you renounce irrespective of whether you are a covered or ‘non-covered’ expatriate?
The other confusing thing that was mentioned is that after-tax non-concessional contributions into my Self-Managed SuperFund (SMSF) are taxed as income by the IRS. I can understand that the IRS would tax concessional (i.e. before-tax) contributions as taxable income but is the IRS really going to tax a self-employed person twice on income? It is also mentioned on their website: https://www.moodystax.com/australian-superannuation-reforms-may-negatively-impact-us-citizens/
Lastly, I got no straight answer on what happens if the Streamline procedure is wound up before I can even apply (I don’t have a SSN and it will now take for ever to get one with Covid-19).
@August
Ignore most of what you heard at that seminar. Moodys are crooks.
I assume you are an Australian citizen, living in Australia; you have US citizenship from birthplace or parentage, otherwise no strong ties, no US assets? If so, there is no reason for you to consider US tax compliance. You can either do nothing and ignore the IRS for the rest of your days, or when the consulates reopen you can renounce US citizenship and be done with it. No need to get an SSN or file any tax returns or, god forbid, pay an exit tax.
August,, Pay attention to Ron. Moody’s are in this for themselves, not for their clients. They are enrolled agents which by definition means their first allegiance is to the IRS. If you have no US ties, your best course of action is to ignore Moody’s and the IRS.
streamlined is for those who want to catch up , reenter the system and keep their US citizenship. when you renounce, you are supposed to certify 5 years compliance. Better to file absolutely nothing. You can renounce US citizenship without being tax compliant. One is not dependent on the other. Once the consulate opens again, renounce and forget about it. Remember Moody’s are not your frinds,.
.
P. S. You don’t have a SSN. That means you have never filed and are probably an accidental American. You are not in the system. Keep it that way. They will never bother you unless you leep into the net.
You don’t even particularly need to renounce, unless you’re in a country where the banks are making life difficult for anyone with a US birthplace. Some find that renouncing helps them sleep nights, others see no point to it.
“frinds” “leep” Geez, an edit function would be nice
August, I renounced in 2018 without ever entering the US tax system. And without using any legal advice. I only renounced because I had a US birthplace and so I couldn’t access financial products in the UK (due to FATCA).
Four years later and Alex Marino is still holding these webinars. I just attended one. It lasted 2 hours and 40 minutes. No breaks!
A lot of the stories, comments and claims mentioned in your review, Ron, and in the comments, are still part of the presentation. The dense 86-slide presentation was full of scary red text. I got off the seminar feeling pretty sure that both my son and I would need to renounce our US citizenship, for a high fee, and that I was morally obligated to warn my expat friends about what was anead if they remained citizens.
But I also found Alex to be a very fast (lightning fast!) smooth talker who offered zero tips on how one could (1) avoid the pitfalls he was describing or (2) take care of it less expensively if we could not afford Moody’s £7-10k charge for renunciation help. In other words, it was very clear that the goal was to drum up business. Fair enough, but most presenters at least *pretend* that they care for audience members’ individual circumstances and offer side tips.
So I started googling (despite “The internet is not your friend”) and I learned various mitigating factors. For example, I learned that since my country of residence has a 22% tax on profit from the sale of my home, it’s unlikely I’ll owe US tax on that profit. Additionally, I find it highly unlikely that the estate of my husband, whose green card expired 20+ years ago, will be liable for taxation when my son inherits it hopefully 20+ years from now.
Now I’m just angry.
Eileen. You can renounce without filing anything at all with the IRS. You do not need to be compliant in order to renounce. One is not dependent on the other. That’s what Bird Person did. Your best course of action depends on so many factors. Are you an accidental American? Have you filed US taxes in the past? Does the IRS know you exist? Are you a whale or a minnow?
Remember , the IRS can’t and wont bother minnows- especially if they live offshore. They do not have the means.
If your husband had a green card and was never a citizen, and he abandoned his green card years ago he has no concerns.
Be very careful about any advice from lawyers who seem to care more about themselves than about their clients’ best interests. You mention a high fee. The only fee you should pay is to the consulate. Both my wife and son renounced without any legal hand-holding.
@Eileen,
Thanks for letting us know how the recent Moody’s seminar went.
As Portland commented, you can renounce without having filed tax. Some people have chosen to file and others have not, depending on their circumstances and connection (or lack of connection) to the US. Here’s some further information and source links regarding the relation between DoS and IRS in the context of renunciation (or relinquishment).
http://isaacbrocksociety.ca/renunciationrelinquishment-interactions-between-department-of-state-and-the-internal-revenue-service/
You can renounce (Immigration and Nationality Act, s. 349(a)(5) if you have not filed taxes. Likewise you can apply for a CLN based on a prior relinquishing act (INA, s. 349(a)(3 and 4) are the most common of these) if you have not filed taxes. The CLN is issued regardless of your status as a tax-filer. Here’s some general information regarding that and the relation between DoS and IRS in the context of renunciation/relinquishment.
(1) Dept of State
Dept of State basically doesn’t care about one’s tax status as the citizenship itself (and the issuance of the CLN) is not dependent on one being tax compliant.
DoS’s involvement/connection with tax is the following:
(a) At the consulate the person signs DS-4081, Statement of Understanding of Consequences; one of the 12 items on it is Item 10, that renouncing “… may not exempt me from US tax income taxation [etc] …”
(b) The DS-4079, which is relevant and required for relinquishments, is not used for renunciations in Canada (or most places elsewhere AFAIK). However, some consulates may be using it for renunciation (while DoS discourages its use with renunciation, they do not forbid it 7 FAM 1264 Your local consulate will let you know which forms they require, either on their website or when you send in an appointment request). This https://eforms.state.gov/Forms/ds4079.pdf, asks at q. 13 (e) “Do you file US income or other tax returns?” This question is on the DS-4079 is there as an indicator of your ties and connections to the US. This is important if you’re applying for a CLN based on a relinquishing act you performed some years ago (in which case, you wouldn’t have continued filing and you’re illustrating your lack of ties/connections/citizenship behaviour).
For renunciations (INA, s 349(1)(5), it’s irrelevant if you have ties/connections/citizenship behaviour or not – and your answer has no bearing on if you can renounce or not.
(c) Dept of State is to provide IRS with a copy of each CLN they issue as per DoS Interagency Coordination and Reporting Requirements, 7 FAM 1243(a).
(2) IRS
To log out of IRS and avoid covered expatriate status, IRS requires that the person file their exit tax form (8854), their final year form, and has “complied with all federal tax obligations for the 5 tax years preceding the date of your expatriation” basically, for most people, file, unless your income was below the minimum threshhold which requires filing), by June 15th of the year following the renunciation.
If a person does not file, the citizenship itself remains terminated and the CLN remains valid.
Eileen, Pacifica is telling you the regulations and she is correct.
HOWEVER, for a great many people, especially minnows living overseas, with precious few ties to the good ol USA, the wisest choice is not to file anything after renouncing. What can the IRS do?
@Eileen
Alex Marino is very good at what he does. I’m sure he makes a pile of money at this. I attended a webinar a few years back and it was the same scary sales pitch. Unfortunately the questions were moderated so I couldn’t play the heckler at the back. Zoom has taken all the fun out of it.
I renounced 2.5 years ago without filing a thing, and I’ve not heard a word from the IRS. I wasn’t unknown to them either, I had filed decades previously while attending graduate school south of the border, and renewed a US passport; as a cynical risk-taker with a vengeful streak I also claimed the pandemic benefits to cover the renunciation fee.
If you need to renounce for FATCA reasons you may do so without filing any tax returns. If your son is a dual citizen born outside the US, he can safely ignore this nonsense. With estate planning, you may want to exercise some caution. If you were to die after your husband and your executor was aware of your US citizenship, they would have an obligation to bring the estate into US tax compliance. To prevent this, you need to either find an executor who does not care, find a way to hide your US citizenship, or renounce. I’ve heard of one Canadian who simply signed an affidavit that he relinquished US citizenship when he took Canadian citizenship, stapled this to the will, and grumpily told the children to stop nagging him.
I was completely non-compliant and untroubled (no filing, not disclosing US citizenship to financial institutions) but ultimately chose to renounce for estate-planning reasons, so that I could serve as executor and trustee for my parents without triggering a ton of FATCA reporting – their banker and lawyer knew where I was born – and so there would be no difficulties setting up trusts to pass on my own eventual wealth.
Yes, I agree with Portland and Ron. IRS is short-staffed with bigger (and much easier) fish to fry than overseas minnows with no US financial connections. Since we started this website in 2011, quite a few people have reported renouncing and not filing and to date none has reported ever hearing anything about it.
IMO, if one has been filling US tax, it makes good sense to “wrap things up” with IRS by following procedure – but if one has never filed (or last filed long ago) and has no financial connection to the US, IMO better to avoid the convoluted hassle of it.
Re my previous comment (29 Oct), I like to put that comment in a thread when we’re discussing Moody’s because they have a history of causing people to think that their renunciation is dependent on their tax filing, but it is not. They’ve even referred to the renunciation appointment as the “exit tax interview.” Dept of State does not care and does not ask about taxes (I know one consulate was asking this and some other out-of-line stuff about 10 years ago, but once we reported their out-of-line behaviour to DoS HQ, they stopped). Moody’s has also alleged that the renunciation procedure “comes to a crescendo with a one hour interview administered at a U.S. Consulate General office.” In reality, this “interview” is a “meeting” which takes about 10-15 minutes face-time and mainly consists of signing and pushing papers back and forth across the counter; it’s administrative, not confrontational.
Detail I meant to add: When I had my renunciation interview, I listened in on the person going before me. Their (optional) statement giving a reason for renouncing was very formulaic and sounded like things said during the seminar, so I expect they were coached by Moody’s. As I was familiar with the script, I decided to have a little fun by doing my best to repeat it verbatim when it came to my turn.
I was saddened to hear that this person was neither born on nor lived in the US. They wasted a lot of time and money renouncing when their US citizenship is so easily concealed. I expect they were convinced to file US tax returns as well.
Thank you so much for the comments above. They have helped to reduce my fear. Regarding the interview at the US Consulate, what might be good reasons to provide when they ask for reason of renunciation ? I know tax or financial reason cannot be mentioned. It seems that legal or immigration lawyer always mentioned that people need to be prepared to the interviews.
Thank you so much.
@ Sapphire,
They generally don’t ask as a reason is not required. But although very rare, a few people have reported being asked, so it is good to have a reply prepared. Legally you’re not required to answer, but I think, if asked, it’s smoother just to tell them something. I recall reading people saying something to the effect of, “My life takes place entirely in (home country), so I prefer to have only that citizenship.” or “Apart from being born there and living there as an child, I have no connection to the US.” Short and non-controversial. They read your forms ahead of time and they’re usually self-explanatory, so the appointment itself goes pretty quickly. Face time with the consulate officer is about 10-15 minutes, a lot of which is signing and pushing papers back and forth across the counter. (Also it starts with about 5 minute with a clerk; and you may have some time in the waiting room (that varies).) You can read about peoples’ experiences at their renunciation meetings in the Consulate Report Directory, 277 pages, arranged by consulate/embassy location.
I was asked if I wanted to make a short statement. I parroted what I’d heard a few minutes before: “My life is exclusively in Canada, I have no future plans to live and work in the US, I have no connection to the country” and that’s about it. The consular official gave me a knowing smile and said “So you just want to simplify your life, right?” to which I grinned and replied “Exactly!”
The statement is optional, and you are not directly asked for a reason. Taxes are only mentioned in the context of reminding you that past tax debts or obligations don’t magically disappear.
Thank you so much pacifica777 and Ron. Much appreciate the replies. It’s great to hear actual experience as the seminar has made me really worried about the whole process especially this tax thing as I had been filing tax returns.
Another question, when is the right timing of applying the 10-year visa to the US using my home country passport ? As I do need to visit maybe once or twice a year to visit my husband’s family. Can I submit the same time I submit the application of renunciation application ? I heard that it take a few months between application and the interview. And I wonder if they are ‘more difficult’ to approve a travel visa knowing that one has renounced US citizenship.
Thanks again.
Can’t help you on the visa question. I’ve not yet attempted to cross the border, and as a Canadian I have no reason to apply for a visa if all I want to do is visit.