Could someone please point me to which are the five countries which have tax collection agreements with the USA? I can never remember which they are.
Canada, Denmark, France, Netherlands, Sweden. Easier to remember if you keep them in alphabetical order, I find. (Possibly eventually Japan, when it comes into effect.)
Mutual assistance in collection is provided on request, but *not* against someone who was a citizen of the country when the debt was incurred (i.e. naturalizing won’t make you safe from a past debt, but a dual from birth can’t be touched as long as they avoid the other countries with such agreements).
I know of only two instances where this has been used. By the Danes against a Danish citizen in the US, and our poor friend Mr. Dewees in Canada.
Two not insignificant inaccuracies:
1. He’s projecting 10,000 renunciations this year. A straight linear extrapolation doesn’t make much sense when the consulates remain closed. (The figures are a misleading mess in general, but that’s another issue.)
2. He makes the common mistake of claiming that tax compliance is necessary to renounce. It’s always worth correcting this one, since it frequently leads the unwary into the clutches of accountants.
A record number of Americans are renouncing their citizenship. In just the first half of this year, 5,315 Americans gave up their citizenship. That puts the country on track to see a record-breaking 10,000 people renounce U.S. citizenship in 2020.
Read in context, he means the demand and desire to renounce. In any case, he may be right. You don’t know what the consulates may or may not do. Maybe they will open. Maybe they will solve the backlog and find an easier way to do this. What he writes is NOT inaccurate. It’s simply extrapolating from the numbers (as you point out). Your point is that you don’t like the inference he is making. That does not make his claim inaccurate.
Renouncing U.S. citizenship is pretty complicated and costly. It involves one or two interviews with a consular officer, a $2,350 administrative fee – very expensive compared to other wealthy countries – and potential audit of the citizen’s last five years of U.S. tax returns.
(Yes, this is possible isn’t it? He isn’t saying that compliance is required to renounce.)
The whole process takes about a year. Once you have successfully unbecome American, you need to submit a tax return to the IRS the year after renouncing. After that, your ties to the U.S. government are severed.
He is clearly saying that you unbecome an American (renounce) without a reference to a requirement of tax compliance. There is no wrong statement to correct. The second sentence “After that, your ties to the U.S. government are severed” is referring to a statutory obligation that is post-renunciation. He is NOT saying that it affects the validity of the renunciation or that it is a condition of the renunciation. (He is simply not saying what you claim he is saying.)
Is it really so difficult to simply compliment a person, who is a clear ally, without trying to find fault with what he has written?
I do thank and compliment authors first, then *politely* offer clarification on some of the more nuanced points.
While his language is not technically incorrect, I do think it needs to be made very clear to readers that US tax compliance is optional for many (most?) potential renunciants, as indeed it is for the vast majority of dual citizens and other non-resident US persons who do not renounce. This generally isn’t what journalists, commentators and the industry tells them.
Okay, except that this is not what his article is about. So, what you really want to do is write him and suggest something that should be added to future articles. But, surely you are not going to say that “tax compliance is optional for many (most?) renunciants” without more. Your statement needs a good deal of context and clarification.
If what you mean (and this is what I think you are saying), is that there is no specific requirement of tax compliance in order to renounce US citizenship under Section 349(a) of the Immigration and Nationality Act, then that is what you need to clearly say. Suggest that you also add that the Immigration and Nationality Act is not the only statute that deals with the consequences of renunciation.
The way you put it suggests that tax compliance has no relevance to the renunciation process and the potential consequences of renunciation, which may or may not be true depending on the circumstances.
Example: Covered expatriate (because of no tax filing) subjects his/her pension to taxation as ordinary income because he renounced without being tax compliant. All that was needed to prevent that was filing five years of returns showing no tax. Obviously tax compliance does have relevance to the process. Given that it has relevance it may or may not have actual consequences. There is a clear difference between relevance and consequences.
You have agreed that there is nothing incorrect in his article. Leave him alone.
Minor boring quibble but there’s smoke everywhere and nothing better to do:
In the example above, if it’s a US pension then one needs to exercise caution, possibly play by the rules, and presumably avoid covered expatriate status. If it’s a non-US pension then no sane person would subject it to US taxation after renouncing. I never claim that non-compliance is the wise choice in *all* situations.
I agree that this is a good article, one of several recently that are finally addressing our issues without prejudice. I especially appreciate his calling attention to the fact that 27% of overseas Americans are modestly-paid educators, not conniving billionaires.
I also agree that picking on the author over trivialities that are unrelated to the theme and intention of the piece is unnecessary: it discourages such journalists and adds ammunition to the “don’t let the door slap yer ass on the way out” brigade. Why do some people always insist on having the last word?
At the risk of having the last word, it comes down to this, quoted from my pleasant, compliment-filled note to the author: “the belief that one must file to renounce, a common misperception, leads a great many unwary dual citizens into the expensive clutches of expat tax preparation firms.”
To me, keeping people out of the US tax system – except for those who legitimately need to be, of course – is job number one. I’m cynical enough not to believe that promoting non-compliance for Accidentals will somehow undermine the chances of overturning FATCA or changing CBT.
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