# Renunciation & tax compliance for "accidental American"



## Ex NRASpouse

My husband renounced in 2013 and my son wants me to help him to do the same. 

He got citizenship at birth from my husband and has always lived in the UK. He has never filed a US tax return and needs to get IRS-compliant! 

Have I got the following right? 

*Streamlined filing* - requires 3-year tax returns and 6 years FBARS
*Renunciation* - asks you to certify that you have filed for the last 5 years.

What's the best way forward?

PS: I couldn't have done my husband's renunciation stuff without the invaluable information and advice on this forum.


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## BBCWatcher

Actually the Streamlined Program requires filing the past 3 late years plus the current year (and forward), so that's 4 years. At this writing that'd be tax years 2011 through 2013 inclusive plus 2014, with 2014 due at the IRS by June 15th for overseas residents attaching the proper statement. Then he could file tax year 2015 in January, 2016, and renounce in, say, February, 2016.

The other option is a late filing of tax year 2010. You are allowed to exceed the Streamlined Program's requirements.


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## maz57

Not quite: 

1. Renouncing US citizenship has nothing to do with taxes. The person goes to the appointment, pays the $2350, and takes the oath. Done. (There is a bunch of paperwork which must be in order but that is what bureaucracies do.) Some months later the CLN is sent by mail or picked up at the Consulate. Nothing to do with taxes, but until the person properly exits the US system by filing Form 8854 they will still be considered a US taxpayer.

2. The Streamlined Filing is the latest IRS program for non-compliant overseas taxpayers. It requires 3 years of returns+6 years of FBAR. (If this were happen in the next few months, he would file a current year 2014 return before the June 15, 2015 due date for overseas filers plus the 2011, 2012, and 2013 delinquent returns. Similarly for the 6 years of FBARS, i.e. current year plus 6 back years.

3. The certifying of five years of compliance refers to the filing of Form 8854 which is the means by which one exits the US tax system for good. To put it all together, if he renounces spring of 2015, he can go ahead and get compliant via streamlined but will not file his final US return (a partial 2015) or Form 8854 until spring of 2016. Filing 8854 will require the current year (which would be the partial 2015 in this example) plus certifying compliance for the previous 5 years. If this is the goal he should add a 2010 return to his streamlined submission so that 5 years compliance is covered. Form 8854 does not mention FBAR, but the FBARs submitted with the streamlined package should be adequate.


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## Ex NRASpouse

Thanks for the prompt replies!

_"Filing 8854 will require the current year (which would be the partial 2015 in this example) plus certifying compliance for the previous 5 years. If this is the goal he should add a 2010 return to his streamlined submission so that 5 years compliance is covered. Form 8854 does not mention FBAR, but the FBARs submitted with the streamlined package should be adequate."_

This is the goal, Maz 57, so you have answered my rather woolly-worded question. I will add 2010 to the streamlined submission to ensure that my son is compliant by the time we submit the 8854.


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## BBCWatcher

Ex NRASpouse said:


> I will add 2010 to the streamlined submission to ensure that my son is compliant by the time we submit the 8854.


Just to clarify, your son is solely responsible for his own tax and financial reports that were/are due when he's a legal adult (age 18 and older). He can seek assistance from whomever he wishes, but this is an important legal point -- when he's 18 it's his responsibility.


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## maz57

BBCWatcher said:


> Just to clarify, your son is solely responsible for his own tax and financial reports that were/are due when he's a legal adult (age 18 and older). He can seek assistance from whomever he wishes, but this is an important legal point -- when he's 18 it's his responsibility.


Except for FinCen 114 (FBAR) where the instructions actually say "Generally, a child is responsible for filing his or her own FBAR report."!!! 

That means to me that everyone, regardless of age, is responsible for their own FBAR. There are exceptions: For example, they have not yet learned to sign their own name. Get 'em started young and they'll think it's all normal.

Come to think of it, now that FBARs can only be filed electronically, the youngsters might well be better able to file FBARs than their elders.


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## BBCWatcher

There's actually a method to that seeming minor (pun intended) bit of madness. It boils down to this: if a minor is old enough to open and hold a financial account in Country X, then she's also old enough to report it to Country USA.

There's no FBAR requirement for Payable on Death (PoD) or similarly organized beneficiary accounts, a typical arrangement for minor children. Parents with UGMA-style accounts would report those on their own reports (since they have signature authority at least), and I don't think the minor child has to duplicate such reports. (But please correct me if I'm wrong.) I think this just leaves the "flying solo" stuff a minor could conceivably hold.

So that's the extent of the reporting requirement if I'm correct. Then we turn to penalties for noncompliance. The U.S. Department of Justice would undoubtedly find it very hard to enforce FBAR penalties against a legal minor if it ever came to that, and it hasn't in all of recorded history so far as I'm aware and can find. The exception might be for a legally emancipated minor who has demonstrated sufficient adult competence to "fly solo."

Note that a _very_ common global problem is exploitation of both the young and old in terms of using "their" accounts for money laundering, tax evasion, and other nefarious purposes.


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## Nononymous

Ex NRASpouse said:


> My husband renounced in 2013 and my son wants me to help him to do the same.
> 
> He got citizenship at birth from my husband and has always lived in the UK. He has never filed a US tax return and needs to get IRS-compliant!


Not that I would want to discourage someone from doing things by the book if they have the time, money and energy to deal with it all, but if your son was born in the UK, has a UK passport, and has no particular connect to or assets in the US, then he can choose not to bother. It is an option.


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## BBCWatcher

I think I'd just call that "deferral," and it can make perfect sense, agreed. It's hard to value the contingent option aspects of any citizenship.

That said, one thing that comes to mind here is the potential inheritance aspects. I don't know if your husband is a "covered expatriate," but, if he is, there are some "interesting" potential estate/inheritance aspects to renunciation. Specifically, U.S. persons must pay an inheritance (or gift) tax on any inheritances or gifts they _receive_ from a covered expatriate -- the tax rules flip around. The tax rate is 40% on anything above $14,000 per year (tax year 2014 and 2015 limit, subject to inflation adjustment after 2015). Some things are not considered taxable gifts (generally), such as paying a son's university tuition or medical bills, so keep that in mind. U.K. estate tax is not _necessarily_ creditable to offset the U.S. tax -- I'd have to look into that. It's likely not creditable if it's a "different" tax: estate versus inheritance in this example. (Ordinarily the U.S. has an estate tax on estates well north of $5 million and no inheritance tax, but the renunciation rules flip things around and create a unique inheritance tax. The IRS probably does not consider a foreign estate tax and a U.S. inheritance tax to be the same thing, but I'm guessing -- somebody could check me on that. The U.S.-U.K. tax treaty might also say something about that.)

So, for example (and God forbid!), your husband dies tomorrow and leaves his $3 million estate to two heirs: $2 million to you, and $1 million to his/your son. Let's assume the U.K. takes 20% in estate tax. (I have no idea what the U.K. takes -- it's just an example.) So your son inherits $800,000 gross. His taxable receipts are thus $786,000 ($800,000 less the annual $14,000 limit), and he could be liable for 40%, or $314,400, in U.S. inheritance/gift covered expatriate tax on that amount in this hypothetical. He keeps a bit more than 60% of his inheritance from a covered expatriate, but that's not 100%.

One potential way around this problem is for the covered expatriate to bequeath to a non-U.S. person, then that person leaves his/her estate to the U.S. person, including via lifetime gifts. But that's at least awkward, unreliable, and (I assume) that Congress thought of that loophole already and somehow limited it. (I don't know, but that's a reasonable guess. Somebody could check me on that, too.)

For future reference, this is one additional aspect of U.S. citizenship renunciation one must be very careful to consider fully and carefully. Assuming you love your heirs -- and let's hope so! -- there are multiple financial aspects to that love.  Your heirs may have much different feelings about their U.S. citizenships (or U.S. residence). If you intend to provide them with gifts and/or inheritances, if you intend to renounce your U.S. citizenship, and if you're a covered expatriate, you'll want to make sure everybody is on board with the idea -- that everybody in the inheritance "clan" renounce at the same time, or at least that you have very careful estate planning to soften the blow. Or reconsider the whole renunciation idea.

If your husband is not a covered expatriate none of the above applies.


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## Ex NRASpouse

Nononymous said:


> Not that I would want to discourage someone from doing things by the book if they have the time, money and energy to deal with it all, but if your son was born in the UK, has a UK passport, and has no particular connect to or assets in the US, then he can choose not to bother. It is an option.


All of those things are true, Nononymous. However, the dreaded FATCA is kicking in in the UK. He wanted to switch current accounts recently and the new bank was asking for a declaration to confirm that he was _not_ a US citizen! He and I are assuming that gradually the UK banks will be making returns to the IRS (they pretty much have to if they want to do business in the US) and gradually the IRS will pick up non-filers. It won't be quick - but my son doesn't want to have the hassle of two tax returns. So, he's biting the bullet to get up to date and pay the extortionate $2350 fee to renounce. 

BBCWatcher, thank you for the reminder that it's my son's responsibility to do all this. I am in the role of "assistant" as I did my husband's US tax for over 40 years and managed to get through the renunciation process. I'm not an expert by any means but I know a bit more than him, at this stage. 

Happily, my husband was not a covered expatriate so we don't have to worry about that nasty sting in the IRS tail when he dies. 

My son is now in the process of digging out the information for completion of the 6 FBARs. And will then move on to the information for the tax returns. I will no doubt have further questions....


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## BBCWatcher

Ex NRASpouse said:


> ....but my son doesn't want to have the hassle of two tax returns.


Well, let's make sure you/he understand the actual requirements here. US$2350 and a couple trips to the embassy aren't trivial expenses by any means, and the contingent option value of U.S. citizenship is worth something. (As an aside, ever wonder why Boris Johnson keeps his U.S. citizenship? It'd cost him the same $2350 -- he wouldn't be subject to the exit tax -- and he's worth ~$180 million so he could afford $2350. Yet he keeps his U.S. citizenship. "Interesting," as they say.) There are two important points in terms of your son's IRS filing "requirements":

1. If he doesn't meet the IRS's filing threshold, he doesn't have to file. For a single filer he'd typically have to hit $10,000 of gross income before he's required to file. But....

2. The penalty for non-filing or late filing is zero if he owes zero U.S. tax. That's right, zero. According to the best estimate I've found about 94% of U.S. persons residing overseas owe zero U.S. tax. In other words, it's most people. (Not me, sadly. )

Continuing....

3. FinCEN Form 114 ("FBAR") is an annual (~15 minute), separate e-filing with a different threshold ($10,000 in total value of foreign financial accounts) and with no tax implications. If he's filing his FBARs when required then the U.S.-U.K. data sharing won't affect him unless and until, _possibly_, he owes _substantial_ U.S. income tax and does not file a U.S. tax return. That scenario is not _completely_ impossible, but it's very, very unlikely for a U.K. resident.

Anyway, it's quite possible he'd only have to file an annual FBAR online and that would be that. (Or not even that if his total financial accounts are below $10,000.) Maybe with the occasional bit of free money from the IRS if he cares to collect it, and that's not bad. That'd be the _typical_ pattern for a _middle class_ (or lower) U.K. resident.

I assume he possessed U.K. citizenship from birth, resides in the U.K., and has lived at least 10 years out of the last 15 outside the United States. In that case under current law (not likely to change any time soon) he'd never be subject to the U.S. exit tax even if he decides to renounce U.S. citizenship as a future, high net worth individual. Just like Boris Johnson.

4. Young (age 18 to 25) male U.S. citizens, U.S. nationals, and U.S. residents have an obligation to register with Selective Service. That's a one-time affair that takes a few minutes. Failure to do so means he won't be eligible for certain U.S. student loans and possibly a U.S. federal government job or two, as examples, so not the end of the world for most people living overseas. But it's plenty easy enough to tick that box if/when he's within that age range. If he's older, it's water under the bridge now.


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## Ex NRASpouse

My husband decided to renounce his US citizenship in 2012. It was a huge decision for him as he was, and still is, proud to be American. The reason was that we are now both retired. All of his income is from pensions. I, his NRA spouse, did his tax returns and was finding keeping up with the changes (FBAR, 8938) and the tedious calculations required for the Foreign Tax Credit more and more onerous and time-consuming. That, plus the knowledge that, on his death, his survivors would have to deal with both the IRS and HMRC made him take the decision.

So, in January 2013 I started to research the renunciation process and I began to read this forum. I have to say, BBCWatcher, that I am always impressed with your detailed, technical knowledge and I admire your consistent and spirited defence of the benefits of US citizenship. 

However, not everyone finds it so quick and easy to do the required filing. And, as one moves on in life, not everyone finds understanding the complexities of the interaction between 2 different tax systems easy. 

My son has never lived in the USA. He is married with a child. His life is here and he sees no “contingent value” in continuing US citizenship; and he does not want to deal with two tax bureaucracies. Yes, the $2350 fee is a bitter pill but, in London, that would cover about 3 or 4 years’ accountant’s fees if his affairs became more complex. As to Boris Johnson, I've given up wondering why he says and does _anything_! 

Now because you understand these complexities, I imagine this is all easy for you. But, as you know, even something as simple as paying into a “foreign” pension scheme has implications for US citizens abroad.

So, his choice is made – and I hope that you’ll continue to help with my next questions….


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## BBCWatcher

Ex NRASpouse said:


> I admire your consistent and spirited defence of the benefits of US citizenship.


Actually I argue that citizenships, at least the high quality ones, have value. U.K., U.S., Japan.... There are many excellent citizenships. Two or more are inherently useful and risk reducing, in my view. I can't promise that any one country will be (or remain) "the one" tomorrow. My crystal ball isn't that good. That's the core of my arguments and philosophy. Much as how I wouldn't recommend that anyone invest all their financial savings only in vehicles heavily dependent on a single country's or industry's fortunes.



> I hope that you’ll continue to help with my next questions….


I'll try.


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## maz57

Don't forget that a non-US person bequeathing to a non-US person can do so without any interference from the IRS.

My impression is that the goal here is getting the US government completely out of their lives.


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## Ex NRASpouse

Got it in one, Maz57! 

To quote Benjamin Franklin "...in this world nothing can be said to be certain, except death and taxes.". We've decided that one tax system is better than two!


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## BBCWatcher

maz57 said:


> Don't forget that a non-US person bequeathing to a non-US person can do so without any interference from the IRS.


That's why I brought it up! But it's a moot issue in these circumstances -- the retired husband is not a covered expatriate.

Regarding risk, it depends on your point of view. Yes, hypothetically the U.S. could increase its tax base among overseas residents from ~6%. But so could the United Kingdom! (It has, actually -- it's tougher to lose U.K. domicile.) Or 1940 could have turned out very differently (and was already really bad) -- lots of people would have taken the bet that Great Britain was literally history, and it almost was. Sellefield could have been a whole lot worse, to pick another example. The Yellowstone Caldera could blow tomorrow, in which case we're all in trouble (including especially Canadians), but you get my point.

I don't like to close down any risk-mitigating avenues unless and until necessary. But of course others may feel differently.


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## maz57

BBCWatcher said:


> I don't like to close down any risk-mitigating avenues unless and until necessary. But of course others may feel differently.


Yup. If a person doesn't actually live in the United States being a US citizen has become a substantial risk in recent years. The US government has gone to great lengths to make sure of that, even coercing other governments to assist in the attack. Losing that US citizenship is a rational, logical risk-mitigating avenue to address this problem.

Risk tolerance varies from person to person. Yours is apparently higher than many on this forum.


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## Bevdeforges

It's not necessarily "just" a matter of risk tolerance. Depends quite a bit on any and all existing ties to the US, particularly financial ones (bank accounts, inheritances, etc.) and your potential visibility on the IRS radar. Other than bank interest and investment income (what FATCA is designed to dig up), there aren't all that many foreign sources of income that are routinely visible to the IRS.

They basically have to take your word on your employment income, and on whatever local government benefits you do or don't report on your returns. (There are some interesting debates on various sites online about what benefits are and aren't considered "income" for US tax purposes. And they can all cite chapter and verse to support their points of view.)

Some folks may see it all as risk, while others consider it "opportunity."
Cheers,
Bev


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## Nononymous

Ex NRASpouse said:


> All of those things are true, Nononymous. However, the dreaded FATCA is kicking in in the UK. He wanted to switch current accounts recently and the new bank was asking for a declaration to confirm that he was _not_ a US citizen! He and I are assuming that gradually the UK banks will be making returns to the IRS (they pretty much have to if they want to do business in the US) and gradually the IRS will pick up non-filers. It won't be quick - but my son doesn't want to have the hassle of two tax returns. So, he's biting the bullet to get up to date and pay the extortionate $2350 fee to renounce.


Fair enough, ultimately that's the safest. But I'm surprised that a UK bank would demand confirmation from a UK citizen with a UK birthplace - is that routine for every new account, or did they know something of his parentage? (If I was off the US radar and didn't want to deal with renunciation I would simply lie to the bank, but that's a personal decision.)


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## BBCWatcher

maz57 said:


> If a person doesn't actually live in the United States being a US citizen has become a substantial risk in recent years.


Hyperbole much? 

Look, it's pretty simple for me. Every citizenship is a package of rights, privileges, and obligations. Moreover, possession of multiple citizenships is inherently risk-reducing because those rights, privileges, and obligations can and do change over time. Country X really could go pear shaped tomorrow, and in that case it'd be awfully nice to have Country Y's passport (and perhaps to terminate Country X's citizenship at that point in time, depending on the circumstances). That's just common sense and shouldn't be controversial -- basic theory of diversification.


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## Nononymous

BBCWatcher said:


> Look, it's pretty simple for me. Every citizenship is a package of rights, privileges, and obligations. Moreover, possession of multiple citizenships is inherently risk-reducing because those rights, privileges, and obligations can and do change over time. Country X really could go pear shaped tomorrow, and in that case it'd be awfully nice to have Country Y's passport (and perhaps to terminate Country X's citizenship at that point in time, depending on the circumstances). That's just common sense and shouldn't be controversial -- basic theory of diversification.


I'd say the best risk-reward combination is being an off-the-radar non-compliant US citizen with a non-US birthplace, but an ancient child passport to prove it (i.e. my daughter). Then you'll never be troubled by Uncle Sam, but you've got safe harbour when Quebec votes to separate and Canada becomes the next Bosnia-circa-1993.


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## Nononymous

Nononymous said:


> I'd say the best risk-reward combination is being an off-the-radar non-compliant US citizen with a non-US birthplace, but an ancient child passport to prove it (i.e. my daughter). Then you'll never be troubled by Uncle Sam, but you've got safe harbour when Quebec votes to separate and Canada becomes the next Bosnia-circa-1993.


Or Scotland, for that matter...


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## BBCWatcher

Nononymous said:


> I'd say the best risk-reward combination is being an off-the-radar non-compliant US citizen with a non-US birthplace, but an ancient child passport to prove it (i.e. my daughter).


Compliance and possession of a citizenship are separate matters, true.


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## maz57

BBCWatcher said:


> Hyperbole much?
> 
> Look, it's pretty simple for me. Every citizenship is a package of rights, privileges, and obligations. Moreover, possession of multiple citizenships is inherently risk-reducing because those rights, privileges, and obligations can and do change over time. Country X really could go pear shaped tomorrow, and in that case it'd be awfully nice to have Country Y's passport (and perhaps to terminate Country X's citizenship at that point in time, depending on the circumstances). That's just common sense and shouldn't be controversial -- basic theory of diversification.


Not hyperbole, a simple statement of fact. 

Boy, you have described the situation perfectly. Country X HAS gone pear shaped, it's great to have Country Y's passport, and terminating Country X's citizenship IS a great relief. The plan works .


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## Ex NRASpouse

Nononymous said:


> But I'm surprised that a UK bank would demand confirmation from a UK citizen with a UK birthplace - is that routine for every new account, or did they know something of his parentage?


We don't know. Son was filling in an online application with Nationwide (a former Building Society -not one of the big six UK banks) and this question came up. They knew nothing of his parentage.

However, here is a quote from the British Banking Association website (my bold):

_"Almost 100 jurisdictions have now publicly committed to implement the Common Reporting Standard (CRS), a global standard for automatic exchange of financial account information for tax purposes, sometimes called ‘Global FATCA’. The EU has now even agreed on a Directive to integrate the CRS into EU law. *New account opening procedures to record tax residence will need to be in place from 1 January 2016.* Certain due diligence procedures will be required to be completed by 31 December 2016. Reporting will start in 2017_."

Perhaps Nationwide have started putting new recording procedures in early?


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## Nononymous

Ex NRASpouse said:


> We don't know. Son was filling in an online application with Nationwide (a former Building Society -not one of the big six UK banks) and this question came up. They knew nothing of his parentage.
> 
> However, here is a quote from the British Banking Association website (my bold):
> 
> _"Almost 100 jurisdictions have now publicly committed to implement the Common Reporting Standard (CRS), a global standard for automatic exchange of financial account information for tax purposes, sometimes called ‘Global FATCA’. The EU has now even agreed on a Directive to integrate the CRS into EU law. *New account opening procedures to record tax residence will need to be in place from 1 January 2016.* Certain due diligence procedures will be required to be completed by 31 December 2016. Reporting will start in 2017_."
> 
> Perhaps Nationwide have started putting new recording procedures in early?


For the CRS thing, my guess is that information about tax residence would apply more to someone living outside the UK having to report that fact when opening an account in the UK, to prevent them hiding money from the tax authorities in their own country. This is fundamentally different from FATCA/FBAR, where your son, a UK tax resident, must to report bank balances to the US, where he is not resident, but because he is a citizen.

I suppose it's not surprising that the bank would simply ask a general question about US citizenship when opening an account (I've seen a similar thing on a screen in a Canadian bank). What's more interesting is what would happen if your son had answered "no" and continued with the online application. I expect that would be the end of it. Otherwise to confirm that he's not a US person the bank would need to see all sorts birth records over several generations, and more (that US citizenship is not automatically acquired simply by virtue of having an American parent - that parent must have lived a certain number of years in the US to transmit citizenship). It's actually quite complex. 

Again, if your son is willing to jump through all the hoops and spend the money to exit the US, that would be safest. But if he's born in the UK, has no connections to the US, and is willing to tell the odd lie, I expect he could do nothing and escape unmolested.


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## Nononymous

BBCWatcher said:


> Compliance and possession of a citizenship are separate matters, true.


It would be grand if the US took away your citizenship for non-compliance, provided of course that you had another passport. Problem solved, for many people.


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## Bevdeforges

Actually, the "global FATCA" thing is more likely something being promoted by the OECD. It's considerably less intrusive than the US version, and it makes sense that they would take steps to determine the tax residence of all customers opening new accounts. I don't see anything in what you've quoted referring specifically to the US FATCA nor to the IRS.

Basically, what I think they're planning on doing is determining your son's tax residence and that's the tax authority to which they'll report any information on the account's existence or balances. If it were US-based (or oriented) they'd be asking him to fill out a W-9 form. I wouldn't do anything more in his situation than to answer the questions they ask - and don't volunteer any extraneous information if they haven't specifically asked for it.

They do have an obligation at this point to do "due diligence" on opening new accounts in connection with the US FATCA - but if your son wasn't born in the US, there's no real reason they should ask about US citizenship. (Unless they've gotten in trouble with the US IRS or banking authorities, in which case they may be overly cautious.)
Cheers,
Bev


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## maz57

Nononymous said:


> But I'm surprised that a UK bank would demand confirmation from a UK citizen with a UK birthplace - is that routine for every new account, or did they know something of his parentage?


Doesn't surprise me. Unless the FATCA trend changes, I expect it will eventually become SOP for every bank in the world, at least those that want to do any business via the US system. Having an undiscovered US citizen among your customers is fast becoming one of those hidden "gotcha"s that is a foreign bank's worst nightmare.

Naturally a bank would want to know about their customer's tax residency, but if that customer also happens to be a US citizen, there is an order of magnitude increase in complication and risk for the bank. The proof of that is the many banks which will no longer allow a US citizen to be their customer.

It's not likely the Canadian banks will "fire" their US customers because they would be a significant percentage of their total customer base. For banks with only a handful of US-tainted customers it is less complicated and eliminates risk to simply get rid of them.


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## BBCWatcher

"Are you a U.S. person?" is already a standard question at many banks outside the U.S. when opening an account. More will follow.

OK, so I fill out a FinCEN 114 every year (usually in January). Yawn.


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## maz57

If it doesn't bother you to register annually as a financial criminal, then I guess you are OK with allowing the IRS to remotely control every aspect of your financial life.


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## Bevdeforges

OK, we're getting a little silly here. The FinCEN 114 is nothing more than the online version of the old FBAR filings. Yes, you are supposed to report the existence of all foreign accounts and report the high balance for the year (which can be an estimate). 

There is nothing to indicate that what you report on the FinCEN/FBAR is checked against any tax filing you may (or may not) have made - unless, of course, you are selected for audit for some reason. Plenty of folks with foreign accounts totaling six figures (or more) are legitimately exempt from filing tax returns.

Further, even with the new (and improved?) bank reports on US persons with foreign accounts, the banks are only reporting year end balances and interest/income paid on the account. It's highly unlikely that anyone is going to run down the normal sorts of discrepancies between the two reporting sources, whether or not you filed a tax return for that particular year. 
Cheers,
Bev


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## BBCWatcher

Maz, I'd be thrilled if you have constructive ideas to offer on how better to combat financially oriented international crimes such as tax evasion, financing of terrorism and other conflicts, money laundering in support of human trafficking, violation of international trade sanctions, corrupt leaders stealing national assets and hiding them overseas, murder for hire, and bribery, as examples.


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## the_mighty_tim

maz57 said:


> Doesn't surprise me. Unless the FATCA trend changes, I expect it will eventually become SOP for every bank in the world, at least those that want to do any business via the US system. Having an undiscovered US citizen among your customers is fast becoming one of those hidden "gotcha"s that is a foreign bank's worst nightmare.
> 
> Naturally a bank would want to know about their customer's tax residency, but if that customer also happens to be a US citizen, there is an order of magnitude increase in complication and risk for the bank. The proof of that is the many banks which will no longer allow a US citizen to be their customer.
> 
> It's not likely the Canadian banks will "fire" their US customers because they would be a significant percentage of their total customer base. For banks with only a handful of US-tainted customers it is less complicated and eliminates risk to simply get rid of them.


Slightly OT, but still related:

I got a form in the post today from a bank with whom I just set up a new account with. It asks if I'm a US citizen (which I am), but it also asks if I'm only a UK tax resident, and if not, which other countries I am a tax resident of.

I live and work in the UK, and when I fill out the tax return forms the IRS insist I do, because I happened to be born in the US, I owe them nothing. However, does this also make me a tax resident of the US as well?

Also, what's the bank likely to do to me once they have this information?


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## Nononymous

the_mighty_tim said:


> Slightly OT, but still related:
> 
> I got a form in the post today from a bank with whom I just set up a new account with. It asks if I'm a US citizen (which I am), but it also asks if I'm only a UK tax resident, and if not, which other countries I am a tax resident of.
> 
> I live and work in the UK, and when I fill out the tax return forms the IRS insist I do, because I happened to be born in the US, I owe them nothing. However, does this also make me a tax resident of the US as well?
> 
> Also, what's the bank likely to do to me once they have this information?


I had an answer then re-read the question and realized that it's ambiguous enough that I'd be inclined to call the bank and ask for clarification. What do they mean by tax resident of another country? You are obliged to file US tax returns as a US citizen anywhere in the world, but I'm not sure that means that you are also US tax resident.

If you are compliant with your US taxes, you're on the radar so there's nothing to be gained by not answering truthfully (though you probably need to ask for the correct answer in your situation, given the ambiguity). The bank will report your account balance information to the US as per FATCA.


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## maz57

the_mighty_tim said:


> Slightly OT, but still related:
> 
> I got a form in the post today from a bank with whom I just set up a new account with. It asks if I'm a US citizen (which I am), but it also asks if I'm only a UK tax resident, and if not, which other countries I am a tax resident of.
> 
> I live and work in the UK, and when I fill out the tax return forms the IRS insist I do, because I happened to be born in the US, I owe them nothing. However, does this also make me a tax resident of the US as well?
> 
> Also, what's the bank likely to do to me once they have this information?


All US citizens are by definition US tax residents. This is true no matter where in the world that US citizen actually lives, whether or not they owe any US tax, and it makes no difference if that person is also a tax resident of some other country. 

If you answer this question truthfully, your new bank will "FATCA" you, i.e. it will report your account information to the IRS. Not sure whether the bank will report directly to the IRS or to the UK tax authority which will then relay that info to the IRS; it depends on the wording in the UK/US IGA. The bank may ask you to fill out an IRS form to ascertain all of your US tax information--SSN, address, etc.

Your new bank might also terminate your account if the bank doesn't want to deal with US citizen customers, but if that were the case it's likely the bank would have asked you if you had a US "taint" before they signed you up as a new customer.


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## Nononymous

BBCWatcher said:


> Maz, I'd be thrilled if you have constructive ideas to offer on how better to combat financially oriented international crimes such as tax evasion, financing of terrorism and other conflicts, money laundering in support of human trafficking, violation of international trade sanctions, corrupt leaders stealing national assets and hiding them overseas, murder for hire, and bribery, as examples.


I'd settle for this: the country in which you are a tax resident (regardless of citizenship) requires you to disclose all your foreign income and financial assets; information exchange agreements allow countries to check up on this by identifying non-resident account holders (e.g. no more Germans stashing their money in Switzerland or Luxembourg). 

I don't quite see how requiring full tax reporting from non-resident citizens (i.e. CBT as practiced only by the US and Eritrea) improves on this.


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## maz57

BBCWatcher said:


> Maz, I'd be thrilled if you have constructive ideas to offer on how better to combat financially oriented international crimes such as tax evasion, financing of terrorism and other conflicts, money laundering in support of human trafficking, violation of international trade sanctions, corrupt leaders stealing national assets and hiding them overseas, murder for hire, and bribery, as examples.


Sorry, BBC. I missed this last post of yours. I regret I can't provide you with any thrills today; I don't have the answers to the concerns you mention. 

However, I do know this: CBT and FATCA are not going to fix any of those problems. You might be surprised to know that I do support international reporting standards based on residency (and by that I mean real tax residency, not the bogus US citizenship based tax residency). Unfortunately, the US insistence on CBT works against implementing such a common reporting standard because it is inconsistent with the tax systems of other countries.

I expect you already know the Republican National Committee passed a resolution in favor of repealing FATCA and switching the US to residence based taxation like the rest of the world. A hopeful sign, but I'm not holding my breath.


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## the_mighty_tim

maz57 said:


> All US citizens are by definition US tax residents. This is true no matter where in the world that US citizen actually lives, whether or not they owe any US tax, and it makes no difference if that person is also a tax resident of some other country.
> 
> If you answer this question truthfully, your new bank will "FATCA" you, i.e. it will report your account information to the IRS. Not sure whether the bank will report directly to the IRS or to the UK tax authority which will then relay that info to the IRS; it depends on the wording in the UK/US IGA. The bank may ask you to fill out an IRS form to ascertain all of your US tax information--SSN, address, etc.
> 
> Your new bank might also terminate your account if the bank doesn't want to deal with US citizen customers, but if that were the case it's likely the bank would have asked you if you had a US "taint" before they signed you up as a new customer.


Thanks all. 

I'm already US tax compliant, having gone through the Streamlined process at the end of 2013, and then subsequently completing the tax forms and FBAR in 2014 for the 2013 tax year.

Hopefully, all that will happen will be that I will send off the form and that will be that.


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## Nononymous

the_mighty_tim said:


> Thanks all.
> 
> I'm already US tax compliant, having gone through the Streamlined process at the end of 2013, and then subsequently completing the tax forms and FBAR in 2014 for the 2013 tax year.
> 
> Hopefully, all that will happen will be that I will send off the form and that will be that.


Sounds like the only thing you'd have to fear is the (presumably) unlikely prospect of the bank deciding they don't want a US-citizen customer. Otherwise there can't be consequences to FATCA reporting if you're already compliant.


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