# Sticky  The renunciation issue - as tax strategy and other



## diharv

Hello all
For the last two years , ever since I learned about my US tax filing "obligations" ,I have been lurking and reading on this forum learning as much as I could possibly learn.Needless to say this has all caused an awful lot of stress and turmoil in my life to the point that it was one of several contributing factors in a nervous breakdown I suffered in Feb of 2012. But that is another story and all is well now. From what I learned on this site and others is that I have too much to lose potentially and the head in the sand approach was not going to help me sleep at night so I explored options and decided that I needed professional help as in addition to my personal tax returns I also need to file an informational return for my corporation so this complicates things further. I settled on a firm here in my province in Canada . I had spent some time talking to an accountant in the US but decided the logistics would be difficult. It took a long while to decide to actually become compliant but the announcement of the streamlined procedure was the push I needed to get the ball rolling. 
I met with the accountant in Nov 2012 and was told that basically I needed to file personal returns and 5471s starting from 2009 and FBARS starting from 2006. It has been alot of back and forth with my accountant for roughly ten months . 2012 was completed also. The biggest hassle was having to drive 900 km each way to Wenatchee Washington to apply for a SSN. I was told on the phone to bring documents that prove my whereabouts for each decade but when I got there it was for each year ! I failed to see the logic in this as I was born in the US so I should be entitled to have one regardless of where I've been. I didn't even really want the thing and they're making it difficult ! Anyway I got it and was able to proceed. Then I was asked to get ITNNs for my wife and kids to be able to claim them as dependents. I wanted them left clear out of this but after all the hassle to get them it did save some money I guess.
So as far as I know I am caught up with four years filed and I rest and sleep easier now that I have taken the decision to become compliant. I refuse to use the term "come clean " because it implies that one was dirty or dishonest prior to and the simple fact is we were unaware. It has been a massively expensive exercise in paperwork all to show that I owe little in tax if anything to the US. I would say to this point I have paid accounting fees and tax of about $15000.00 , 90% of that being accountant fees. I don't see how I can do this every year for the rest of my life to be honest. I do not have any specific questions to the members of the forum but I wanted to share my story. I know the law is the law but I feel angry and betrayed by the country of my birth. I am a Canadian citizen also by the way but where I once considered my US citizenship an asset it is now a burden , a poisoned apple that I do not want passed onto my children which is not the case as I have been in Canada since age of four and my wife is Canadian.
I guess one thing I would like to ask of forum members if I am permitted to do so is anyone else tired of all this ? I live ,eat and breathe this it seems every waking hour. The process now ,thinking about next year and the next and every day opening the mailbox with dread . The constant reading about FATCA which does not affect those of us that are compliant but will flush all those out that are not. Like it or not it is coming and it will NOT be repealed. The constant threat of penalties and prosecutions , they really wear on a person. Rea;lly , is threats the way to get people compliant? All of this has got me thinking about what to do and it looks like expatriation from the US is my best and only option. I don't like it but feel I am being forced into it and it will be with a heavy heart that I do it but my ties with the US are limited to some family members living down there. My only concern is being able to freely cross the border without hassle as an expatriate. I would love to hear from any others who feel the same way. Sorry about being so long winded but I wanted to get my story out there. Thank you.


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## BBCWatcher

You have to weigh the inconvenience of a possible annual U.S. tax filing -- keeping in mind the first one is the most challenging -- against your legal right to visit, reside, and/or work in the United States any time you wish for as long as you wish. Non-nationals have no legal right to enter the United States -- a phenomenon in reverse quite familiar to Americans with even minor criminal records who try to enter Canada. If you want an ironclad guarantee of being able to visit family members in the United States (and for more than 90 days) then retaining citizenship seems to be the only option.

It's basically impossible to tell you how to value the pros and cons. It's a personal decision.


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## Bevdeforges

Thanks for sharing your experience. Yes, you do have to make a decision going forward as to just how much "forward" you want to go with this. And renunciation is the option if you want to be shed of the whole tax filing responsibility. (Though do look into the "expatriation tax" - if you qualify for it, you're kind of stuck.)

I just spent a good part of yesterday afternoon reading through the tax treaty between the US and France (plus the "protocols" and "technical explanations" that go with it all). Not fun reading, but it did relieve me of quite a bit of concern over a few upcoming issues on my tax returns.

Each of the tax treaties is different and it pays to know precisely what you may be up against. FATCA is also an issue - and while I agree with you that there is darned little chance it will be repealed, you also have to consider how it impacts on your particular situation, based on what financial assets and investments you hold, and where.

As BBCWatcher says, the year you get into compliance is the killer as far as fees and filings are concerned. If your financial situation isn't too awfully complicated, you may want to look into using filing software to do your own taxes, using your copies of those years already filed as a model. Or simply find an accountant (or enrolled agent) who can prepare your returns for a lower fee. Do consider all your options. 

Just as an example, after twenty years of doing my "annual love letter to the IRS" I have it down to about 20 minutes to prepare the forms. (A little more now that I use tax preparation software, since I have to figure out how to get the software to put things where I know they go. <g>) But my tax situation is pretty simple - and I know how to research what I need on the IRS website. (It also helps that the IRS office in Paris puts out some excellent information for filing from overseas, including a summary of "free-file" sites that take foreign addresses.)
Cheers,
Bev


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## diharv

Happy new year and thank you for the replies. I agree that getting out of the system is indeed a very personal decision. I guess I have to look at it as really how much does being a US citizen play a part in my life and that of my family. By that I mean the positive parts it plays because for the last two years it has played a very very negative part in our lives. I'm coming to the conclusion that the pros are mostly idealogical and not necessarily practical. I have lived almost 45 out of my 48 years in Canada . I will finish out my career here and my children will live here so I think I am not going anywhere in the future to live long term. Basically what I get out of the US is the occasional trip to Maui and short term trips to visit family. I'm thinking that if I will be afforded the same treatment as any other Canadian citizen will have then I would not have any regrets with going all in and throwing my hat in the Canadian ring. If I am not going to be looked as a villain or a traitor every time I cross the border then all I have to do is come to terms with how it will make me feel. I believe Canadians can spend up to 180 days in the US per year if I am not mistaken.The thing is not to spend so much time as to be roped back into the tax system if one is deeemd a resident.
As for doing the returns myself I have not had a good analytical look at them. Each years return is over one inch thick what with the 1040,5471,8893,RRSP form and a bunch of others. There was a whole lot of procedures taken also what with carrying tax credits forward and back over the years it just seemed that with all the accountant was going through I don't think I could ever pull it off myself. I probably picked one of the more expensive firms but I wanted a complete job done with little error as I don't want this flying back in my face. Hence the opening the mailbox with dread each and every day. From what I have found , there are very few options outside of the larger multinational accounting firms. Maybe I am wrong but most of the mom and pop accounting shops and independent accountants including my own personal accountant that does my personal Canadian return know nothing about this and have advised me to do nothing and ignore it which I did not want to do. The CA who does my returns for my little corporation , when I told him I was a US citizen you could hear his cries of no no no through the telephone in the next room. It was not possible for him to do the returns either because it was way beyond his scope, not knowing enough about the uS tax code etc.
This past fall I had to get my banking reorganized and in dealing with two banks neither one of the agents we dealt with had heard of all this or FATCA. when you tell them that all US citizens have to fikle returns with no US income they think you're from another planet. Even the agent at the social security office when I went to apply for the SSN was bewildered which did not make me feel good. I questioned whether I was doing the right thing as it felt like I was the only person in the world gullible enough to become compliant. The US border agent also asked me if I had US income. When I said no then she asked then why do you have to file? As for the banks here , unless it is pushed back further they will be giving their staff a quick education on FATCA!
Thanks everyone !


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## BBCWatcher

There's a fairly high correlation between complex taxes (form outputs) and complex/expensive exit tax issues. As Bev suggests, the cure may be worse than the disease.

Canadians typically enjoy entry privileges into the U.S. at present. There are no guarantees whatsoever. A foreigner's entry into the U.S. is entirely at the discretion of the CBP agent and his/her superiors. If guaranteed access to family members is important, you have to think things through carefully.

I also agree with Bev that you ought to take your own spin through the free and/or low cost tax preparation software packages, e.g. TaxAct. Now that you have years of completed returns they're presumably good models going forward. The forms and their length may be complex, but even the professionals don't fill out the forms the way you think they do. They also use preparation software which then spits everything out.


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## swisspinoy

diharv said:


> Hello all
> For the last two years , ever since I learned about my US tax filing "obligations" ,I have been lurking and reading on this forum learning as much as I could possibly learn.Needless to say this has all caused an awful lot of stress and turmoil in my life to the point that it was one of several contributing factors in a nervous breakdown I suffered in Feb of 2012. But that is another story and all is well now. From what I learned on this site and others is that I have too much to lose potentially and the head in the sand approach was not going to help me sleep at night so I explored options and decided that I needed professional help as in addition to my personal tax returns I also need to file an informational return for my corporation so this complicates things further. I settled on a firm here in my province in Canada . I had spent some time talking to an accountant in the US but decided the logistics would be difficult. It took a long while to decide to actually become compliant but the announcement of the streamlined procedure was the push I needed to get the ball rolling.
> I met with the accountant in Nov 2012 and was told that basically I needed to file personal returns and 5471s starting from 2009 and FBARS starting from 2006. It has been alot of back and forth with my accountant for roughly ten months . 2012 was completed also. The biggest hassle was having to drive 900 km each way to Wenatchee Washington to apply for a SSN. I was told on the phone to bring documents that prove my whereabouts for each decade but when I got there it was for each year ! I failed to see the logic in this as I was born in the US so I should be entitled to have one regardless of where I've been. I didn't even really want the thing and they're making it difficult ! Anyway I got it and was able to proceed. Then I was asked to get ITNNs for my wife and kids to be able to claim them as dependents. I wanted them left clear out of this but after all the hassle to get them it did save some money I guess.
> So as far as I know I am caught up with four years filed and I rest and sleep easier now that I have taken the decision to become compliant. I refuse to use the term "come clean " because it implies that one was dirty or dishonest prior to and the simple fact is we were unaware. It has been a massively expensive exercise in paperwork all to show that I owe little in tax if anything to the US. I would say to this point I have paid accounting fees and tax of about $15000.00 , 90% of that being accountant fees. I don't see how I can do this every year for the rest of my life to be honest. I do not have any specific questions to the members of the forum but I wanted to share my story. I know the law is the law but I feel angry and betrayed by the country of my birth. I am a Canadian citizen also by the way but where I once considered my US citizenship an asset it is now a burden , a poisoned apple that I do not want passed onto my children which is not the case as I have been in Canada since age of four and my wife is Canadian.
> I guess one thing I would like to ask of forum members if I am permitted to do so is anyone else tired of all this ? I live ,eat and breathe this it seems every waking hour. The process now ,thinking about next year and the next and every day opening the mailbox with dread . The constant reading about FATCA which does not affect those of us that are compliant but will flush all those out that are not. Like it or not it is coming and it will NOT be repealed. The constant threat of penalties and prosecutions , they really wear on a person. Rea;lly , is threats the way to get people compliant? All of this has got me thinking about what to do and it looks like expatriation from the US is my best and only option. I don't like it but feel I am being forced into it and it will be with a heavy heart that I do it but my ties with the US are limited to some family members living down there. My only concern is being able to freely cross the border without hassle as an expatriate. I would love to hear from any others who feel the same way. Sorry about being so long winded but I wanted to get my story out there. Thank you.


I used to attempt to free-file and never paid more than $75/year to file US tax returns. Once, I explained to the US that I'll be living outside of the US for at least another 30 years, after which I might possibly retire in the US. Yet, then I learned that most banks were rejecting US clients and most refused to refinance my mortgage. In response, I went to the US embassy and renounced US citizenship.

Since then, I've been able to refinance my mortgage with my same local bank which does not accept US clients. I now have more time and money (saving $75/year) for myself, as well as less stress and no threats from the US. No local US tax filing burden makes it easier to be better organized with local taxation. I also have far more financial options available to me, which were previosly denied as a US citizen.

So, overall, I'd say that a renunciation is a highly positive experience which I can only recommend. I love American, the American people and I'll always have American culture and American ancestry, but it is nice to live a normal life without being burdened with US domestic problems. One really doesn't need to be troubled with all of these American issues when one does not live in America.

It is sad and unfortunate that individuals are being forced to renounce US citizenship, but often unavoidable with the current US political atmosphere.


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## diharv

swisspinoy said:


> I used to attempt to free-file and never paid more than $75/year to file US tax returns. Once, I explained to the US that I'll be living outside of the US for at least another 30 years, after which I might possibly retire in the US. Yet, then I learned that most banks were rejecting US clients and most refused to refinance my mortgage. In response, I went to the US embassy and renounced US citizenship.
> 
> Since then, I've been able to refinance my mortgage with my same local bank which does not accept US clients. I now have more time and money (saving $75/year) for myself, as well as less stress and no threats from the US. No local US tax filing burden makes it easier to be better organized with local taxation. I also have far more financial options available to me, which were previosly denied as a US citizen.
> 
> So, overall, I'd say that a renunciation is a highly positive experience which I can only recommend. I love American, the American people and I'll always have American culture and American ancestry, but it is nice to live a normal life without being burdened with US domestic problems. One really doesn't need to be troubled with all of these American issues when one does not live in America.
> 
> It is sad and unfortunate that individuals are being forced to renounce US citizenship, but often unavoidable with the current US political atmosphere.


Thank you for this reply. I have been wanting to hear from anyone who has actually gone through the renunciation process and learn about their experience with it during and after the process.I guess I am looking for others' positive experiences to help validate my own decision which of course is mine and mine to make alone. I know that everything I read especially if it is US sourced will only try to discourage and cast doubt on anyone's decision to expatriate. I would not be heartbroken if I could not go and live there but I would hope I would be treated like any other Canadian born citizen that crosses the border to visit and travel. My ties to the US are familial but to the extent of an Aunt and first cousins and on further in distance .
Could you tell me a bit about the actual process and the filing of the final returns that once and for all got you out of the system ?
Thank you.


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## Bevdeforges

A couple of comments on the renunciation process:

At the present time, there should be no impediment to your visiting the US now and then. There is a law on the books saying that you can be refused any sort of entry visa (presumably also a VWP entry) but as far as I can tell, this has never been enforced - and is mostly for "notorious" cases.

If and when you do return to the US, you should carry your renunciation certificate with your (presumably Canadian) passport - because they can give you a hard time if they note that you have a US place of birth.

The other thing to check is the status of your children. Lately, as long as you spent the requisite time in the US, your kids automatically acquire US citizenship even if you don't register them at the consulate. I note you said you've spent 45 of your 48 years as a Canadian resident, so it's most likely your kids aren't US citizens. 

For information about the tax forms necessary once you have renounced, you can read up on it here: Expatriation Tax Check the forms and publications section and you'll find a copy of the forms available for download. 
Cheers,
Bev


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## Pacifica

@Diharv,

Regarding renunciation procedure, you can read several dozen people’s accounts of their renunciation experiences in the Consulate Report Directory. 

You can see the required Dept of State forms at the following links. Some consulates require form 4079 questionnaire, for renunciation, some don’t -- your local consulate will let you know. 
Form 4079 Questionnaire. 
Form 4081 Statement of Understanding of Consequences  
Form 4080 Oath of Renunciation 
Form 4083 Certificate of Loss of Nationality 

Renunciation takes one visit at some consulates, two visits at some. As for Western Canada, Calgary and Vancouver do it in one visit. The meeting/s tend to be short and focused on nuts and bolts. The consulate staffs seem overall to be quite pleasant and mainly interested in making sure you’re aware of the consequences of renouncing (as per the 4081), not adversarial. 

Maple Sandbox has a thread on post-expatriation border crossing experiences . So far, no one has reported problems crossing the border after expatriation. I’ve entered the US as a former citizen dozens of times over thirty years with no problem or hassles at all, although of course one never knows about the future.

Your final tax returns would be due June 15th of the year following your renunciation.


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## BBCWatcher

I'll toss in another possible consideration. You currently have the guaranteed right to live and work anywhere in the United States since you are a U.S. citizen. You also have the right to sponsor your spouse and your minor children to live with you in the United States, and they in turn have at least a path to U.S. citizenship on that basis should they wish.

Now, maybe they feel that U.S. citizenship is full of cons and no pros, or at least the cons outweigh the pros. Or...maybe they don't feel that way, depending on their individual situations and aspirations in life. As one example, if your goal in life is to be a Broadway or Hollywood star (or at least work in that industry), then U.S. citizenship is a major and unique plus. As another example, if you're a talented surfer, U.S. citizenship is at least useful. "It depends."

One reasonable technique to address that potential problem is to wait until all your children are grown (i.e. 18 or older, with no prospect of additional children) -- in other words, to wait until the opportunity to sponsor their residency in the U.S. is foreclosed due to their ages. I think that's age 18 -- I'd have to double check the rules -- but that's the basic idea.


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## Bevdeforges

One small caveat to BBCWatcher's comments:

You have to be resident in the US as a US citizen to sponsor anyone - spouse, or children - for a visa. If you have no intentions of moving back there, then it isn't a consideration, regardless of the ambitions of your children.

The one thing to bear in mind is that the decision to renounce is irreversible and it is possible that you could be refused any sort of immigrant visa to move to the US. (Not sure if that has been tested yet.) So far, short term visits back to the US don't seem to pose any/much problem.
Cheers,
Bev


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## swisspinoy

Bevdeforges said:


> The one thing to bear in mind is that the decision to renounce is irreversible and it is possible that you could be refused any sort of immigrant visa to move to the US.


Everything is relative. Some individuals who renounced had their citizenship restored, such as thousands of Japanese Americans. Some Americans also recognize the problems of FATCA and the negative impact it is having on innocent Americans living abroad. It all depends upon the situation and circumstances and any law can be ignored, overruled, reversed or slashed. But, it generally doesn't make any sense for a long-term expat to be troubled with US jurisdiction stuff.


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## swisspinoy

diharv said:


> Thank you for this reply. I have been wanting to hear from anyone who has actually gone through the renunciation process and learn about their experience with it during and after the process.I guess I am looking for others' positive experiences to help validate my own decision which of course is mine and mine to make alone. I know that everything I read especially if it is US sourced will only try to discourage and cast doubt on anyone's decision to expatriate. I would not be heartbroken if I could not go and live there but I would hope I would be treated like any other Canadian born citizen that crosses the border to visit and travel. My ties to the US are familial but to the extent of an Aunt and first cousins and on further in distance .
> Could you tell me a bit about the actual process and the filing of the final returns that once and for all got you out of the system ?
> Thank you.


It is generally more difficult to renounce than to have renounced. Prior to renouncing, one wonders why such is necessary, if it is really the best thing, if it makes sense, etc. Afterwards, one tends to feel relaxed and much lighter in the shoulders. It is like feeling a sense of relief. Then, life goes on as if nothing happened. Basically, one continues living on at home like usual with a distant fading memory about this distant irrelevant citizenship that one once used to have but really doesn't need.

Renouncing may even make one feel more American with the understanding that one doesn't need to live in America to be American! Or, one may feel closer attached to one's home, no longer having any dual-nationality conflicts and no longer feeling obligated to have any loyalties, ties or attachments to America. It certainly encourages one to become more patriotic where one lives.

The basic process is simple. One contacts the embassy for some forms, schedules an appointment and then hands over the filled-out forms to get rid of the citizenship. The next year, one then fills out form 8854 to exit the US tax system.

It may become more complicated, though, if one is not a dual since birth or has 2+ million in assets. In such cases, one may need to demonstrate that one is not a "covered expatriate".


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## Bevdeforges

swisspinoy said:


> Everything is relative. Some individuals who renounced had their citizenship restored, such as thousands of Japanese Americans. Some Americans also recognize the problems of FATCA and the negative impact it is having on innocent Americans living abroad. It all depends upon the situation and circumstances and any law can be ignored, overruled, reversed or slashed. But, it generally doesn't make any sense for a long-term expat to be troubled with US jurisdiction stuff.


I don't think this is the place, nor the time, to argue the virtues and "challenges" of renunciation. It's a very personal decision, and needs to be taken with full appreciation of one's own financial and emotional situation.

OTOH, it is an option and just about the only way out of the requirement to file US taxes while living overseas. Just consider all the options before jumping to any decisions.
Cheers,
Bev


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## BBCWatcher

swisspinoy said:


> Some individuals who renounced had their citizenship restored, such as thousands of Japanese Americans.


I have no idea what you're trying to say. Bev is correct: a voluntary renunciation of U.S. citizenship is irrevocable and should be treated as such.

I think I was clear enough on U.S. immigration sponsorship. There are many, many circumstances when parents relocate to support the aspirations of their children. We frequently talk about such situations in these forums. Practically every parent who is raising a future Olympic athlete is making tremendous sacrifices for that child (or spouse), including often relocating the entire household to the best training and coaching site.

The U.S. is uniquely home to some of the things seriously motivated and talented children might aspire to do with excellence. (Silicon Valley, to pick another example.) If that situation applies or could apply, then it's a factor to consider.

Said another way, options have value, and the U.S. presents some unique options. How much value depends on the circumstances. (So does Canada. If the question would be whether to renounce Canadian citizenship because of some new regulation requiring annual religious affiliation declarations, for example, same thing. Options have value, and Canada also offers unique options to children and spouses with aspirations. If you aspire to become the best curling player in the world, Canada is probably the best place to do it, for example.)


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## Nobledreamer

For different reasons than Swiss Pinoy, it was necessary for me to renounce even though I really didn't want to. I grew up in the States and lived there until I was 27. There were 2 main reasons I chose to go that way. First, I am nearly 60, my parents are gone and we simply could not afford to retire in the US even if we wanted to. Second, my non-US husband earned all the money in our family and was not at all pleased that his financial security was put at risk (of penalties) and that his personal financial information had to be reported to the IRS. At the time that I learned of the need to file taxes and information returns, it was not at all clear how heavily one might/might not be penalized. It was most unpleasant to say the least. The emotional factor simply didn't hold up in the end, to the reality of the situation. Nearly 2 years later, I am still back and forth between sad and angry but it had to be done. 
The consulate was great and I was told that I would be treated the same as any other Canadian with regard to crossing the border. So far, I have had no difficulty whatever, though I don't do it often. 
I am fortunate that my family and friends understood my situation and I had their support. When I went to pick up my Certificate of Loss of Nationality, I said to the young woman processing my payment, that it was the saddest $450 I'd ever had to spend. She asked me why I was doing it (and she added, that there were SO many). I gave a short reply and she said to me, "I don't care that you are not technically American, to me, you will ALWAYS be American." I was very grateful for her statement. FWIW, many in the IRS and the Dept of State have been extremely kind and have let us know, that they don't think what is happening, is fair.


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## BBCWatcher

There's also some insurance value in citizenship diversification, just as there is in financial portfolio diversification. Is there a guarantee that either the U.S. or Canada will always be wonderful, however defined in one's personal circumstances? No, I can't promise that. But two countries are better than one in that sense. If one goes pear shaped, the other might offer a suitable refuge.

Don't get me wrong here. Canada is wonderful in many ways, but it isn't the entire world and all the world's experiences and possible benefits. Nor is the U.S. But all of North America? That's at least more interesting from the point of view of diversification.

How a particular individual or family weighs these factors -- and how much value assigned -- is highly situational. But I think we can stipulate that, ceteris paribus, two are better than one, and three are better than two for that matter. How much better in option value? "It depends."


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## Nobledreamer

There has been an interesting development from the Republican National Committee which has made many expats hopeful for a major change in this situation. 

"RESOLVED, The Republican National Committee hereby presents this Resolution to each Member of Congress and urges the U.S. Congress to repeal FATCA and to allow those U.S. citizens who renounced their citizenship under FATCA to regain their citizenship;"

For some of us, unless there is a change in citizenship based taxation and in the reporting involved in FBAR, this will not make any difference but there are some who are very hopeful about this. To see the entire set of resolutions:

https://www.facebook.com/republicansoverseas/posts/208228726027597


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## BBCWatcher

I don't think the current cost of retiring in the U.S. is a reason *to* renounce U.S. citizenship. It's a reason why the option value of U.S. residence might be lower than otherwise, but by itself it doesn't do much.

With respect, I think the tax fears are overblown. Or at least there's another possibility one should consider. Can anybody promise that Canada's tax authorities -- any government's -- will always treat every individual, family, and their descendants with fairness, under a just system of taxation that's always at least reasonable? In other words, can we promise that Toronto Mayor Rob Ford won't ever be the tax official you face? 

Nobody can promise that. Unfortunately it's possible that you might have to flee Canada -- or the U.S., or any country. "**** happens."

So there is option value in having a second country on standby. How much value? That's your call. "It depends."


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## swisspinoy

BBCWatcher said:


> I have no idea what you're trying to say. Bev is correct: a voluntary renunciation of U.S. citizenship is irrevocable and should be treated as such.


Renunciations are argued to be irrevocable to scare individuals from renouncing in defense of bad policy. Yet, in practice this is different. While some individuals were denied a restoration of their citizenship, others were granted such. It all depends.



BBCWatcher said:


> should be treated as such.


Maybe so without FATCA, but with FATCA such is undesirable since FATCA violates US law with national origin discrimination which is forcing Americans to renounce US citizenship. Under such conditions, renunciations cannot be irrevocable since renunciation are necessary due to US federal violations of US federal law.


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## BBCWatcher

Let's just say I would not want you as my attorney, Swisspinoy.


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## swisspinoy

BBCWatcher said:


> I don't think the current cost of retiring in the U.S. is a reason *to* renounce U.S. citizenship. It's a reason why the option value of U.S. residence might be lower than otherwise, but by itself it doesn't do much.
> 
> With respect, I think the tax fears are overblown. Or at least there's another possibility one should consider. Can anybody promise that Canada's tax authorities -- any government's -- will always treat every individual, family, and their descendants with fairness, under a just system of taxation that's always at least reasonable? In other words, can we promise that Toronto Mayor Rob Ford won't ever be the tax official you face?
> 
> Nobody can promise that. Unfortunately it's possible that you might have to flee Canada -- or the U.S., or any country. "**** happens."
> 
> So there is option value in having a second country on standby. How much value? That's your call. "It depends."


It is for this reason that individuals do not wish to export their privacy to foreign governments. The more people who have access to information, the greater the probability becomes for abuse. I've never encountered a single stateside American who wanted to export their privacy to a foreign government and thus it is unreasonable for anyone to expect for anyone not living in America to export their privacy to America.

Canadian residents have no need or reason to export their privacy to America, America must respect such since it expects the same, currently America requires renunciations as being necessary and thus renunciations must be possibly revocable at a possible later date.


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## swisspinoy

BBCWatcher said:


> Let's just say I would not want you as my attorney, Swisspinoy.


What does this have to do with anything? I'm simply pointing out that renunciations have been revoked, renunciations can be revoked, national origin discrimination is a US federal crime and various Americans are currently working on revoking bad policy which has incorrectly led to renunciations.

Are you suggesting that you would rather oppose me than to oppose American federal crimes? If so, then how can your position not be criminal? In my view, you should attempt to be open and honest with people, telling them the truth instead of scaring them from renouncing in defense of a horrible US policy which relies on US federal crimes to force renunciations in response to national origin discrimination.

This is a very serious issue having a very negative impact upon people and your statements are need more gray between the black and white.


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## BBCWatcher

You're way into the crazy legal theories, Swisspinoy. There is no jurisprudence suggesting or even hinting that FATCA is unconstitutional, much less than how any court finding would have any impact whatsoever on the citizenships of former Americans who surrendered them. Quite the opposite, actually, and it would be irresponsible to advise a client otherwise. It's just crazy, like the folks who advised Wesley Snipes that it was legal not to pay his income tax bill.

Yes, I suppose anything is possible. But recovering a voluntarily and competently renounced U.S. citizenship is somewhere around 0.000(lots of decimal places)% odds. There is a long and distinguished record of jurisprudence on that point. One must assume that a U.S. citizenship renunciation is irrevocable for all time, and one must be prepared for that outcome. If you are not ready to accept that reality, then you're probably not ready to renounce U.S. citizenship. Don't expect a "do over."


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## BBCWatcher

swisspinoy said:


> It is for this reason that individuals do not wish to export their privacy to foreign....


I'm not at all following your logic.

First of all, one can be a citizen of Country X and not obey Country X's laws. I don't recommend that, but there are plenty of people who do exactly that. Possession and retention of a particular citizenship is sometime conflated with compliance with that country's laws, but they're actually two largely separate issues.

Second, if you believe that the U.S. (to pick an example) is currently behaving in ways you don't like, then I'm not sure how you conclude that Canada (to pick another example) couldn't also behave the same way or worse. That is, if you've observed an actual risk of a country behaving badly, I don't think it follows that the way to address that is to put all your eggs in another country's basket, as it were. Rather the opposite.

Leaving the more conspiratorial and fanciful stuff aside, let's pick a random pair of citizenships: Spanish and American. Which is going to be better to have in, say, 10 years time for you, personally? Darned if I know, and frankly it's impossible to predict with certainty. Why not hang onto to both and see what happens? Maybe Spain's (and Europe's) economy will recover and get as strong or stronger than the U.S. economy is now, increasing earning prospects. Or maybe not. Maybe Europe will adopt even more intrusive Internet surveillance, or maybe not. Maybe FATCA will be modified, or maybe not. Maybe a space rock will take out the entire Iberian peninsula, or maybe not. Maybe Franco Jr. will pop up to rule in the U.S., or maybe he'll come to power in Spain. Or maybe not. All I know is, absent a significant compelling reason (or set of reasons) to reduce options, it's better to have more options than fewer.

Now, is filing an annual tax report with the U.S. government and, generally, not owing the IRS any money a compelling enough reason to terminate one's citizenship, assuming one isn't going to retain citizenship but not comply (which is another option with pros and cons)? "It depends." I'd vote no, in my family's particular circumstances, but your mileage may vary. (The U.S. is certainly not the only government that legally requires me to file reports, by the way.)


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## Nobledreamer

I should have stated it differently. Of course, the only reason for renouncing was the situation my non-US spouse was forced into and he asked that we change that.

I believe, as you do, it really is not about taxes. Primarily, it is the concern of penalties, specifically FBAR. I don't think this aspect is overblown. There are many hideous stories of the way (and the extent to which) people have been fined and treated poorly in the OVDP and OVDI programs. 

I would much have preferred to remain dual. Of course, it is always possible that things in Canada will not remain the same. Up here though, we are more concerned about developments such as the Border Action Plan, which includes allowing US police agencies to operate on Canadian soil. Originally intended to be under the direction of the RCMP, now the US wants to apply their laws on our soil. We simply do not see these kinds of actions, along with FATCA, etc., as acceptable and are willing to bet we'd rather be here.


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## BBCWatcher

Let's be accurate here. There has only been one "pure" FBAR prosecution in history, and that wasn't actually pure. The taxpayer in question has had a long and distinguished "career" of not paying the IRS the taxes he owed. To say he was "colorful" would be putting it mildly. So Treasury decided to throw the book at him.

Is the risk of prosecution for FBAR non-filing high? No, it is not, to be perfectly honest and rational. It is also extremely difficult for the U.S. to bring someone to FBAR justice who is, say, a Canadian citizen living in Canada, even if the U.S. decided to pursue such cases with vigor. And I suppose if you're guilty of criminal FBAR non-filing then that's water under the bridge, so attempted renunciation would be another occasion when the U.S. government could decide to prosecute. (Also low risk in my view, but hey, we're talking about comparing low risks here.)

My view is you file your FBARs. The U.S. government already knows everything you put in a FBAR. You're reporting what they already know. And that's the whole bloody point: non-reporting is FAR more interesting. Aren't we talking about the government that was (maybe still is) listening to Angela Merkel's phone calls? Filing FBARs makes you boring, and that's a good thing.


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## Nobledreamer

I did not make any reference to prosecutions, I am referring to fines.

I am not the sort of person who could live with an open-ended situation unresolved. I knew nothing of FBAR. I took care of it and moved on. In my situation, even minus fines, fears and so on, it was the objection of my non-US spouse that was the deciding factor.


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## Bevdeforges

OK, I think this conversation is probably reaching its conclusion.

Let's just agree that "to renounce or not to renounce" is a decision that each US expat has to make for his- or her-self, based on their own personal situation (financial or political).

As far as the likelihood that FATCA will be repealed any time soon, I wouldn't bet the rent money on it. FATCA has been widely praised within the OECD as a big step toward fighting money laundering and tax evasion and several countries are considering similar legislation of their own. It's probably more likely that some changes could be made to some of the details of FATCA - however in the current climate in Washington, it's anyone's guess what those might be or when there might be any movement in that (or any) direction.
Cheers,
Bev


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## swisspinoy

Bevdeforges said:


> FATCA has been widely praised within the OECD


And FATCA has also been widely condemned by the entire world!



> as a big step toward fighting money laundering and tax evasion and several countries are considering similar legislation of their own.


That's why many tax cheats these days hide their money in American banking secrecy. America it the largest and one of the most secret tax havens which absolutely abhors any type of competition.



> It's probably more likely that some changes could be made to some of the details of FATCA


Change? America absolutely honors national origin discrimination! There is nothing more great in America than for its government to be criminal against its people. Nothing in the world will convince the US government to become less criminal towards its citizens.


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## swisspinoy

BBCWatcher said:


> I'm not at all following your logic.


You don't have to "follow my logic" and you also don't have to recognize that the American people don't want to export their privacy to foreign regimes. You can even read any FATCA IGA to see that no such requirement is ever listed. Americans do not export their privacy outside of US jurisdiction.



> First of all, one can be a citizen of Country X and not obey Country X's laws. I don't recommend that, but there are plenty of people who do exactly that. Possession and retention of a particular citizenship is sometime conflated with compliance with that country's laws, but they're actually two largely separate issues.


People obey the laws of the jurisdiction where they live.



> Second, if you believe that the U.S. (to pick an example) is currently behaving in ways you don't like, then I'm not sure how you conclude that Canada (to pick another example) couldn't also behave the same way or worse. That is, if you've observed an actual risk of a country behaving badly, I don't think it follows that the way to address that is to put all your eggs in another country's basket, as it were. Rather the opposite.


America can behave any way that it likes within its own jurisdiction. Yet, anything outside of US jurisdiction is non-US jurisdiction.



> Leaving the more conspiratorial and fanciful stuff aside, let's pick a random pair of citizenships: Spanish and American. Which is going to be better to have in, say, 10 years time for you, personally? Darned if I know, and frankly it's impossible to predict with certainty. Why not hang onto to both and see what happens? Maybe Spain's (and Europe's) economy will recover and get as strong or stronger than the U.S. economy is now, increasing earning prospects. Or maybe not. Maybe Europe will adopt even more intrusive Internet surveillance, or maybe not. Maybe FATCA will be modified, or maybe not. Maybe a space rock will take out the entire Iberian peninsula, or maybe not. Maybe Franco Jr. will pop up to rule in the U.S., or maybe he'll come to power in Spain. Or maybe not. All I know is, absent a significant compelling reason (or set of reasons) to reduce options, it's better to have more options than fewer.


More options can be better than fewer, depending upon which government such involves.



> Now, is filing an annual tax report with the U.S. government and, generally, not owing the IRS any money a compelling enough reason to terminate one's citizenship, assuming one isn't going to retain citizenship but not comply (which is another option with pros and cons)? "It depends." I'd vote no, in my family's particular circumstances, but your mileage may vary. (The U.S. is certainly not the only government that legally requires me to file reports, by the way.)


I renounced US citizenship in response to national origin discrimination, which is a US federal crime, resulting from US policy. Such has nothing to do with filing. If America believes that its crimes are a problem since they cause renunciations, then it should consider distancing itself from such criminal practices.


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## swisspinoy

BBCWatcher said:


> You're way into the crazy legal theories, Swisspinoy. There is no jurisprudence suggesting or even hinting that FATCA is unconstitutional, much less than how any court finding would have any impact whatsoever on the citizenships of former Americans who surrendered them. Quite the opposite, actually, and it would be irresponsible to advise a client otherwise. It's just crazy, like the folks who advised Wesley Snipes that it was legal not to pay his income tax bill.
> 
> Yes, I suppose anything is possible. But recovering a voluntarily and competently renounced U.S. citizenship is somewhere around 0.000(lots of decimal places)% odds. There is a long and distinguished record of jurisprudence on that point. One must assume that a U.S. citizenship renunciation is irrevocable for all time, and one must be prepared for that outcome. If you are not ready to accept that reality, then you're probably not ready to renounce U.S. citizenship. Don't expect a "do over."


The United States Government declares that national origin discrimination is a US federal crime:

_Federal laws prohibit discrimination based on a person's national origin, race, color, religion, disability, sex, and familial status. Laws prohibiting national origin discrimination make it illegal to discriminate because of a person's birthplace, ancestry, culture or language.
Civil Rights Division Home Page _


You seem to believe that national origin discrimination is a American FATCA act of great honor. So, US law has a legal conflict of interests. It appears to honor the crime which it condemns. Maybe America should prohibit laws prohibiting national origin discrimination so that some US citizens can continue honoring crimes against humanity without being in violation of American federal laws. That would be a fair solution to this conflict of interests.



> Yes, I suppose anything is possible. But recovering a voluntarily and competently renounced U.S. citizenship is somewhere around 0.000(lots of decimal places)% odds. There is a long and distinguished record of jurisprudence on that point. One must assume that a U.S. citizenship renunciation is irrevocable for all time, and one must be prepared for that outcome. If you are not ready to accept that reality, then you're probably not ready to renounce U.S. citizenship. Don't expect a "do over."


US federal figures on renunciations are inaccurate and non-transparent, being thus a non-reliable base to form opinions on.



> One must assume that a U.S. citizenship renunciation is irrevocable for all time, and one must be prepared for that outcome. If you are not ready to accept that reality, then you're probably not ready to renounce U.S. citizenship. Don't expect a "do over."


One can assume that renunciations are irrevocable, but that does't mean that renunciations are irrevocable, and that's my point.



> If you are not ready to accept that reality, then you're probably not ready to renounce U.S. citizenship. Don't expect a "do over."


Americans living abroad do not need US citizenship to be Americans. US citizenship is for "tax cheats", as the US government frequently tells people these days. If you want to be a "tax cheat", then be a "US citizen" so that international banks will treat you in that manner, thanks to the US government love for national origin discrimination crimes.


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## swisspinoy

Bevdeforges said:


> I don't think this is the place, nor the time, to argue the virtues and "challenges" of renunciation. It's a very personal decision, and needs to be taken with full appreciation of one's own financial and emotional situation.
> 
> OTOH, it is an option and just about the only way out of the requirement to file US taxes while living overseas. Just consider all the options before jumping to any decisions.
> Cheers,
> Bev


To "consider all the options", one must be informed of all the options, meaning that this is not the place to state: 



Bevdeforges said:


> I don't think this is the place, nor the time, to argue the virtues and "challenges" of renunciation.


Such is an attempt to limit information to reduce the options with the purpose of directing personal decisions while denying individuals the ability to: 



Bevdeforges said:


> be taken with full appreciation of one's own financial and emotional situation.





> it is an option and just about the only way out of the requirement to file US taxes while living overseas.


If renunciations are only about filing taxes, then individuals can move to Puerto Rico where they can continue being US citizens without being required to file US tax returns.


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## maz57

Well Happy New Year folks! I'm gone for the holidays, come back, log on and see that everyone is all fired up to start 2014 with a bang! 

As far as loss of US citizenship goes, if the US government says it's irrevocable, we must assume they mean what they say. It's possible they might decide to revisit it based on the flood of renunciations that recent policy has caused, but that's a long shot at best. My guess is that most of those who have been forced into that option wouldn't be interested in regaining it anyway. The betrayal is unforgivable. Sort of like finally separating from an abusive spouse and then being begged to come back; I don't think so!

As far as obeying the law goes, I think it's safe to say everyone here is a law abiding person. It's not likely that tax evaders frequent this forum! The problem, of course, is US Citizenship-based-taxation. Aside from the odious filing of endless stupid forms, and the gross invasion of privacy (sending the same sensitive information year after year to what is effectively a foreign government), the US code interacts badly with the tax codes of many other countries. Having a normal financial life and continuing to be a US citizen abroad is becoming less and less of an option due to the refusal of the IRS to attempt to harmonize with any other country's rules. After all, the US isn't the only country that has a tax code!

At the root of the whole business is the attempted extraterritorial reach of US law. Why the dopes in Congress can't see the effect that is having on US citizens abroad is beyond me. As a Canadian citizen on Canadian soil I am subject to Canadian law and only Canadian law. Legally US law has no standing in Canada, US claims to the contrary. In fact, my former US citizenship had no relevance as far as the Canadian government was concerned. The only thing that counted was my relationship with my home government, Canada. I suspect this is the reason Canada has not yet signed a FATCA IGA. I believe the Canadian government is insisting on hands off for Canadian citizens. How could it be otherwise? Canada is a sovereign country. This principal has been in the Canada/US tax treaty for many years and is a reciprocal arrangement. Canada will not collect a tax liability assessed by the US if that liability was incurred while the taxpayer was a Canadian citizen living in Canada. I suspect that Canada refuses to allow an IGA to override a long standing treaty. 

So what it boils down to is this; Canadian dual citizens may voluntarily file US returns but they are not legally required to according to Canadian law. Failure to do so might jeopardize a US person's right of return or risk arrest on US soil but as long as one remains in Canada one is beyond the reach of the IRS and will be in no trouble with Canadian authorities. Note this is not the case for US citizens who are merely residing in Canada. 

So CBT remains on the books for now but it is essentially unenforceable with respect to dual citizens residing in Canada. The US government knows this and that is why there has been such a campaign of threats and intimidation. They have no other leverage. In addition, for average net worth people there will be no tax owing so the US tax is effectively RBT anyway. Bottom line: is the right of return worth all the hassle (and expense if your affairs are more complex)? Everyone must answer that question for themselves. If renunciation is your choice then the complicated expatriation procedure presents it's own set of invasive and possibly costly hurdles. 

For me personally, it was more about the principal of who is in control my life than the money (I never actually owed US tax). Although to date I have entered the US many times with my Canadian passport showing US birth, I know it is entirely possible that it could be a problem in the future. I can live with that possibility.


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## BBCWatcher

maz57 said:


> It's possible they might decide to revisit it based on the flood of renunciations that recent policy has caused....


I must correct one factual point for accuracy. There's no evidence of a "flood" of renunciations of U.S. citizenship. Yes, I'm aware there are such _claims_ made, but there are no data to support such claims. (Yes, I know there's the "But the government isn't reporting the real numbers!" claim. There's no evidence of that either.) The most that could be said is that U.S. renunciations might be up, but they were and are extremely rare compared to, for example, U.S. naturalizations. And it's not at all clear that recent years have seen more renunciations than in past periods of U.S. history. Actually we can quite confidently say that's not true. In 1861 a _huge_ percentage of the U.S. population renounced U.S. citizenship! 

This correction only reinforces your overall point about irrevocability of U.S. citizenship renunciation, which was the general thrust of your comments. I agree: if you're renouncing U.S. citizenship you must be prepared for what that means and could mean. If you're still in the bargaining phase of your thought processes, you should not renounce.


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## swisspinoy

BBCWatcher said:


> I must correct one factual point for accuracy. There's no evidence of a "flood" of renunciations of U.S. citizenship.


This is false. The long waits, at times, to renounce are, on their own, evidence of a flood. This is further supported with press releases, government statements, the observations of legal and financial advisors and testimonies. Many individuals whom we once knew to be US citizens now no longer have US citizenship.




BBCWatcher said:


> Yes, I'm aware there are such _claims_ made, but there are no data to support such claims.


This is false. While the US is not being transparent with the data, evidence of underreporting exists, as can be seen with the FBI NICS Count, FOIA requests on green card cancellations and individual reports from some countries.




BBCWatcher said:


> (Yes, I know there's the "But the government isn't reporting the real numbers!" claim. There's no evidence of that either.)


This is false. I renounced US citizenship a year ago and am not listed in the Federal Register. Thus, there is evidence that the government isn't reporting the real numbers, as can be seen with the differences between the FBI NICS count and the Federal Register numbers.



BBCWatcher said:


> The most that could be said is that U.S. renunciations might be up, but they were and are extremely rare compared to, for example, U.S. naturalizations. And it's not at all clear that recent years have seen more renunciations than in past periods of U.S. history. Actually we can quite confidently say that's not true. In 1861 a _huge_ percentage of the U.S. population renounced U.S. citizenship!
> 
> This correction only reinforces your overall point about irrevocability of U.S. citizenship renunciation, which was the general thrust of your comments. I agree: if you're renouncing U.S. citizenship you must be prepared for what that means and could mean. If you're still in the bargaining phase of your thought processes, you should not renounce.


One cannot say this since such views rely on false information. Now, given all the facts which contradict your views, why is it so very important for you for US citizens to rely heavily on false information on the topic? Would it not be more fair for you to be more open to and accepting of the available facts which don't support your position?


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## Nobledreamer

I have never understood why the large number of US naturalizations are considered more important or to cancel out the number of those who renounce. The numbers represent different situations and one might expect a measured look at why people are renouncing. What is gained by losing citizens and/or merely looking at the total number of people who are US citizens? Wouldn’t it make sense to take this information and analyze it in terms of why the renunciations are happening?

With regard to factual accuracy, I offer the following for your consideration.

1) According to 18 U.S.C. §922 (g) (7), the FBI is required to keep track of those for whom it is illegal to obtain a firearm. One of the categories is renounced US Citizens. This list is called the National Instant Criminal Background Check System (NICS). The IRS is required by IRC section 6039G of the Health Insurance Portability and Accountability Act (HIPPA) to report those who have lost their citizenship on the Federal Register. The* FBI reported 4,650* renounced their U.S. citizenship in 2012 – compared to the *State Department’s 932.*

See: 

https://www.federalregister.gov/quarterly-publication-of-individuals-who-have-chosen-to-expatriate
For 04/30/2012; 07/27/2012; 10/11/2012 & 02/14/2013

http://www.fbi.gov/about-us/cjis/nics/reports/2011-operations-report/operations-report-2011

FBI — NICS Operations Report 2012

2) “The US embassy to Switzerland told swissinfo.ch that it had processed *411 renunciations in the first nine months of this year*. This compares to *180 Americans giving up their passports in 2011*. While the number of Americans that turn in their passports is a small fraction of the estimated 35,000 to 40,000 US citizens living in Switzerland, the *rise in such renunciations is causing concern for US ambassador Donald Beyer.”*

Tax pressure compels US in Switzerland to give up passports. - swissinfo.ch

3) “Of the almost 40,000 US citizens who are estimated to live in Switzerland, [*Minus the over 900* of whom have renounced their US citizenship* in 2012 alone* according to Ambassador Beyer]......

http://www.white-lighthouse.com/files/2013_FATCA_EN.pdf

4) “For the *second quarter of 2013*, the expatriation list includes a whopping *1,130* names.”

I renounced on January 20, 2012 and my name appears on this list.

IRS Releases List Of Americans Hoping To Expatriate, Number Tops 1,000 - Forbes


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## Bevdeforges

I was going to split off the renunciation discussion here into a thread of its own - but I see that this actually IS primarily about renunciation.

You'll see that I have changed the title of this thread - and am making it a "sticky." Renunciation is a hot topic on lots of levels, and since we are coming into the US tax season, is likely to come up more often.

If possible, I'd like to have all discussions of the pros and cons of renouncing US citizenship in this thread, and have made it "sticky" for just that reason. Renunciation is one of several options for those Americans living overseas who find the filing of US taxes to be unfair, onerous or just plain annoying.

Rather than discussing the personal, financial and political ramifications of the renunciation in threads where someone has asked a tax question, please point the person to this discussion. 

I now return you to your regularly scheduled programming...:behindsofa:
Cheers,
Bev


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## starsz

diharv said:


> Hello all
> For the last two years , ever since I learned about my US tax filing "obligations" ,I have been lurking and reading on this forum learning as much as I could possibly learn.Needless to say this has all caused an awful lot of stress and turmoil in my life to the point that it was one of several contributing factors in a nervous breakdown I suffered in Feb of 2012. But that is another story and all is well now. From what I learned on this site and others is that I have too much to lose potentially and the head in the sand approach was not going to help me sleep at night so I explored options and decided that I needed professional help as in addition to my personal tax returns I also need to file an informational return for my corporation so this complicates things further. I settled on a firm here in my province in Canada . I had spent some time talking to an accountant in the US but decided the logistics would be difficult. It took a long while to decide to actually become compliant but the announcement of the streamlined procedure was the push I needed to get the ball rolling.
> I met with the accountant in Nov 2012 and was told that basically I needed to file personal returns and 5471s starting from 2009 and FBARS starting from 2006. It has been alot of back and forth with my accountant for roughly ten months . 2012 was completed also. The biggest hassle was having to drive 900 km each way to Wenatchee Washington to apply for a SSN. I was told on the phone to bring documents that prove my whereabouts for each decade but when I got there it was for each year ! I failed to see the logic in this as I was born in the US so I should be entitled to have one regardless of where I've been. I didn't even really want the thing and they're making it difficult ! Anyway I got it and was able to proceed. Then I was asked to get ITNNs for my wife and kids to be able to claim them as dependents. I wanted them left clear out of this but after all the hassle to get them it did save some money I guess.
> So as far as I know I am caught up with four years filed and I rest and sleep easier now that I have taken the decision to become compliant. I refuse to use the term "come clean " because it implies that one was dirty or dishonest prior to and the simple fact is we were unaware. It has been a massively expensive exercise in paperwork all to show that I owe little in tax if anything to the US. I would say to this point I have paid accounting fees and tax of about $15000.00 , 90% of that being accountant fees. I don't see how I can do this every year for the rest of my life to be honest. I do not have any specific questions to the members of the forum but I wanted to share my story. I know the law is the law but I feel angry and betrayed by the country of my birth. I am a Canadian citizen also by the way but where I once considered my US citizenship an asset it is now a burden , a poisoned apple that I do not want passed onto my children which is not the case as I have been in Canada since age of four and my wife is Canadian.
> I guess one thing I would like to ask of forum members if I am permitted to do so is anyone else tired of all this ? I live ,eat and breathe this it seems every waking hour. The process now ,thinking about next year and the next and every day opening the mailbox with dread . The constant reading about FATCA which does not affect those of us that are compliant but will flush all those out that are not. Like it or not it is coming and it will NOT be repealed. The constant threat of penalties and prosecutions , they really wear on a person. Rea;lly , is threats the way to get people compliant? All of this has got me thinking about what to do and it looks like expatriation from the US is my best and only option. I don't like it but feel I am being forced into it and it will be with a heavy heart that I do it but my ties with the US are limited to some family members living down there. My only concern is being able to freely cross the border without hassle as an expatriate. I would love to hear from any others who feel the same way. Sorry about being so long winded but I wanted to get my story out there. Thank you.


Thank you for writing this excellent summary - it is almost word for word my situation (including the huge fees and the nervous breakdown) and it gives me courage to read of others wrestling with similar decisions. 

In my case I have decided to renounce US citizenship for two reasons.

1. Financial. While I could deal with the hassle and expense of submitting a US return every year for the rest of my life (just about - compliance is hugely costly and, no, I can't do it without an accountant, despite me not owing any tax) this is just the tip of the iceberg. I cannot deal with being unable to invest in my country of residence (where I am also an citizen) without being penalised by the US, I cannot deal with constantly having to negotiate two incompatible tax systems, I cannot deal with my spouse having to pay taxes on my estate if I die before him and I cannot deal with the US whacking capital gains tax on the sale of my home when one day I come to sell it. Forget it.

2. Emotional. As others have said, I didn't want to leave the US, but the US has left me. I do not want to be a citizen of a country that treats its overseas citizens so poorly. After a lifetime of feeling (some) pride in being American I am now ashamed and I feel very bitter towards the country of my birth. 

I hope this helps your decision-making. I hope that by this time next year I will be free of US citizenship. Good luck to you.


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## Nobledreamer

Sounds like a good idea. Thanks Bev!


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## Bevdeforges

Hi starsz - and welcome to the forum.

Thank you for your very well rendered explanation of your decision. Each person has to consider their own situation carefully, just as you appear to have done.

I have toyed with the idea of renunciation as my situation here in France has changed over the years, but ultimately I don't think it's worthwhile in my circumstances. A couple of the considerations in my case:

Totally independently of the US tax issue, my husband and I have a "separation de biens" regime - which basically separates our assets into "his" "mine" and "ours." The "ours" category is extremely limited (and at that, only to personal property, not investments or financial assets of any sort), so there is no need to expose any joint assets to the IRS.

My total holding in "foreign" financial assets is well below the threshold for having to worry about FATCA reporting - and unless I win the lottery somewhere, it's very unlikely that this is going to change.

I have no immediate family left in the US, and over time my visits back there have become less and less frequent. 

There are some other reasons, not the least of which is the 30% withholding that is mandatory for retirement (and other payments) made to NRA's, but I do keep reviewing my situation just to be sure. It helps that I have always done my own tax returns - and these days, can complete them in about 20 minutes.

So net-net, in my case it doesn't seem worth the effort (and expense) to renounce. I do, however, respect those who are in very different situations and choose the other option. 
Cheers,
Bev


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## Nobledreamer

I never knew that France offered the option of dividing assets into "yours, mine and ours." What a great advantage in a situation like this! Nothing like that in Canada. 
Your description of why renunciation doesn't make sense for you makes perfect sense to me.


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## Pacifica

@Noble Dreamer,

One can do separation as to property in Québec, as there’s three possible régimes to choose from – the default régime is sort of a cross between separation and community: 
•	Partnership of acquests (société d’acquȇts). If you don’t have a marriage contract, this one is automatically imposed. What the spouses acquire during the marriage is considered to be in partnership. But what each brings into the marriage, and some things of a personal nature that each acquires during the marriage (like an inheritance or insurance benefit), are considered each person’s private property. 
•	Separation as to property (séparation de biens); 
•	Community of property (communauté de biens).


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## starsz

Bev, Please can you elaborate on the "30% withholding that is mandatory for retirement". I have no pension in the US so I don't think it applies to me but ...


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## Bevdeforges

starsz said:


> Bev, Please can you elaborate on the "30% withholding that is mandatory for retirement". I have no pension in the US so I don't think it applies to me but ...


If you don't have a pension or are not entitled to US social security, it probably won't apply to you. (Though I think it applies to some other types of payments - possible interest if you have a bank account or other type of investments based in the US.)

Basically, it means that if a US bank or brokerage is paying interest or other forms of investment interest to a non-resident alien (i.e. a non-citizen living outside the US), they are supposed to withhold 30% of the income as payment of potential taxes.

You can file a 1040 NR (non-resident) at the end of the year to figure your actual tax liability (strictly on US source income) and you should get a refund for any excess that has been withheld.
Cheers,
Bev


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## BBCWatcher

The best I can figure is that your tax rate on U.S. investment gains does indeed go up if you renounce U.S. citizenship. In other words, that tax rate zooms to 30% unless you happen to benefit from fairly unusual lower treaty rates.

I guess we should also mention that it's not free to renounce. It's $450 just to get the certificate.

Some of these things aren't immediately obvious.


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## diharv

Hello all. Wow I go away for two days and come back to see that the thread has taken on a life of its own. Thank you all for your thoughts and opinions. I think that as this year goes on this topic will be brought more and more to the forefront. I also agree that there is clear evidence that renunciations are increasing dramatically , otherwise why would there be so many media stories and accountant and lawyer studies done on the topic in recent years? Coincidence ?


starsz said:


> Thank you for writing this excellent summary - it is almost word for word my situation (including the huge fees and the nervous breakdown) and it gives me courage to read of others wrestling with similar decisions.
> 
> In my case I have decided to renounce US citizenship for two reasons.
> 
> 1. Financial. While I could deal with the hassle and expense of submitting a US return every year for the rest of my life (just about - compliance is hugely costly and, no, I can't do it without an accountant, despite me not owing any tax) this is just the tip of the iceberg. I cannot deal with being unable to invest in my country of residence (where I am also an citizen) without being penalised by the US, I cannot deal with constantly having to negotiate two incompatible tax systems, I cannot deal with my spouse having to pay taxes on my estate if I die before him and I cannot deal with the US whacking capital gains tax on the sale of my home when one day I come to sell it. Forget it.
> 
> 2. Emotional. As others have said, I didn't want to leave the US, but the US has left me. I do not want to be a citizen of a country that treats its overseas citizens so poorly. After a lifetime of feeling (some) pride in being American I am now ashamed and I feel very bitter towards the country of my birth.
> 
> I hope this helps your decision-making. I hope that by this time next year I will be free of US citizenship. Good luck to you.


Thank you for your reply. It is really something how closely your situation and feelings mirror mine. It is reading posts like yours that are instrumental in helping me make up my mind and give me courage to go and do what is right for me and my family. Just knowing that there are alot of other real people going through this gives me comfort in that I am not alone and there are solutions to this "problem"I realize it is beneficial to have options ie staying dual as BBC Watcher suggests but the long term cost is too great for me in terms of money and stress and if tossing my whole lot in the Canadian ring puts me on an even keel with every other Canadian citizen going forward , well I think I'll take it and probably do just fine.


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## Nobledreamer

@BBC Watcher

In Canada, the treaty rate is 15%. 
There are many types of interest that are actually exempt.
There is Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b) which must be filed if one is claiming a treaty rate.

One has to be careful when renouncing and filing as the dual status return year. I will have to look at my notes but I seem to recall if trying to invoke a treaty rate in dual status year may trigger the question of renouncing for tax purposes so it needs careful consideration. Other general issues about this can be found at:

http://www.irs.gov/pub/irs-pdf/f1040nr.pdf

Restrictions for Dual-Status 
Taxpayers

Income connected with a trade or business in 
the United States for the period of 
nonresidence is subject to the flat 
30% rate or lower treaty rate. No
deductions are allowed against this 
income.

Exceptions to the general rule. The 
withholding tax rate may be lower or 
the income may be exempt if your 
country of tax residence and the 
United States have a treaty setting 
lower rates. Table 1 in Pub. 901 
summarizes which countries have 
such treaties and what the rates are.

As far as the $375 goes, this is readily available information for anyone investigating what renouncing involves. If one can relinquish, there is no fee.


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## Nobledreamer

@Pacifica,

Thank you for that information. I was not aware of it.


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## Bevdeforges

The issue of whether or not there is an upsurge in renunciations raises another point about renunciations. At the moment, the "full court press" by the IRS appears to be limited to particular countries.

Canada is getting lots of publicity about the US requirements - because it's right next door and seems most like the US in terms of political and financial structures. The other countries where the FATCA legislation is getting big attention are Switzerland (no doubt because of the UBS investigations and fines), Germany (because the Germans tend to take all rules and laws quite literally and many big German banks are very active in the US market) and Austria (probably the Germanic influence). 

I got a letter a couple years ago from HSBC saying that they were going to close out all savings accounts held by foreign residents. Since I was thinking of closing out my accounts in the UK, I just figured I'd let them handle it all for me. Well, it never happened, so I've finally contacted them to get things rolling. I have a huge suspicion that this may be because of the various investigations of HSBC - including those that resulting in big fines for the bank. 

But otherwise, here in France there has been no publicity to speak of - other than what's posted on the US Consulate website.
Cheers,
Bev


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## BBCWatcher

It's really very clear that renunciation of U.S. citizenship is rare. The most recent statistics are that 2,369 Americans renounced their citizenships through the first 9 months of 2013, but that pace was actually _slowing_ through the year since it was 560 in the third quarter.

OK, but Tina Turner? Aren't famous people renouncing with greater frequency? It doesn't seem so. I scanned through a Wikipedia list of "famous" people to find any that were/are generally well known, and here are those examples: Josephine Baker (1937), Yul Brynner (1965), Maria Callas (1966), T.S. Eliot (1927), Terry Gilliam (2006), Shere Hite (1995), John Huston (1964), Henry James (1915), Queen Nor of Jordan (1978), Christina Onassis (1975), Andreas Papandreou (1964), Tupperware founder Earl Tupper (1958), and Elizabeth Taylor (renounced in 1966, but naturalized as a U.S. citizen in 1977).

You can check for yourself. This list suggests that U.S. citizenship renunciations were more common (though still rare) among famous people in the mid-1960s. Callas and Taylor in one year!

I point this out because some (kooky) people think the statistics are wrong, that there are so many more people renouncing U.S. citizenship than the statistics show. But you can't hide famous people, and it seems like the pace of famous people renouncing U.S. citizenship is consistent or even perhaps lower than in the past. And there are more famous U.S. citizens now than in the past.


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## Bevdeforges

Frankly, I don't think it really matters that much whether the pace of renunciation is accelerating or slowing down.

Back before about 1990 (when the Supreme Court ruled that you couldn't lose your citizenship except by renouncing in front of a consular official), you were supposed to automatically lose your citizenship if you served in a foreign military, held a responsible position in a foreign government, or voluntary applied for and received another nationality. There was even a situation in Paris in the 1950s where a clerk in the consulate stripped women of their citizenship if they had married a Frenchman without specifically refusing the automatic French citizenship that used to be part of the deal. (Usually done when the ladies came in to renew their US passports.) A few years back, the US Consulate tried to find some of these women to give them back their US nationality, but AFAIK they didn't have too many takers. 

There certainly appears to be more interest in renunciation, in any event, as many consulates now have information on it on their websites. This definitely wasn't the case ten or 15 years ago. It's probably more in the interest of famous (i.e. rich) people to consider it. It's far easier for those of us without significant resources to remain either fully compliant or to stay under the radar. 
Cheers,
Bev


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## BBCWatcher

Bevdeforges said:


> There certainly appears to be more interest in renunciation, in any event, as many consulates now have information on it on their websites. This definitely wasn't the case ten or 15 years ago.


You know what else embassy/consulate Web sites have now that they didn't have 10 or 15 years ago? Information _of all kinds_! The Web has grown a lot in the past decade plus.

OK, if famous people have more reasons to renounce U.S. citizenship today than they did, say, in that mid-1960s period when more actually did, where are the huge numbers of famous people doing it? They don't exist. It's rare. U.S. tax rates are lower now than they were then -- a lot lower -- and the income-generating advantages of U.S. citizenship are considerably greater now than they were then. There are significantly more Americans with far more wealth now than there were then, by any reasonable or even unreasonable measure. And note that those mid-1960s famous people were arguably in the primes of their careers, and they renounced. I love Tina Turner and her music, but her best income earning days are way, way behind her. (Which is why I doubt she renounced primarily for tax reasons, and I think her public comments over many years support that hypothesis. She would have been subject to exit taxes with little lifetime to recover and still a large amount of U.S.-source income. It makes a little more sense for Saverin, but that's speculative and will depend on how much income and wealth he can generate post-Facebook and excluding U.S.-source income which will be taxed if anything even more heavily now. I don't have specific insight into his tax situation, but it doesn't seem like a terrific bet. But who knows.)

Please note that I'm not offering any opinion here about the merits or not of renunciation for any particular individuals (except those two). I'm just merely pointing out the fact that renunciation of U.S. citizenship is extremely rare. Moreover, I can find no supporting evidence that it's getting substantially less rare. And also note that all the famous person examples are voluntary renunciations. I was careful to filter out individuals who involuntarily lost U.S. citizenship, e.g. W.E.B. Du Bois (1963 -- look, another famous person in those terrible 60s!)

Where are the scores or hundreds of famous people renouncing U.S. citizenship, basically?


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## BBCWatcher

As a follow up, Turner (actually her heirs) might end up saving some money in U.S. estate taxes depending on how much of her wealth is attributable to non-U.S. assets. Probably a substantial fraction. That's assuming she wasn't able to do adequate estate planning.

I've seen some reporting that Saverin might have had a concern about estate taxes (primarily), but I don't understand how that would work since his wealth is almost entirely in U.S. assets. There's also some speculation he saved capital gains tax by renouncing pre-IPO, but I can't figure out how that would work either. I simply can't figure out the financial angle for him, so maybe he renounced for other reasons. Or more likely I don't have the knowledge of his tax accountants.


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## Bevdeforges

As I said before, I don't think the "trend" in renunciations really matters much at all. The one person I know personally who renounced (several years back before the current kerfluffle on the subject) did so in order to take German nationality prior to divorcing her German spouse, so that she could remain in the EU. You can't take German nationality unless you present a certificate of renunciation of your old nationality - so she actually had to renounce before she could even submit the paperwork to demand her German nationality. It was an amiable divorce, so they delayed the divorce filing until it wouldn't affect her newly won nationality. She then moved to another EU country on her own.

And the certificate she got was something the local consulate gave her. At the time, there was no need to have these things go through Washington or the Congressional Journal or whatever the process is these days. (It also didn't cost her $450.)

In 1996, they passed a big tax law related to renouncing US citizenship "for tax purposes" (basically, if the IRS thought you were renouncing "for tax purposes" you'd be subject to filing for another 10 years) but they made a specific exception for anyone renouncing in order to take the nationality of their spouse or returning to the home country of their family and taking up that nationality. Didn't even insist that the new country require you to renounce.

The process has changed over time, so I'm not even sure you can make a valid comparison of how many folks renounced in the past vs. today. Then again, I would challenge you to figure out how many folks living overseas are compliant with their US tax obligations. No one actually knows how many US citizens (and potential taxpayers) are resident outside the US. Now, try to figure out how many of those folks "should" be filing tax returns, and how many actually did. Add in the changes to recognizing US nationality from the mid-1970's (for children born overseas with one US citizen parent) and there are probably LOADS of de facto US citizens not filing taxes - and probably not in much danger of being caught, particularly if they don't realize or acknowledge their US citizenship.

Given the way the IRS has traditionally tried to encourage compliance back in the US (i.e. primarily by issuing press releases about big arrests for tax evasion shortly before April 15th), I suspect much of the big PR move about renunciation and FATCA obligations overseas may mask the difficulties of enforcing US tax policy outside the US.
Cheers,
Bev


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## BBCWatcher

I missed one famous person who renounced U.S. citizenship in the mid-1960s: John Templeton, in 1964. So score another one for those terrible '60s.

By the way, here were the top marginal U.S. tax rates in 1964: 77% on ordinary income and estates, and 25% on long term capital gains. Here are the top marginal rates today: 43.4% on ordinary income, 45% on estates, and 23.8% on long term capital gains. I'm including the Medicare surtax in the current figures.

Anyone still want to make the argument that taxes are _more_ of a reason to renounce U.S. citizenship than they were in the past?


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## swisspinoy

I translated an article about one who renounced US citizenship, which is very similar to my own situation:

_How is it really, to voluntarily discard the US passport
The Isaac Brock Society_


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## Nononymous

maz57 said:


> As far as obeying the law goes, I think it's safe to say everyone here is a law abiding person.


Well, I'm not. I'm consciously choosing to ignore my US tax filing obligations.


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## swisspinoy

BBCWatcher said:


> It's really very clear that renunciation of U.S. citizenship is rare. The most recent statistics are that 2,369 Americans renounced their citizenships through the first 9 months of 2013, but that pace was actually _slowing_ through the year since it was 560 in the third quarter.


This is not clear since those figures are inaccurate. What is clear is that one currently has to wait one year to renounce US citizenshp in Switzerland.



> I point this out because some (kooky) people think the statistics are wrong, that there are so many more people renouncing U.S. citizenship than the statistics show. But you can't hide famous people, and it seems like the pace of famous people renouncing U.S. citizenship is consistent or even perhaps lower than in the past. And there are more famous U.S. citizens now than in the past.


Kooky? Ad hominems won't make these figures less inaccurate. Rather, such simply questions why you need to insult and people in defense of false information? Is this what has become of the US government?


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## Nononymous

A couple of random points.

I recall reading something about Saverin and one of the grounds he offered was that his US citizenship was an impediment to future business ventures once he had left the country. (And if his reasons for leaving were to save money, so what, is he morally obliged to stay in the US?)

I think there is anecdotal evidence suggesting a rise in renunciation enquiries, at least in selected countries. But the numbers are still tiny. We can probably agree on that. I would be surprised if there wasn't a rise, given FATCA.

Canada should be treated as a special case. Not because there are so many US citizens here, but because there are so many dual citizens, many of whom are dimly (or not at all) aware of their US citizenship, as it may have been inherited from a parent, even though they themselves were born in Canada. (And there are lots of them - estimates range from 0.5 to 1 million.) Unlike expats who may have later nationalized, these people have little or no connection to the US, and likely no plans to ever move south. So when folks like this discover their filing obligations and learn of potential fines and penalties (even though they are unenforceable against Canadian citizens) it tends to inspire a lot of sputtering outrage, and a lot of phone calls and visits to consulates.

My decision stands. For now, I assume that I'm off the radar, and plan to stay there. (Yeah it'll take three seconds to look up this IP address...) I renewed my US passport this year (but from a European address) so that I wouldn't be hassled on business trips, due to my unfortunate US birthplace. Otherwise, I have no plans to inform the IRS of my existence. The family investment broker asked about citizenship, since apparently they are preparing for FATCA, but I refused to answer the question, and so far they haven't threatened to close the account.

Just to be clear, I am not remotely close to anyone's definition of wealthy and probably wouldn't owe any money, I'm just (a) lazy about paperwork, (b) stubborn, and (c) performing a vaguely chicken**** act of private civil disobedience against something which I think is quite stupid.


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## Nononymous

swisspinoy said:


> Kooky? Ad hominems won't make these figures less inaccurate. Rather, such simply questions why you need to insult and people in defense of false information? Is this what has become of the US government?


I hate to say this, since I'm sympathetic to your position, but at a certain point excessive vehemence begins to smell vaguely of OCD, which tends to undermine the overall argument.


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## swisspinoy

Nononymous said:


> I hate to say this, since I'm sympathetic to your position, but at a certain point excessive vehemence begins to smell vaguely of OCD, which tends to undermine the overall argument.


Are you referring to the vehement claim that anyone who dares to question certain US government figures is "kooky", or are you referring to the observation that those goverment figures are inaccurate?

You seem to have been programmed to believe that a person is "kooky" and "OCD" if they noticed that the FBI NICS Count for only renuncations is greater than the Federal Register list which is supposed to count renunciations, relinquishments and green cancellations. 

Yet, can it really a fault of the individual for noticing and mentioning these differences? Can a government really always be trusted? Shouldn't the FBI NICS Count at least be lower than than the Federal Register list since the FBI NICS Count excludes relinquishments and green card cancellations? How can renunciations alone be greater than renunciations, relinquishments and green card cancellations? The math is not adding up.

Think, man, think. It is not "kooky" or "OCD" to have a look at statistics, notice a difference and to be verbal about one's observations. Yet, a government which relies heavily on propaganda is going to favor "kooky" or "OCD" accusations, as demonstrated here.



Nononymous said:


> But the numbers are still tiny.


Those numbers are small, but those numbers are not the actual numbers. Why are those numbers being underreported?


Denying that one is a US citizenship is or is becoming a violation of local law. Is US citizenship really worth violating the laws of the nation where one lives? I'd say that it is better to either be transparent with the US government or to discard the citizenship.


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## maz57

Re numbers of renunciations: When I tried to get an appointment at the nearest US consulate, I was told that appointments for such were in "extremely high demand" and I would have to wait more than a year. Sounds to me like renunciations are up.

Re compliance: Various tax preparation outfits are reporting that many are seeking to become compliant in their filings simply to get ready for the expatriation procedure and avoid being deemed "covered expatriates".

Re John Templeton: I was going to remind you of that one BBC, but you beat me to it. With a top marginal rate of 77% I don't blame the guy. Any one want to speculate on the effect of Hollande's new 75% rate?


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## Nononymous

I never quite understood why being a "covered expatriate" was a bad thing. If you are low net worth, you miss the exit tax anyway, and being noncompliant saves you a bunch of paperwork.


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## maz57

@ Nononymous. Sure does!


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## Nobledreamer

I don't understand why the emphasis on famous people.

When I first contacted the US Consulate, I had a long, friendly conversation with a lady who had worked there for decades. She told me it was normal to have about 5 renunciations a year in Toronto. At that time, October 2011, they had so many people coming, they had a meeting where 22 people renounced together. They were getting over 20 calls a week. I was waiting to be included in the planned second meeting (which never happened). It is a common experience to be at the Consulate and hear several others renouncing. The numbers may not be huge but they are there. And they are happening for a reason.


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## swisspinoy

Nobledreamer said:


> I don't understand why the emphasis on famous people.
> 
> When I first contacted the US Consulate, I had a long, friendly conversation with a lady who had worked there for decades. She told me it was normal to have about 5 renunciations a year in Toronto. At that time, October 2011, they had so many people coming, they had a meeting where 22 people renounced together. They were getting over 20 calls a week. I was waiting to be included in the planned second meeting (which never happened). It is a common experience to be at the Consulate and hear several others renouncing. The numbers may not be huge but they are there. And they are happening for a reason.


"Huge" is anything over 10 million per year. Anything below 500k per year is "tiny". If the entire expat community of 2-7 million cancelled their US citizenship, stateside Americans woudn't notice anything immediately. It would only be later that they would notice a decline of exports and foreign relations, but they wouldn't link such with their former expat population. I don't believe that stateside Americans are capable of recognizing that they actually have an expat population. They only recognize that more immigrants are competing for jobs in their saturated job market, and they figure that such is a good thing. Renunciations simply mean that people who are not competing for stateside jobs become less likely to create jobs in the US.


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## BBCWatcher

swisspinoy said:


> "Huge" is anything over 10 million per year. Anything below 500k per year is "tiny".


Then the number is "microscopic" since the best evidence suggests fewer than 10,000 individuals per year (rounding way, way up to the nearest order of magnitude) are renouncing U.S. citizenship.

For comparison, in 2012 there were 757,434 individuals who naturalized as U.S. citizens, i.e. a number two orders of magnitude greater. (In 2011 it was 694,193, and in 2010 it was 619,913. So that trend is definitely up.) No, sorry, I don't think _anybody_ among the political leadership in the U.S. is even slightly concerned about the (microscopic) number of Americans renouncing U.S. citizenship. I'm just utterly pragmatic about these things, and that's the reality, for better or worse.

I suppose people argue this stuff because "if everybody is doing it" that makes them feel better. Peer support and all, and here we are. But no, objectively, very few people are renouncing their U.S. citizenships. If you want to do it, great. I would protect and defend that option. It's an important aspect of individual liberty to be able to give up one's citizenship if one so chooses. But you're a rare and special individual if you do -- and hopefully that fact should make you feel better if anything does, not some kooky mythology. (Sorry, it just is kooky.)

OK, why did I raise the issue of famous people? Only because some kooky people -- yes, sorry, that's really what it is -- think the official statistics are highly incorrect. They don't actually present any real evidence that the official statistics are highly incorrect, or at least evidence of the size of the statistical error, they just claim it.

Very well, then. If the official statistics are in error, then one strong piece of evidence that would demonstrate an error -- indeed, a proof _requirement_ if there's a substantial error -- is that we'd see more than a nano-microscopic trickle of famous people renouncing their U.S. citizenships. More than, for example, the mid-1960s. Those numbers should be reasonably well correlated to the overall numbers.

We simply don't see that. Then we're _really_ in loony land if you want to suggest that there are 100+ famous people hiding the fact they renounced their U.S. citizenships.

Look, I get why people want to claim that U.S. expatriation is a crisis, the U.S. economy will swirl down the toilet, taxes are unprecedentedly high (they're not), etc., etc. If it makes you feel better, knock yourself out. But it simply isn't true. The U.S. inflow is at least 100 times the outflow, so I think the U.S. will do perfectly well for itself. Saverin is a excellent example, actually: he was a naturalized U.S. citizen. To the extent he had a unique role in creating Facebook (a bit), and to the extent Facebook was/is uniquely innovative (jury still out), mission accomplished -- a mission that could not have plausibly been accomplished in any other place on the planet, by the way. Maybe Saverin will bless Singapore with some great new and innovative business venture arising from his unique talents that uniquely adds value to Singapore, but...well, let's just say I wouldn't take that bet. Though if he wants to send me some money to test that hypothesis, I wouldn't mind.  I would note that Saverin doesn't seem to be helping Brazil much (at all), and he's a Brazilian citizen. Though I suppose there's still time.

I don't recall Costa Rica enjoying the fruits of Earl Tupper's talents, do you? ("Costapots"?) No, he sat on the beach and sipped cocktails for his remaining days, as best I can tell. I mean, if you want to try that argument, then who are the citizens the U.S. lost that at least arguably resulted in material losses to the U.S. economy? John Huston still made movies, and Yul Brynner still acted in movies. (His anti-smoking public service announcement recorded just before he died was also a tremendous contribution to U.S. public health.) There was no difficulty buying Maria Callas's recordings in the U.S. after she renounced. John Templeton cashed out (to Franklin) and...did anyone hear from him again? Or did the U.S. financial sector do perfectly well for the next 50 years without him? (Answer: More than well!)

Seriously, who was the U.S. citizen "who got away" who would have made the U.S. a better place in some greater way if not for his/her renunciation? There must be at least a few examples, right?

I'm hard pressed to come up with good examples. It seems to me before advancing that sort of argument you'd have some at least arguable examples.


----------



## BBCWatcher

Now here's a surprise. It appears that Belgium granted its citizenship to exactly zero people who applied in 2013. Why? Out of the 508 applicants they couldn't find anyone who contributed "outstanding services to Belgium," the legal standard for naturalization there.

Belgium has a population of about 11 million, so if Belgium were naturalizing at a per capita rate comparable to the U.S. then they should be naturalizing about 25,000 people per year.

Canada and the U.K. appear to be other countries with high per capital naturalization rates, though I think the U.S. is clearly the world leader in absolute numbers. (Someone please correct me if I'm wrong about that, but that's what my quick research suggests.)


----------



## Bevdeforges

Gang, it is NOT a competition. Gerard Depardieu tried to give up his French citizenship, but as it turns out there isn't really a mechanism for him to do so - certainly not one that will get him out of paying taxes on his French business ventures. He has a home in Belgium - but he's not eligible for naturalization there until he has lived there for 5 or 7 years or something like that. But, thanks to his home in Belgium, he will be subject to Belgian taxes. It might get him out of paying French ISF (though there is a sort of one time "exit tax" for expatriating from France) but his honorary Russian nationality doesn't change his tax jurisdiction unless he takes up residence there.

This is all pretty much irrelevant to this particular thread. Regardless of how many people are or aren't renouncing US citizenship, either "for tax reasons" or not, this thread is supposed to be about the pros and cons of renunciation.

Renunciation is one option (among several) for those US citizens resident overseas who feel that they need or want to be free of the US "taxation by nationality" obligation. Short of blatant and willful tax evasion, it is arguably the most extreme response, but certainly legitimate and legal.

If you have comments to make concerning the consequences of renunciation (foreseen or not) feel free to make them here. But I think we've really reached the end of the "debate" over how many people (famous or not) have renounced in the past vs. now. It really doesn't matter.
Cheers,
Bev


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## swisspinoy

Bevdeforges said:


> Renunciation is one option (among several) for those US citizens resident overseas who feel that they need or want to be free of the US "taxation by nationality" obligation.


Most renunciations are simply a reaction to discrimination and harassment. Renunciations are generally forced since Americans living abroad have no political representation and no legal protection.

Individuals who do not renounce generally hope that "the harassment will stop if he/she ignores it". Victims generally blame themselves for causing the harassment since they left the US. If they had not left the US, then they wouldn't be harassed, they say. Americans abroad generally don't want for the US government to get into trouble for its harassment and discrimination, and yet they often fear retaliation.

The US relies on several adverse actions to dissuade the victims of its harassment from renouncing. Individuals who thus renounce in response to harassment are also victims of retaliation, which includes:

1) Renunciation fee
2) Exit tax
3) Irrevocable renunciations
4) Threat of banishment (Reed Amendment)

Retaliation against renunciations is, like national origin discrimination, also a US federal crime. Technically, Expats are protected from such retaliation even if they do not complain about discrimination or harassment. The threat of banishment alone is a violation of retaliation, even when the expat does suffer a monetary loss like the exit tax.

Expats are eligible for back pay, reinstatement, front pay, compensation damages, punitive damages and reimbursement for out-of-pocket expenses.

One single renunciation resulting from harassment or national origin discrimination is enough to lead to discliplinary action against the US govenment, even if the government had been previously warned. Any US federal employee may be held personally liable for their acts of harassment against expats or their failure to prevent harassment. This means that any government employee can be sued and be financially liable for their action or inaction against Americans living abroad.


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## Bevdeforges

Just as I think it's a bit presumptuous to claim that renunciations are increasing or decreasing without having hard numbers (that we all can trust) to back up the claims, it seems to me to be a bit presumptuous to generalize about the reasons for "most" renunciations these days. No doubt the reasons for renunciation have changed over the years, too, as the laws (tax, immigration and other laws) have evolved.

There was also a time within my own lifetime when citizens were stripped of their US citizenship for a number of reasons. These hardly qualify as "renunciations."

There's also the matter of where "inconvenience" crosses the line into "harassment" - most definitely a personal threshold.

And while the government and its employees can probably be sued for alleged acts of harassment, I would wonder at the likelihood of the outcome in the US courts. To my knowledge, the clerk at the US Consulate in Paris who was single handedly taking away the citizenship of Americans married to French nationals never was subjected to any sort of discipline or legal action over her handiwork.
Cheers,
Bev


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## swisspinoy

Bevdeforges said:


> Just as I think it's a bit presumptuous to claim that renunciations are increasing or decreasing without having hard numbers (that we all can trust) to back up the claims, it seems to me to be a bit presumptuous to generalize about the reasons for "most" renunciations these days. No doubt the reasons for renunciation have changed over the years, too, as the laws (tax, immigration and other laws) have evolved.
> 
> There was also a time within my own lifetime when citizens were stripped of their US citizenship for a number of reasons. These hardly qualify as "renunciations."
> 
> There's also the matter of where "inconvenience" crosses the line into "harassment" - most definitely a personal threshold.
> 
> And while the government and its employees can probably be sued for alleged acts of harassment, I would wonder at the likelihood of the outcome in the US courts. To my knowledge, the clerk at the US Consulate in Paris who was single handedly taking away the citizenship of Americans married to French nationals never was subjected to any sort of discipline or legal action over her handiwork.
> Cheers,
> Bev


A citizen of a jurisdiction has the right to be treated the same as any other citizen of the same jurisdiction and a resident has the right to be subject to the laws of their local jurisdiction. America seeks to treat the citizens within its jurisdiction equally, as written in its laws. Yet, it also attemps to force equality upon its citizens outside of its jurisdiction too. While the concept of this may sound good in theory, in practice it causes residents of other jurisdictions to be treated unequally, to be harassed and to be discriminated against, since they are identified, grouped, blamed and denied services due to the clash between US jurisdiction equality laws and local equality laws.

This leads to US citizens in non-US jurisdictions becoming isolated without having anyone to turn to, pushing renunciations into becoming unavoidable due to discrimination and harassment. Thus, anyone who loses their citizenship, for whatever reason, is qualified to based such losses on the existing US discrimination they are being harmed with. Regardless of fame, wealth, skill or crime, each US citizen living abroad can fairly and legally blame US harassment and discrimination for the loss of their citizenship.

Being aware of this, the US government denies its faults, rejects transparency on expat affairs, intimidates and threatens its diaspora to scare them from taking legal action, since the it fears the weight of the financial penalties looming over its head. It is unreasonable to believe that the US government will self-correct itself, since it has the power to use might to define what it claims to be right. And right are not the expats, it says. It rather blames them for the discrimination and harassment that it forces upon them, in defense of its own crimes.

This has the unavoidable consequence of driving America further down the road towards facism. The more that it denies, rejects, condemns and silences, the more difficult it becomes to reverse the growing corruption, the loss of economic power and political influence. America is driving full speed ahead into decline.


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## Bevdeforges

swisspinoy - while I don't actually disagree with what you're saying, you only have to look at Edward Snowden to see that the judicial side of this argument probably isn't worth fighting at the moment.

And, there is always the "limited compliance" option, not to mention the "flying beneath the radar" option, depending on one's financial situation. Not optimal, but many go that route and have little, if any, problem with it.
Cheers,
Bev


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## swisspinoy

Bevdeforges said:


> swisspinoy - while I don't actually disagree with what you're saying, you only have to look at Edward Snowden to see that the judicial side of this argument probably isn't worth fighting at the moment.
> 
> And, there is always the "limited compliance" option, not to mention the "flying beneath the radar" option, depending on one's financial situation. Not optimal, but many go that route and have little, if any, problem with it.
> Cheers,
> Bev


At the going rate of things, I wouldn't recommend limited compliance or flying under the Radar. 

I could have probably "flown beneath the radar", since I always declared myself as being Swiss in Switzerland and didn't volunteer any American details. As such, I was never kicked out of a bank and I never got any warning letters or requests to sign any US papers. Yet, I prefer to be on the less risky side of things.

Now it has become against the law to not declare that one is an American when so, meaning that one could have problems if US citizenship becomes discovered (NSA?).

I find that there are good reasons to believe that the "Program" that the US is currently forcing upon Swiss Banks will be expanded to other countries, pushing banks to discover the Americans and send them into OVDI. Anyone forced into that situation will be hit with heavy penalties and sooner or later, something will likely raise a red flag and require the bank to take action. The US loves nothing more than an undeclared asset that it can confiscate.


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## Bevdeforges

Admittedly, Switzerland is one of the more "closely observed" countries in all of this. Here in France, the issue has barely come up - in fact I successfully had my bank conseiller remove my US citizenship from my bank records after I took French citizenship. OK, if the IRS ever comes in and audits the bank records, my birthplace gives me away - but it's a small, regional bank and I don't expect it's too high up on the IRS list of banks to check up on.
Cheers,
Bev


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## Nononymous

Who knows where this will all lead, but once again, I repeat, the Canadian government has stated that it will not assist the US in any form of collection against Canadian citizens, whether it be taxes due or FBAR penalties or whatever, so for the time being dual nationals are protected. At least for now, the US has no ability to touch Canadian assets. (It would of course be an inconvenience not being able to travel to the US.) 

It's entirely possible that our government could capitulate at some point in the future. But I doubt it.

As for FATCA, I'm curious to see what will happen with my investment broker, if they ask again about citizenship. I may simply lie to them, while winking, or I may refuse to the answer the question, in which case they might ask me to take my business elsewhere.


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## Nobledreamer

@Bev

There are many in Canada who also had their US citizenship taken away when they became Canadians in the 60's - 70's and part of the '80's. There apparently was no procedure or CLNs issued. Many of these have found out that the government reversed that position indicating they would have to declare that they intended to lose US citizenship when they took Canadian. If they have not exercised any privileges of US citizenship (voting, using US passport, etc), they can relinquish US citizenship at no cost.

I have yet to hear of any consular officer in Canada acting as you've described. That's criminal. I know you mentioned the issue is not so big in France but I wonder if any of those citizens realize they may still be considered citizens and thus caught up in all this hoopla?


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## Bevdeforges

Nobledreamer said:


> @Bev
> 
> There are many in Canada who also had their US citizenship taken away when they became Canadians in the 60's - 70's and part of the '80's. There apparently was no procedure or CLNs issued. Many of these have found out that the government reversed that position indicating they would have to declare that they intended to lose US citizenship when they took Canadian. If they have not exercised any privileges of US citizenship (voting, using US passport, etc), they can relinquish US citizenship at no cost.
> 
> I have yet to hear of any consular officer in Canada acting as you've described. That's criminal. I know you mentioned the issue is not so big in France but I wonder if any of those citizens realize they may still be considered citizens and thus caught up in all this hoopla?


The whole situation in the French Consulate is discussed (and the clerk is named) in a book called The Unknown Ambassadors by Phyllis Michaux. I happen to have been friends with Phyllis at one point (she's well into her 90's now and I'm not sure of her status these days). 

The Consulate here in Paris has tried for the last 10 or 15 years to find the women (mostly) who lost their citizenship because of this clerk and to formally reinstate them. Not surprisingly, some of the women they found told them to take their citizenship and stuff it. 

But Phyllis and the folks from the US expat groups were largely responsible for lobbying to extend citizenship to children born overseas with one American parent (as well as making it easier for US citizens to vote from abroad). I'm not sure they intended matters to take the turn it has in the last 20 years or so.
Cheers,
Bev


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## Nobledreamer

Thanks for book reference. Will see if I can find it. Would never blame them for any of this mess; it's the politicians who have managed to make such a mess of it all.


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## diharv

maz57 said:


> Re numbers of renunciations: When I tried to get an appointment at the nearest US consulate, I was told that appointments for such were in "extremely high demand" and I would have to wait more than a year. Sounds to me like renunciations are up.


I sent in my request for an appointment last weekend and today I recieved a call to book the appointment at the Vancouver consulate. I could have got one as early as Feb 3 but chose one in March as I will be in Vancouver at the same time. I live about 700km north of Vancouver so it is a long trip.
I was surprised that appointments were available so soon given that the very cordial lady who called me stated that they have been very busy with these in the last two years. Anyway I have come to terms with what I have decided to do . I've rationalized it and justified it in my mind a thousand ways and times in the last few weeks and to tell the truth I am already feeling some relief now that I have moved forward on this,imagine how I'll feel once it is all done .What it comes down to is nobody deserves treatment by their home country's government like this. Every uS citizen living outside the US is a goodwill abassador for the US , willing to promote and defend it to foreigners. Now all that goodwill is going to be squandered as more and more of us become more disenchanted with the US' actions.I read a post in a similar forum by a poster who said that in a decade there will be no US citizens living outside the US. Probably not very likely it will come to that but it is heading in that direction. The moment of decision for millions will commence July 1 of this year I guess.


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## Nobledreamer

Over the two years I've been involved in this, there are a lot of inconsistencies regarding the Consulates/Embassies. Vancouver has been one of the more puzzling locations; dithering back and forth between one appointment and two, making people wait more than a year for a second appointment and so on. Toronto and Calgary have been super. The locations with long waits are the norm were mostly in Europe-especially Switzerland. I've not really kept up with what is happening now. So glad to hear that once you've made this decision, it won't be dragged out by waiting.

It is a mixture of conflicting feelings. Sometimes relief, often sadness or anger. But in the long run, if you can remember that the defining reason is based upon practicality, it's just the best option for your situation, the emotional side will fall into place. It's not fair for sure, but really, there are worse things in life. 

I'm not sure if it would be better for FATCA to be postponed again or for it to just start and get it over with. Countdown: 171 days.


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## swisspinoy

diharv said:


> maz57 said:
> 
> 
> 
> Re numbers of renunciations: When I tried to get an appointment at the nearest US consulate, I was told that appointments for such were in "extremely high demand" and I would have to wait more than a year. Sounds to me like renunciations are up.
> 
> 
> 
> I sent in my request for an appointment last weekend and today I recieved a call to book the appointment at the Vancouver consulate. I could have got one as early as Feb 3 but chose one in March as I will be in Vancouver at the same time. I live about 700km north of Vancouver so it is a long trip.
> I was surprised that appointments were available so soon given that the very cordial lady who called me stated that they have been very busy with these in the last two years. Anyway I have come to terms with what I have decided to do . I've rationalized it and justified it in my mind a thousand ways and times in the last few weeks and to tell the truth I am already feeling some relief now that I have moved forward on this,imagine how I'll feel once it is all done .What it comes down to is nobody deserves treatment by their home country's government like this. Every uS citizen living outside the US is a goodwill abassador for the US , willing to promote and defend it to foreigners. Now all that goodwill is going to be squandered as more and more of us become more disenchanted with the US' actions.I read a post in a similar forum by a poster who said that in a decade there will be no US citizens living outside the US. Probably not very likely it will come to that but it is heading in that direction. The moment of decision for millions will commence July 1 of this year I guess.
Click to expand...

That's my view too. America should not treat ist expats like that and expats don't have to accept such treatment. If America never learns to recognize it faults, then so be it. But, as a native citizen of the nation where I live, there is no point, logic or reason for being wrongly annoyed by the US simply because I don't collect food stamps in the US. If I never retire to America, then that's America's loss, not my loss.


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## diharv

Nobledreamer said:


> Over the two years I've been involved in this, there are a lot of inconsistencies regarding the Consulates/Embassies. Vancouver has been one of the more puzzling locations; dithering back and forth between one appointment and two, making people wait more than a year for a second appointment and so on. Toronto and Calgary have been super. The locations with long waits are the norm were mostly in Europe-especially Switzerland. I've not really kept up with what is happening now. So glad to hear that once you've made this decision, it won't be dragged out by waiting.
> 
> It is a mixture of conflicting feelings. Sometimes relief, often sadness or anger. But in the long run, if you can remember that the defining reason is based upon practicality, it's just the best option for your situation, the emotional side will fall into place. It's not fair for sure, but really, there are worse things in life.
> 
> I'm not sure if it would be better for FATCA to be postponed again or for it to just start and get it over with. Countdown: 171 days.


I take it that you have gone through the process ? Are you loggd out of the system as far as the 8854 is concerned yet ? would love to hear how that process went. 
The Vancouver Consulate I guess is doing it all in one appt as far as logging out of the system where the Dept of State is concerned but the lady on the line told me it could be 4-14 months before I hear any thing back as far as the CLN is concerned.
Thank you for your reply !:tea:


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## Bevdeforges

One other difference with the availability of appointments may be that some of the Canadian consulates seem to be doing "bulk appointments" - at least according to a few reports we've had here.

It really does seem to depend on where abroad you live as to just how difficult things become for Americans resident abroad. That and your financial situation. For those falling under the thresholds - or those who don't have sufficient income to warrant filing, it's kind of a non-issue. (And in retirement, living off savings, it's fairly easy to stay below the filing thresholds.)
Cheers,
Bev


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## BBCWatcher

One interesting "quirk" is that, to the extent non-U.S. financial institutions decide they don't want to do business with Americans due to FATCA, they might just as well decide they don't want to do business with people _born_ in the U.S., regardless of citizenship status.

And wouldn't that be interesting, to say the least?


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## Pacifica

@ Bev,

Re “bulk appointments” in Canada, it appears to have been a one-off pilot project at Toronto. 

Renunciations began to increase very sharply in Canada in 2011. At the time Toronto held the group meeting in November 2011, Toronto still required two meetings for a renunciation (some consulates were already doing it in only one). To deal with the volume, they scheduled a group meeting for the first meeting of the two-meeting process, which 22 persons attended. The second meetings remained as an individual meeting for each person. These second meetings took place in the following weeks. 

This “group meeting” model enabled Toronto to process 22 people in 23 meetings instead of in 44 meetings. However, they never held another one. In 2012, Toronto switched to having just one meeting for a renunciation. Over the past two years, Toronto has generally been making available in the range of 176-208 appointments per month, with 208 for February and 208 for March 2014.


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## Pacifica

@Diharv,

It was taking up to, and just over, a year in 2011-early 2012 for people in Canada (Western Hemisphere Zone) to get their CLNs. (The Dept of State office in DC handling CLNs in DC is divided into 5 zones.) They tackled the backlog and delivery times came down beginning mid-2012, with 2 to 6 months being common. It does seem to be bogging down again, though, as I’m aware of quite a few people waiting since July. (The other Zones have pretty consistently been taking 1-3 months).

In the meantime, once you renounce, you will have a receipt from the consulate for the $450 as proof of your renunciation. Bring that with you if you are crossing the border, in case you are asked why you are using a Canadian passport with a US place of birth. They generally don’t ask -- that you have a CLN application in process is entered on a database which is accessible by the border officials. Likewise when you get your CLN, they generally don't ask to see it, but the consulates advise you always bring a copy with you.


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## swisspinoy

BBCWatcher said:


> One interesting "quirk" is that, to the extent non-U.S. financial institutions decide they don't want to do business with Americans due to FATCA, they might just as well decide they don't want to do business with people _born_ in the U.S., regardless of citizenship status.
> 
> And wouldn't that be interesting, to say the least?


Outside of N. Korea or Iran, I've seen no evidence of this. The citizenship status discrimination is the result of US law. Without the US law, the discrimination wouldn't exist. citizenship status discrimination is a US federal crime, but the US looks the other way when it practices such outside of its jurisdiction.


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## maz57

@ BBC re: foreign institutions deciding not to do business with people born in the US, CLN or not. 

I can't speak for other countries, but here in Canada banks don't even know a customer's place of birth because by law all that's required to open an account is a SIN# (Canadian equivalent of a SS#) and valid photo ID (such as DL or Provincial ID card. Neither indicate place of birth and the bank cannot ask for it. This is not going to change. In Canada a person has a legal RIGHT to have access to basic banking services if they can produce the requisite identification. So the only way for an institution to know about a US birthplace would be if the customer told them voluntarily.

If an institution actually acted on this information and denied services, that would be a Charter of Rights violation (refusing service because of ethnic or national origin). To declare the account holder "recalcitrant" and close the account because the customer wouldn't answer a question that the bank can't legally ask would also be a violation of Canadian law. No Canadian institution wants to put itself in such a legally untenable position.

An institution might have some so-called "US indicia" for one of their customers, but it would not include birthplace and would be a clear violation of both federal and provincial privacy laws to directly hand that customer's information over to the US government. That's why all the Canadian banks are pressing the Federal government to sign an IGA. 

So protection of privacy laws, both federal and provincial, AND the Charter of Rights and Freedoms, AND laws regulating financial institutions would have to be changed to accommodate FATCA. The chance of that happening is zero. With the FATCA deadline now less than six months away and no IGA yet signed, it remains to be seen just how the FATCA train wreck will unfold. One thing is for sure; with US "persons" being squeezed by the US, Canadian financial institutions being squeezed, and the Canadian government being squeezed, there is not a mood of accommodation in the air. It's generally believed that the Canadian government is holding out for a massive carve-out for "US persons" who are also Canadian citizens. If such an exception is agreed to, all the other countries who jumped on the FATCA bandwagon early on without a whimper are going to look pretty stupid; they didn't even have the guts to protect their own citizens or their own national interest.

When the US' closest neighbor with an intertwined economy and culture won't even sign up it doesn't bode well for a smooth FATCA rollout. And if the US ever tried to make good on it's 30% withholding threat, it would amount to a declaration of financial war which would reverberate around the world. The disruption to the financial markets and destruction of economic activity would severely hurt the US in short order and the US knows it.


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## swisspinoy

Journalists are slowly waking up:

_More than 3,100 Americans renounced citizenship last year: FBI_
More than 3,100 Americans renounced citizenship last year: FBI - National | Globalnews.ca


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## Nononymous

Also

Renunciation trends in Auckland – Hodgen Law


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## maz57

When Globalnews submitted an FOI request to US Dept. of State regarding numbers of people who lost US citizenship it was denied. Sounds to me like a government that either doesn't want that information released to the public (suppression of bad news) or doesn't know (shoddy information gathering). 

Personally, I'd go with the former. Remember the body counts back in the Vietnam era?


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## BBCWatcher

I wasn't aware that Canada is the only other country in the world. 

In Singapore, for example, disclosure of birthplace when opening a financial account is typically unavoidable. Unless a Singaporean citizen, all institutions require presentation of a passport at account opening. I think all passports contain place of birth.

Every country is different.

I'm merely pointing out that a CLN in hand doesn't guarantee a non-U.S. financial institution will do business with you. And I'm not wrong.


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## maz57

Didn't notice anyone claiming Canada is the only other country in the world. It's just one destined to be a key FATCA battleground. The IRS chose to target Canada with it's offshore witch-hunt because there are probably more "US persons" here than any other single country. Something like 1 million out of a total of 7 million US expats scattered around the world. No one knows for sure. So to say Canada is pretty important to the FATCA rollout is not an exaggeration. 

If FATCA doesn't work here it ain't gonna work elsewhere and it would seem it's not going well. Funny how people react badly to threats and extortion. A coalition of the unwilling is doomed to fail.

The point is, the extra-territorial provisions of FATCA collide head-on with Canadian law. FATCA just doesn't work in Canada because of that conflict and Canadian law isn't going to change just because the US says so. US lawmakers don't care about that fact but Canadians do. Canadian banks won't be finding out where people were born and therefore won't be denying service based on a US birthplace. 

It's possible to order a Canadian passport with no place of birth but it would be a bad idea because many countries deny entry if one has such a passport. I've heard the US is one such country.


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## BBCWatcher

Then I'm not wrong. OK, then, thanks.


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## Nobledreamer

@diharv,

Yes, I am completely logged out. I filed my final batch of forms in June. I know all is ok with the 1040/1040NR and the 3520A & 3520. Have never heard anything re FBAR but have filed twice online so presume it is all in order. I've not heard anything regarding 8854. If I get nervous, I could always authorize my CPA sister to check my status. But I feel ok about it. I renounced in mid January 2012 and picked up my CLN in September 2012. I remember noticing the Consulate didn't even send it out until March, it was approved in July and we were away when the notice came in August. My son renounced in June 2013 and we still haven't heard anything regarding the CLN. Only one more batch of forms to file and this family is all done!


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## diharv

swisspinoy said:


> Journalists are slowly waking up:
> 
> _More than 3,100 Americans renounced citizenship last year: FBI_
> More than 3,100 Americans renounced citizenship last year: FBI - National | Globalnews.ca


If as Pacifica says the Toronto Consulat e alone has been handling 178-208 renunciations per month for the last two years , how with all the consulates in the world can only "more" than 3100 Americans have renounced last year? I know that" more "can mean up to infinity but one would think the bare minimun must be in the tens of thousands . There looks to be some serious downplaying of the numbers occuring here , no ?


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## Bevdeforges

I suspect that Canada is probably the major "poster child" for the IRS' administration of FATCA. There appears to have been some major publicity going on there on the subject - and honestly, it's the "handiest" place to try out their enforcement techniques.

Switzerland is another key target, thanks to the various banking scandals there over secret accounts (affecting not only US but also other European taxpayers and tax evaders). 

To be honest, there has been little to no publicity about FATCA here in France - except perhaps from the US expat groups that are based here. (But if you don't belong to the groups, there's no way you'd know.) France is fighting much the same battle on tax evasion, though, and has requirements that taxpayers report foreign bank accounts and "life insurance" along with their tax returns. 

I suspect this kind of takes France off the radar for the IRS - at least for the time being - or at least permits the IRS to simply compare records with the French "fisc" if they have any concerns. Apparently they have done so in the past when a French taxpayer has failed to report US based accounts - but normally only when the person dies and the estate is being settled.

Suffice it to say that your level of "risk" does seem to depend on your country of residence.
Cheers,
Bev


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## BBCWatcher

Again, Canada is not the world, to summarize. Though it is a lovely place.


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## BBCWatcher

Regarding FATCA developments, Italy signed a "Model 1A" inter-governmental agreement with the U.S. on January 10, 2014.

Model 1 means that the financial institutions report the account information to the respective tax authorities, then the tax authorities report that information to each other. Model 1A (specifically) means reciprocal, so Italian tax authorities (the Agenzia delle Entrate) will receive information on all the financial accounts held in the U.S. by Italians (and suspected Italians) via the IRS, and the IRS will receive information on all the financial accounts held in Italy by Americans (or suspected Americans) via the Agenzia delle Entrate.

Residents of Italy already have detailed overseas asset reporting requirements via Form RW -- more detailed than FBAR/FATCA disclosures. As examples, Form RW no longer has a 10,000 euro reporting threshold, and the report includes artwork, real estate, precious metals, yachts, and all sorts of other financial and non-financial assets held overseas. Presumably the Agenzia delle Entrate will be comparing Form RW reports against the data they receive from the IRS. Penalties for misreporting or nonreporting on Form RW are extremely severe. Italy also has a small wealth tax of 0.15% applied to most overseas assets, so presumably the Agenzia delle Entrate will be comparing the U.S. data they get via the IRS against wealth tax payments. In short -- and I think this is the point a lot of people are missing about FATCA and why it's likely to be better received than anticipated -- if anything FATCA may be more beneficial to Italian tax authorities than to U.S. authorities.

Of course the IRS (and U.S. Treasury) can compare the Italian financial data they receive via the Agenzia delle Entrate with FBAR, FATCA, and U.S. tax forms.


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## maz57

Gosh, that's good news. Let's see; as far as I can tell, that's the eleventh IGA signed out of the 189 "other countries" of the world. Of course, negotiations are "ongoing" with many of those other countries. Way to go USG!

Stay tuned, it's going to be a fabulous train wreck!


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## BBCWatcher

I'm not so flippant. The reason? Network effects. Once you get some small number of countries, especially of larger countries, they then start _jointly_ pressuring countries outside the club.

Look, you have to keep in mind economic motivations here, and they're by no means unique to the U.S. Every country's government wants to collect taxes owed. The classic, popular way to evade taxes is to stash funds overseas, and every country suffers from that problem to one degree or another. The IRS isn't even particularly aggressive compared to tax agencies in other countries. (Anybody noticed what's going on in India lately, to pick another example?) There are some aggressive tax agencies out there!

So is an 11 country (and counting) database of financial account information tempting if you're the 12th tax agency? Maybe. How about a 20 country database if you're the 21st? Even more interesting. That's a lot of information!

There are also the anti-terrorism and anti-money laundering aspects to the data exchanges which are other motivations to join the club. Those are called "network effects," and they are growing. I would predict this data exchange club does just fine. It's not a question of "if," it's only a question of "when."


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## Nononymous

I expect that a small squadron of lawyers have lined up Charter challenges against FATCA and/or an IGA, so that if/when the Canadian banks or government attempt to implement anything, it'll be tied up in court for ages.


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## Nobledreamer

I was about to say "as it should be," before remembering this is exactly why FATCA is such a colossal waste - of time, energy and other countries' money. Seriously, what are the politicians thinking? I'll bet more will be spent in these endeavors than is protected by signing an IGA for the benefit of the banks' pockets.


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## justmenow

*Introduction and question*

I just found this forum while searching for information on relinquishing/renouncing US citizenship so I decided to join the forum. I am not allowed to post the URL of the thread that brought me to your forum as I don't have the requisite number of posts.

I have some questions (that I am sure have already been answered somewhere on the forum) but I thought it would be wise to, at least, introduce myself and proceed from there with questions as they arise. I am simply not sure where to post the questions. I could tag onto the thread I mentioned (as the questions are similar) or start a new thread. Could anyone give me advice as to how to proceed? I will start with an introduction and post my situation. If anyone thinks that this thread would be more appropriate elsewhere I would appreciate it if you could let me know. I could edit/copy/paste it as a new thread.

I am a US citizen living in British Columbia, Canada and have Canadian/US citizenship. We (wife, two children) moved to Canada in 1984 and have lived here since that time. My wife died last summer after a brief bout with cancer. Our two kids still live in Canada-one in BC and the other in Alberta.

We have been filing taxes in the US over the last 7 years and have never had any taxes owing. Nor should we have any going forward as our income (mine only now) falls below the annual income thresholds for taxes due in the US. We are also below the allowable total assets to become a "covered expatriate".

As I worked in the US long enough to qualify for SSA and Medicare, I will have those benefits going forward. The SSA payments will be small but helpful. Qualification for Medicare may not be an issue as I live on Vancouver Island and getting to the US for medical care is challenging. But there is the possibility that at some point I may move to the lower mainland and travel to the US may present less of a problem. At least, currently, I will still have the option to enroll in Medicare next year when I turn 65. I will have to pay for the other options in Medicare (B,C,D) should I move to the lower mainland and should I decide it is a worthwhile endeavor. 

But I am considering relinquishing/renouncing my US citizenship which is why I am here on the forum. One reason for doing it so is that the amount of money needed to pay accountants to do my corporate/personal accounting here in Canada (and doing the same for US filing) is onerous. I will always have to pay accountants on the Canadian side. And at current rates of taxation, I will continue to fall under the radar in terms of paying taxes in the US. I simply hate having to pay for accounting fees to comply with US rules knowing that I will never live there again. 

I wish that the US would have concentrated their efforts in taxation to those citizens of the US (who resided in the US) who had off-shore bank accounts that were not accountable to the IRS. I am not sure how that could have been achieved but they, not the rest of us (or the banking institutions that will be required to spend hundreds of millions of dollars to satisfy the whims of the US government) should be the ones under the microscope. 

At any rate, I am considering R/R US citizenship and will have more questions as time goes on. If this is the appropriate place for this thread please let me know.

Thanks for your assistance.


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## Bevdeforges

As you'll see, I have merged your post into our ongoing thread on renunciation as tax strategy.

Some of the others will advise you on the process for renunciation, but if you are living outside the US (particularly in a country like Canada that has decent health care) it seems rather pointless to enroll for US Medicare. The (freebie) part A, maybe, as it would cover hospitalization if you were to fall seriously ill or have an accident while visiting the US. But the other parts all cost money, will cost more if you don't sign up for them when you are first eligible, and are of questionable utility at all if you aren't living in the US.
Cheers,
Bev


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## BBCWatcher

I'm curious why you employ an accountant for what seems from your description a straightforward tax filing. Maybe the first time (maybe), but now those tax filings are going to be very similar, presumably.

Medicare Part A enrollment is free, so you might as well. Certainly no harm in that.


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## Nononymous

Agreed on the above. If your finances are relatively simple you should be able to do your own taxes without too much grief (or at very least use one of the online preparers who charge a few hundred per return). There's no real advantage to having Medicaire when you have awesome (I mean that non-ironically) Canadian medical care, except possibly if you consider it free travel insurance when visiting the US.

On another note, I think I am about to get some firm legal advice to renounce (from the lawyers preparing various trusts etc for my parents) so I'll probably have to suck it up and get tax compliant and start that paperwork. Pity, because I've enjoyed being a rebel.


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## justmenow

Sorry it took so long to reply but I have had a very busy day. They all seem to be these days.

The corporate taxes, even though the corporation is small, are quite complex. At least to me. My wife had a degree in business and she was the one who suggested we get an accountant when we incorporated. She found it complex and she was light years ahead of me in the financial realm. 

With her passing I don't have the time to actually try and figure out how to file the taxes. I have taken on a lot of added responsibility since her death. Not only at work (we worked together for 35 years) but on the home front as well. Time is a rare commodity for me these days. Perhaps in the future I will retire and have more time to assess the possibility of doing the taxes on my own but for now it is a non-starter. And, currently, I need to work as a distraction to thinking about my wife. 

I suppose another issue for me would be capital gains taxes on our primary residence if it were to be sold. We have been in the house for quite some time and the value of the home has appreciated substantially. It is my understanding that (as a couple) we would be allowed a $500K exclusion on capital gains. With her gone, if I were to sell the house, I believe I would lose her portion of the capital gain. That would result in a significant capital gain for me (and the resultant taxes). Those taxes would be substantial so on that note alone a R/R would be beneficial.

As far as Medicare goes I will qualify for the "free" portion-hospitalization under Part A. I know that I would have to pay for B,C, and D. I may, or may not, choose to do so depending on the circumstances and where I will be living in the future. I will always have access to health care here in Canada for a pittance, although there are changes in the wind in that regard. And I can purchase out of country health care insurance when traveling to the states. But if I do end up living close to the border I would at least purchase part B.

I will probably have more questions and will post them when I have time.

Thanks for your replies.


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## BBCWatcher

Well, if you're worrying about a possible future taxable capital gain on the hypothetical sale of a residence, it's at least somewhat more likely that you have a net worth of $2 million or more and thus will be subject to expatriation tax if you decide to renounce U.S. citizenship. (There are other circumstances when you'd be subject to expatriation tax, but that's one of them.) And you probably don't want to be subject to expatriation tax since that's typically uglier.

Note that you can subtract buying expenses, selling expenses, and the cost of most home improvements when calculating the gain. The gain is not simply the difference between the "headline" buying and selling prices, it's something less than that. Also note that excess Foreign Tax Credits can typically be applied to offset any U.S. tax liabilities. And there may be a tax treaty provision dealing with real estate in Canada. Finally, the gain can be split according to ownership shares if there are multiple owners that qualify for the 2-out-of-5 occupancy rule. It's not only spouses.

Don't forget to sign up for Medicare Part A a couple months before your 65th birthday. There's absolutely no harm/cost in that, so you might as well. (Put a reminder on your calendar.) The rest (Part B, etc.) is highly situational, as you say. If you can wait until age 70 to start Social Security, and you're in good health (i.e. with a reasonable prospect of beating the actuarial tables), I would. Your monthly benefit increases the longer you wait until age 70. Put another reminder on your calendar for that one.


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## maz57

For what it's worth, if I found myself in circumstances such as justmenow, I'd be off to the Consulate to get that CLN asap. A government that abuses it's citizens like the US doesn't deserve their loyalty. This is a textbook example of the pathetic absurdity of Citizenship Based Taxation. It is absolutely expat abuse. The only reason to continue to submit to this abuse would be to preserve the right of return. If that's not a factor, then get out while the getting is good.

The preparation of a tax return for a small business is most definitely a job for a professional, especially when you consider that a business return produces NO benefit for the business other than keeping the government happy. Accounting and preparation of tax returns is a business unto itself. A business owner is better off spending their time running their business, not dealing with government paperwork. (And hopefully making a profit for themselves and producing some revenue for the government.) 

The cost of such accounting and tax preparation is considerable; fortunately it is also tax deductible. But it is still a cost and to double that cost each year to produce a useless US return is a total waste of money. Finding a tax expert in Canada who is qualified to prepare a US return for a business does not come cheaply. For God sakes folks, this man is a Canadian in Canada! What right does the US have to attempt to grab a portion of justmenow's (and Canada's) wealth?

It's my opinion that the OP would be better off to rid himself of US citizenship immediately. Get rid of it while still under the 2 million threshold for the exit tax. (The fact that one is subjected to an "exit" tax for assets that were never in the US in the first place is yet another travesty.) Why wait until he's over the threshold and deemed a "covered expatriate"? It's pretty well guaranteed that when this person decides to sell the business and retire he will wind up with a filing nightmare, not to mention a US tax liability. Who knows what harebrained and abusive thing the US government will come up with in the meanwhile? The only certainty is that the situation will continue to get worse for expats.

The bottom line is the USG hates us because we left to seek a better life elsewhere. Congress (and the US population) believe we are traitors who must be punished. This fact is proven by CBT, the exit tax regime, and now, FATCA. The IRS has created a special form hell for those of us who dared to move to another country.

As for Social Security, it is not tied to citizenship. If you pay into the system, you are entitled to benefits. Even if a person doesn't have enough units (generally ten years of employment not necessarily continuous) the US/Canada treaty will allow a reduced benefit based on the actual amount paid into the system. By treaty that benefit is only taxable in the country of residence, in this case Canada.


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## Bevdeforges

Just curious - is it part of the US-Canada tax treaty that US Social Security payments are taxable only in the country of residence? Cause it's the other way around in the US-France tax treaty - government pensions are taxable only by the government that is paying them.

But otherwise, you're preaching to the choir here. I'm not sure the US Gummint "hates" us exactly - but there is this image amongst the Congresscritters that being an "expat" means that you're living high off the hog on a corporate expense account and that seems to be what they are after. Very difficult to get the idea across that "expat" also takes in those of us making a living like any other working stiff, or those on pensions and/or social security, etc.
Cheers,
Bev


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## maz57

That's correct, Bev. US Social Security and Canada Pension Plan are covered under the US/Canada treaty. I believe the term is "totalisation". Because the two countries share so much economically, it's not uncommon for many people's working lives to be split between the two countries. The idea is to make sure that credit is given for paying into each of the systems, otherwise you could work all your life and still wind up with only half a pension. 

Without that agreement, one could work in one country, pay into that country's system, but still not qualify for benefits if the time requirement is not met. With the treaty agreement if one has paid into the system but has not accrued enough "time" to qualify for benefits, time accrued in the other country's system will count towards the time requirement. The benefit received from either country still depends on how much was actually contributed to that country's system.

A person living in Canada can collect both SS and CPP, taxable only in Canada. Likewise, a person living in the US can collect SS and CPP, taxable only in the US. Citizenship doesn't enter into the calculation. I find it curious that, at least with respect to Canada and government retirement benefits, the US practices RBT!

I'm also surprised that the situation is different in Europe. RBT seems to be the norm there; why depart from that for government retirement pensions? Practically speaking, as long as pensions aren't double taxed, I suppose it doesn't matter. But it does seem like it would be simpler to tax them only in the country of residence.


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## Bevdeforges

Oddly enough, US Social Security is taxed in country of residence for those living in the UK and in Italy (though, if I read things correctly, only for an Italian citizen resident in Italy). Yet here in France, French pensions are taxable only by the French and US pensions (i.e. US social security) only by the US.

It's a real hodge podge of provisions in the various tax treaties.
Cheers,
Bev


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## justmenow

BBC-I am below the threshold for the covered expatriate so that is not currently an issue. I think I will remain below that level but my concern would be that the government, at the stroke of a pen, could lower that threshold to a number that that could warrant an exit tax in my case. It is the uncertainty of the situation that concerns me.

Thanks for the hints on applying for Medicare and applying for SSA. I am happy with the medical coverage while in Canada, but there are times where medical care can be subject to lengthy waiting lists. If I lived closer to the border I could receive care in the states-at least the hospital care which I qualify for. The decision to purchase additional coverage for the other parts of Medicare will be made next year and will be location dependent. The worst case scenario is that I could purchase (in Canada) extended coverage for travels in the states that would not include the hospitalization portion.

maz57-Thanks for your input on my situation. Your thinking parallels mine. But relinquishing citizenship would be done with a heavy heart. 

Bevdeforges-I was in touch with the firm that does my US taxes and they said that there is no withholding of taxes at source. Whatever I receive from SSA will be taxable in Canada.

Another tax issue going forward that concerns me is how would the US treat dividend and RRSP income:

RRSP's-For those of you not familiar with RRSP's, they are a savings program that allows one to deduct contributions to a RRSP from the current year's gross income. RRSP's certainly allow one to diminish the current year's taxes but if that money is allowed to accrue (tax free), once one decides to withdraw the funds, they are taxed at a personal tax rate, and that can be cumbersome (in Canada). 

I am going to start withdrawing those funds for income this year (and the next four to five years). I will take nothing out of the corporation in terms of dividends. I will actually be able to keep contributing funds to the corporation as I will continue to work. The accountants who do my US taxes said it "should be OK to use the RRSP's as a sole source of income this year" as far as the US is concerned. But there would be no guarantee as the US doesn't like to see money idle in a corporation. I would still have to pay tax on the monies that accrue in the corporation in Canada.

The reason I am starting to withdraw funds out of the RRSP is solely because of inheritance issues. If I were to die tomorrow, those funds would be taxed at 48%. Whatever is left in the corporation, from an inheritance standpoint, would be taxed at 22%. So it is reasonable to draw down the assets which bear the higher tax implications.

Dividend Income-When I begin to take dividend income from the corporation there would be no tax (in Canada) on dividends up to $35K/year (remember I would have already paid taxes on monies left in the corporation each year and paid taxes on those funds withdrawn from the corporation on a personal basis). My needs are simple and I have no desire to spend money on traveling, etc. The house is encumbrance free. In today's dollars, I could live on the government pensions I will be receiving and still be under the radar from a tax standpoint if I were to take $35K/year in dividends. At least in Canada.

But again, uncertainty rears it's ugly head. I have no way to predict the implications of taxes from the US if I live on RRSP's for the next five years and allow money to accumulate in the corporation. And what would the US do if I lived on government pensions and tax free dividends? Granted, by the time I start withdrawing dividends, inflation will have necessitated that I withdraw more than $35K/year. 

And inheritance is an relevant issue to me. I, and I believe my wife would concur, would want to give our kids an opportunity that we didn't have. That is actually a driving issue for me. 

Lest you think that my concerns regarding R/R citizenship are simply about tax implications, I also have concerns about the past, present and future of the US in terms of health care, foreign policy, etc.. Those are personal and need not be discussed in the forum. 

Thanks for all of your help!


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## BBCWatcher

The U.S. may be the country with the most advantageous estate taxes given its $5.25 million (and rising) exemption and unlimited spousal exemption. See if you can take advantage of that.


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## Nononymous

Or Canada, which has none whatsoever.

(Though apparently the capital gains tax and probate fees can be a bit of a *****.)


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## justmenow

BBCWatcher said:


> The U.S. may be the country with the most advantageous estate taxes given its $5.25 million (and rising) exemption and unlimited spousal exemption. See if you can take advantage of that.


The taxes I was referring to in terms of inheritance were taxes on the Canadian side. And, to my knowledge, we also enjoy unlimited spousal exemptions. But there is a 22% tax on funds left in the corporation when willed to children. In that regard the US treats it's citizens more fairly (from my perspective).


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## BBCWatcher

Exactly, so I'm suggesting you investigate which assets to hold in the U.S. (and how) for estate planning purposes since there could be tax advantages there.


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## justmenow

I currently hold no assets in the US and don't see that as a possibility going forward.


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## maz57

Just in case readers here haven't found this already:

http://citizenshipsolutions.ca/wp-c...RichardsonYatesKishJan232014SFCSubmission.pdf


This is a serious submission to the Senate finance committee and includes some pretty heavy hitters, most notably Willard Yates (formerly with IRS). Not sure how far it will go but it's a splendid try.


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## ite

Thanks for sharing your experience. Yes, you do have to make a decision going forward as to just how much "forward" you want to go with this. And renunciation is the option if you want to be shed of the whole tax filing responsibility. (Though do look into the "expatriation tax" - if you qualify for it, you're kind of stuck.)


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## eucitizen

diharv said:


> Thank you for this reply. I have been wanting to hear from anyone who has actually gone through the renunciation process and learn about their experience with it during and after the process.


Reading your post in January, I thought you were talking about me.

I went through exactly the same soul searching.

Depression.

Marital distress.

Fear of not being able to return to care for my elderly parents who will need me because US healthcare is what it is.

I finally renounced. I felt like I had lost a limb coming out of the embassy that day. It has taken me years to recover. Yet I have to say in light of what is happening now, it was the best decision I have ever made after marrying my wonderful spouse and having my children.

Filing the US return is not an "inconvenience". It is a costly and permanent threat that you live under, perpetual fear you will make a mistake and lose your life's savings. What many others on this forum seem to ignore, if you are a true long term expat, you may not have to pay anything during your working life but once you retire you will pay big time on everything from selling your home, to getting your retirement checks, to cashing out your life insurances (if you still have them and have not gotten kicked out), to gifts to your family and finally death taxes.


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## BBCWatcher

eucitizen said:


> What many others on this forum seem to ignore, if you are a true long term expat, you may not have to pay anything during your working life but once you retire you will pay big time on everything from selling your home, to getting your retirement checks, to cashing out your life insurances (if you still have them and have not gotten kicked out), to gifts to your family and finally death taxes.


I don't think anybody is ignoring anything, but facts are important. Let's take these in order.

1. The U.S. taxes the net capital gains -- that word net is very important -- in excess of $250,000 ($500,000 as a married couple, I believe) on the sale of a home, and then only if the gains are not foreign taxed at or above U.S. levels. On top of that the U.S. grants one of its most generous tax breaks in the form of the Foreign Housing Tax Credit during the time you live overseas, so most of your housing expenses add to your Foreign Earned Income Exclusion. Mortgage interest is also deductible.

2. The U.S. never taxes retirement checks if they are already foreign taxed at or above U.S. levels, and sometimes the U.S. does not tax them (again) at all (e.g. U.S. Social Security in many cases, Roth IRAs). In other cases the U.S. tax is fully deferred (U.S. Traditional IRAs, Traditional 401ks). Life insurance (the investment type -- pure/real life insurance is not generally taxable) is the same.

3. You can give away and bequeath more than $5.25 million to anybody you wish, U.S. tax free. It's "more than" because the limit increases every year and because lifetime gifts below the maximums -- about $14,000 per individual, $140,000 to a non-resident alien spouse -- do not count against that total. That's a lot of gifting and inheritance!

Way too often these discussions are hyperbolic. Let's stick to the facts, please.


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## CdnAllTheWay

The facts are a broke and corrupt country, through a broke and corrupt agency of the corrupt government, are trying to squeeze any dime they can from foreigners. If you don't believe me, explain why a nation that tells them they are not citizens claims decades later they have a legal duty to file tax returns, after manufacturing the serf chain that the IRS retroactively re-instates, calling US personhood.

You can continue to try to justify your country's actions all you want, BBCWatcher, but most of us can see the Emperor has no clothes, and we can smell a stinkng pile when we come across it. The smell travels across all parts of your government, and if you don't believe me, try watching Frontline from this past week, and this upcoming Tuesday. If your DOJ, tasked with upholding the law of your land, fabricates ways to circumvent law, how could anyone in yourcountry do so, such as the IRS?


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## maz57

BBCWatcher said:


> 1. The U.S. taxes the net capital gains -- that word net is very important -- in excess of $250,000 ($500,000 as a married couple, I believe) on the sale of a home, and then only if the gains are not foreign taxed at or above U.S. levels. On top of that the U.S. grants one of its most generous tax breaks in the form of the Foreign Housing Tax Credit during the time you live overseas, so most of your housing expenses add to your Foreign Earned Income Exclusion. Mortgage interest is also deductible.


Why should a long time US expat pay ANY cap gains on the sale of a home to the IRS if that home is not even in the US? For many expats a home that has been owned for years could be well in excess of $250k (those who married an NRA would likely be filing MFS) if they live in a major urban area. 

That home can often represent a major portion of a person's net worth and for many it is their retirement nest egg. To then suffer a major tax hit could seriously impact their retirement prospects. That mortgage and ownership cost was all paid for with after tax dollars in the currency of that person's country of residence regardless of all the silly US mortgage deduction rules. 

The fluctuation of real estate values is a bad enough risk; to then be subjected to the vagaries of exchange rates and US tax rules make the whole thing a crap shoot. This is one of many ways the US system totally conflicts with the tax systems of other countries.

If the US really wanted to grant a generous tax break they would convert to residence based taxation like every other civilized country. Instead they persist with CBT and its complicated rules and reporting. Long time expats eventually grow weary of the whole thing and renounce to finally get off the merry-go-round.


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## maz57

BBCWatcher said:


> 3. You can give away and bequeath more than $5.25 million to anybody you wish, U.S. tax free. It's "more than" because the limit increases every year and because lifetime gifts below the maximums -- about $14,000 per individual, $140,000 to a non-resident alien spouse -- do not count against that total. That's a lot of gifting and inheritance!


Big deal. You can do that and more if you are NOT a US citizen as well.


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## maz57

BBCWatcher said:


> 2. The U.S. never taxes retirement checks if they are already foreign taxed at or above U.S. levels, and sometimes the U.S. does not tax them (again) at all (e.g. U.S. Social Security in many cases, Roth IRAs). In other cases the U.S. tax is fully deferred (U.S. Traditional IRAs, Traditional 401ks). Life insurance (the investment type -- pure/real life insurance is not generally taxable) is the same.


Once a person is retired the FEIE goes away and the Foreign Tax Credit is the only way to reduce US tax. That person will always pay the higher of the two rates. Not a problem if you live in high income tax jurisdiction but many countries are tending to raise more of their revenue with VAT and other non income tax schemes, none of which count for the FTC. Only income tax qualifies for the FTC so it is possible to pay a higher overall tax rate to your home jurisdiction and still owe US tax.

Many governments have tax relief programs for seniors; the IRS is happy to collect any of those resulting tax savings because they are not recognized by the US tax code.


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## Bevdeforges

maz57 said:


> Once a person is retired the FEIE goes away and the Foreign Tax Credit is the only way to reduce US tax. That person will always pay the higher of the two rates. Not a problem if you live in high income tax jurisdiction but many countries are tending to raise more of their revenue with VAT and other non income tax schemes, none of which count for the FTC. Only income tax qualifies for the FTC so it is possible to pay a higher overall tax rate to your home jurisdiction and still owe US tax.
> 
> Many governments have tax relief programs for seniors; the IRS is happy to collect any of those resulting tax savings because they are not recognized by the US tax code.


I've been looking into this (obviously due to personal circumstances), and it pays to read the tax treaties, where one exists between your country of residence and the US. At least when it comes to government pensions, some treaties state pretty clearly that pensions are taxable only in the source state or (in some cases) only in the state of residence.

It also pays to consider what resources the IRS does or doesn't have regarding what government benefits are paid out in other countries. 
Cheers,
Bev


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## maz57

Bevdeforges said:


> I've been looking into this (obviously due to personal circumstances), and it pays to read the tax treaties, where one exists between your country of residence and the US. At least when it comes to government pensions, some treaties state pretty clearly that pensions are taxable only in the source state or (in some cases) only in the state of residence.
> 
> It also pays to consider what resources the IRS does or doesn't have regarding what government benefits are paid out in other countries.
> Cheers,
> Bev


Yes, if one is lucky enough to live in a treaty country in which government pensions are taxable only in the country of residence, modest income folks are in OK shape US tax wise. If the lion's share of your income is government pensions, the personal exemption, additional age exemption, possible spousal exemption, and standard deduction allow for a reasonable amount of non-pension income before you even have any US taxable income.

Presumably the IRS would know about Social Security being paid overseas to an expat, but its doubtful they would know anything about foreign country pensions. With FATCA they will possibly start getting bank account information but still nothing about the source of those funds. 

Selective compliance any one?


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## caminokris

Not necessarily will the IRS know that you are living overseas. For example, if you are having your ss checks in a US bank, and you are taking the money out in Europe, how are they to know you are not in the US or if overseas, not on a vacation. Now if you arrange to have them direct deposit in a non-US bank...that's different. Also, if you are not getting any other income (pensions, for instance) that must be reported to the IRS, your social security is nontaxable.

Kris


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## hawknest

When we left the USofA 22 yrs ago, we had the choice of being investigated and considered as tax evaders or pay the 25% exit tax. We closed all of our bank accounts, sold our home and paid the tax - one time. Have not returned to USofA or surrounding waters since. We travel on Belizean passports, having renounced at a time when Belize was a great offshore haven.

Offshore Avoidance of U.S. Income Taxation


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## Nononymous

Even the capital gains on sale of a house in a foreign country, how the IRS would know that is a bit of an open question. FATCA will make things harder to conceal, but I think there will always be opportunities for non- or selective compliance. 

And don't forget that the US may not easily be able to collect penalties in other countries. That's certainly the case for dual citizens in Canada.


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## BBCWatcher

As I wrote, facts matter. Your opinions and your feelings about particular tax systems are your own.

As another fact, the U.S. is indeed one of the few countries that broadly requires its citizens -- if relatively well-to-do and if living in comparatively low tax jurisdictions -- to pay U.S. personal income tax. (According to Wikipedia, Hungary is another example. In the case of Hungary, if you hold a second citizenship or live in a country that happens to have a tax treaty with Hungary with different terms then you are not subject to Hungarian income tax while living outside Hungary. Otherwise, as a Hungarian citizen, you are. And apparently Hungary has no equivalent to the U.S. Foreign Earned Income Exclusion.) May I also point out that there are over 35 countries in the world that require its citizens to serve in their armed forces, i.e. that have conscription. In other words, there are over 35 countries with citizenship-based servitude (CBS). Typically CBS requires dedicating two years of one's life to the state with at least some personal risk of death and with compensation (if it exists) significantly below market rates. If the compensation were at market rates then there wouldn't be conscription, after all.

Opinions can certainly differ, but my view is that CBS is a much heavier burden -- and a far, far more serious impact on personal liberty -- than CBT. CBS is quite simply forced labor. The United States abolished CBS in 1973, but over 35 countries around the world still have CBS. Please note that I'm not talking about CBS for national emergencies. Practically every country has that. I'm talking about standing, operating CBS.

The larger point is that every country has its pros and cons, and those pros and cons will vary depending on your preferences and attitudes. Every country has taxation of some sort -- well, the ones with functioning governments, anyway -- but taxation is only one characteristic among thousands. It's usually not the most important, even financially. (Hint: Which is better? An annual income of $50,000 taxed at a total effective rate of 20% with 10% unemployment risk, or an annual income of $150,000 taxed at a total effective rate of 30% with 6% unemployment risk, ceteris paribus?) Yes, the U.S. has a citizenship-based personal income tax system which requires its citizens residing overseas to pay personal income tax to the U.S. on their foreign-source income if four conditions hold: (1) they are relatively well-to-do, (2) the type of income is ordinarily U.S. taxable, (3) the income is not treaty-protected, and (4) they are residing in a comparatively low tax jurisdiction. But if you don't like the U.S. personal income tax system then you can acquire another citizenship and renounce U.S. citizenship, paying $450 for a certificate and settling your final outstanding U.S. tax bill (possibly with a final "mark to market" exit tax if you're wealthy). Alternatively, if you value your U.S. citizenship, you can keep it and all its rights, privileges, and obligations, including its tax obligations. In my view that's not tyranny, that's choice, and it's a reasonable one. Take that deal or don't -- and I defend the right of U.S. citizens to have that choice.

CBS probably is real tyranny, for perspective.


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## theOAP

BBCWatcher said:


> *As I wrote, facts matter.*
> 
> Yes, the U.S. has a citizenship-based personal income tax system which requires its citizens residing overseas to pay personal income tax to the U.S. on their foreign-source income* if four conditions hold*: *(1) they are relatively well-to-do,* (2) the type of income is ordinarily U.S. taxable, (3) the income is not treaty-protected, and *(4) they are residing in a comparatively low tax jurisdiction*.


In a previous post, you (BBCWatcher) warned against hyperbole. Could I respectfully suggest that there should also be a warning against misinformation, such as contained in the above quoted post.

If we consider a US Person, age 66, filing MFS (as most do), living in the UK with the following sources of income: £9,500 from UK State and company pensions, £1,000 from a cash ISA (tax free in the UK), £100 from the winter fuel allowance (tax free in the UK), and the £10 December bonus from the State (also tax free in the UK), do they owe US tax?

In the UK, _"a higher tax jurisdiction",_ the first £10,600 is tax free for this individual. Aside from the already tax free status of the ISA, WFA, and bonus, their pensions are also tax free since they are below the threshold. Thus, on the £10,610 income they owe no UK tax. It seems inaccurate to say the £10,610 income makes them _"relatively well-to-do". _If we translate that amount to US dollars at the 2013 IRS average rate it results in an income of $16,021.

All the above income is unearned for IRS purposes and therefore only FTC's can be used to offset the income. The Standard Deduction ($7,300 for age 66) and the exemption ($3,900) total $11,200. Again, they pay no UK income tax. There are no FTC's.

Do they owe the US tax on the $4,821 difference? Of course they do.

Note: Do to unfortunate wording in the US/UK double tax treaty, it is agreed amongst UK/US tax professionals that the UK State Pension IS taxable by the US.

_(Correct)_ facts do matter.


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## BBCWatcher

theOAP said:


> Could I respectfully suggest that there should also be a warning against misinformation, such as contained in the above quoted post.


Let's take a look....



> If we consider a US Person, age 66, filing MFS (as most do), living in the UK with the following sources of income: £9,500 from UK State and company pensions, £1,000 from a cash ISA (tax free in the UK), £100 from the winter fuel allowance (tax free in the UK), and the £10 December bonus from the State (also tax free in the UK), do they owe US tax?


As you've constructed the scenario, yes, probably. But read on....



> In the UK, _"a higher tax jurisdiction",_....


Please note what I wrote: "they are residing in a comparatively low tax jurisdiction." Comparatively obviously means compared to the U.S. and _in the citizen's particular circumstances_.



> Thus, on the £10,610 income they owe no UK tax.


And that would be a comparatively low tax jurisdiction. Zero is comparatively low!



> It seems inaccurate to say the £10,610 income makes them _"relatively well-to-do"._


_
It depends on your definition of "relatively," but I concede that point. With a rewrite I would add the word "generally." You've (almost) spotted the one exception that might intrude deep into the middle class: untaxed (or lightly taxed) foreign source(s) of passive income as a significant or dominant share of household income. More on my views on that in a moment.

However, you've artificially constrained the scenario to Married Filing Separately. I think that's quite unfair. That is not actually a constraint that exists in the U.S. tax code. That's strictly a filer's choice. In your hypothetical if you've described household income, even discounting treaty protections (if any), there would be zero U.S. tax owed with Married Filing Jointly. I'm hard pressed to blame the U.S. tax code or the IRS for providing a zero tax rate (also) and a taxpayer then choosing not to take advantage of that zero rate.

Yes, of course, if you pick a less favorable path then you could pay more tax. That's true in practically every tax code on the planet. But shouldn't we be assuming that taxpayers pick the best legal outcome?




(Correct) facts do matter.

Click to expand...

Absolutely.

OK, here are some more thoughts on your scenario. Another assumption you've made -- also somewhat unfair, in my view -- is that the world began at age 66 and ended at age 67 for this hypothetical U.S. citizen.

With respect, no, that's not how the world works, and that's not the core principle behind CBT. And I have to give CBT's defenders the benefit of the doubt here in the following section, so let's follow the logic. It is a logical argument, as it happens. Whether you agree with the outcome is much more of a value-based judgment, but the logic works if you favor the principles of CBT that are fundamentally rooted in lifecycle experiences.

At age 66 that hypothetical pensioner worked over several years/decades to accrue those pensions. In this solidly middle class example that worker (in the U.K.) would have paid zero U.S. tax during his/her lifetime. (Perhaps even qualified for some free money from the IRS. U.S. citizenship does occasionally have its perks.) He/she could have taken the Foreign Earned Income Exclusion and Foreign Housing Exclusion to shield the first ~$100,000 of income during his/her working career (if his/her U.K. income tax was comparatively low), or, alternatively, he/she could have taken and accrued Foreign Tax Credits. All savings and pension credits would thus be at least U.S. tax deferred even if above the MFJ outcomes, and perhaps even better than that if FTCs accrued and/or treaty provisions apply and/or the taxpayer took advantage of U.S. tax-advantaged savings vehicles (IRAs). That's really pretty good when viewed over a lifetime, and I think that's a reasonably fair way to view things.

That said, if you're going to have a CBT regime -- and the U.S. will for at least my lifetime, I would predict -- you've highlighted one area where I think the U.S. tax code needs some improvement. I would favor some type of foreign income exclusion on passive income set at about half the FEIE cap. That is, if I were Congress and the President for a day, I would exclude foreign source income up to today's FEIE cap with up to 50% of that cap allowed as passive (unearned) income. For reference, the FEIE is $97,600 in tax year 2013, so half of that would be $48,800. That's per spouse, and that's above personal exemptions and deductions and not including the Foreign Housing Exclusion.

For example, if you have $30,000 in foreign bank interest and $50,000 in foreign earned income, that'd all be excludable under BBCWatcher's Foreign Income Exclusion should you choose it. The $30,000 is below the $48,800 limit, and the total ($80,000) is below the $97,600 limit. Note that your earned income (if any) would always be counted first against the combined limit for sensible tax reasons in favor of the taxpayer.

Note that I haven't explained how I'd pay for that particular tax cut. Off the top of my head I'd probably favor a slightly less generous Foreign Housing Exclusion and/or an additional top marginal tax bracket of around 27% on long-term capital gains kicking in at the $1.5 million income level (with the threshold indexed for inflation). The current top marginal tax rate on long-term capital gains is 23.8% for reference. More radically (and fairly I'd argue) I'd eliminate separate non-earned income tax rates altogether and allow long-term (>1 year) gains to be calculated with an inflation adjustment. That is, if your long-term capital gains are 2%/year compounded, and inflation was 2%/year, then you have zero real gain and thus zero tax owed. For the portion of long-term gains above inflation you'd pay standard marginal tax rates which currently range up to 40.5%.

OK, I'll stop there. I think you've made a fair point, though there are some reasonable counterweight arguments. I appreciate the opportunity to expand on these points._


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## Bevdeforges

To be perfectly honest, the only facts that matter here are those facts that pertain to an individual's tax situation. If the taxpayer is currently 66 and living in the UK, married to a NRA, there is not alot of point in speculating on ways they might have benefited from US tax policy 20 or 30 years ago. And besides, all that depends on what their situation 20 or 30 years ago was or wasn't. It's a tad late to go back and change all that now.

The option of non-compliance or selective compliance also is on the table. It depends largely on what your sources of income are and how likely it is those foreign sources will come to the attention of the IRS.

Then there are the ambiguities of the IRS' own definitions of income that must be included on your declaration. Take unemployment, for instance. It states most clearly that unemployment compensation is any payment made by the Federal or state government. So how about foreign unemployment benefits? Some tax advisers say not to declare them on your US 1040.

Also, why wouldn't this apply to the UK winter fuel allowance?


> *Payments to reduce cost of winter energy.*
> Payments made by a state to qualified people
> to reduce their cost of winter energy use are not taxable
> _from IRS Publication 525 p. 28_


Under Public Assistance Benefits, the same publication states:


> Do not include in your income governmental
> benefit payments from a public welfare fund
> based upon need, such as payments due to
> blindness. Payments from a state fund for the
> victims of crime should not be included in the
> victims' incomes if they are in the nature of wel-
> fare payments. Do not deduct medical expen-
> ses that are reimbursed by such a fund.


There are lots of instructions like this that can be very ambiguous when applied to overseas residents. Does "state" also mean "State" (i.e. US state vs. a national State, like the UK or France)? This is the kind of stuff you pay the big accounting firms to take a stance on, because it's not clear - and for those of us hovering around the "do we owe US taxes or not" threshold, the answers may be different.
Cheers,
Bev


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## theOAP

@BBCWatcher
Ahhh, a civilised debate. Thank you for the reply.

Allow me to start with an agreement to your post.
You said: _"That said, if you're going to have a CBT regime -- and the U.S. will for at least my lifetime,"_
I agree. I suspect we agree on a number of things.

I also appreciate your comments on an unearned income cap contained in the FEIE; provided Congress continues to keep the FEIE and ignore the ever constant attempts to abolish it. Even if it did happen, there are too many resident in the US who depend on the FTC, so I believe the FTC will never be abolished.

I accept your rewording to include 'generally' to your statement concerning who will owe tax while residing abroad. Absolutely! The problem with the US tax system for non-residents is the generalisations (or outright omissions) contained in the Code. _Generally_, no one situation can ever fit all.

Yes, my example was carefully constructed; but it would be unfair to suggest it is isolated. There are many of the 6 million abroad who may find themselves in this situation. Those are real, live people. If CBT is the equitable tax system for all as is claimed, do the numbers matter?

Elsewhere, you discuss the possibility of the example being 'household income'. The assumption seems to be an MFJ return could be filed, reducing the exposure to US tax. The implication is MFS would be an unwise tax choice which would not be considered by the astute filer. I would suggest there are many NRA spouses who have no desire to be included on a tax return to a foreign nation for which they have no obligations. You may find the spouse would oppose having all their income and asset information disclosed as a bridge too far. I certainly am aware of one such marriage. If CBT is the equitable tax system for all as is claimed, should divorce be considered as an acceptable alternative in order to adhere?

I'll leave aside the discussion as to what is a relatively high income and what is a relatively low/high tax rate. I'll only respond with the person in the example could, in fact, have an income high enough to owe UK tax on which they would pay a 20% rate of tax, and STILL owe US tax also. I'll expand if you wish. There is also the inherent principle that no one leaves the US permanently; that all US Persons abroad are there temporarily.

Now, the disagreements. Let's take an example of someone who lives in London and is aged 66. _(I don't understand the comments of life starting at 66 and ending at 67.)_ They purchased a home 20 years ago. _(I also don't understand the argument concerning the benefits of the Foreign Housing Deduction. My understanding is it only applies to the rental property of someone temporarily abroad. I may be wrong about that.)_ Home prices in London today (and the figures were released TODAY) are 20% higher than they were in 2007 at the height of the property bubble. It is quite possible that individual would make a cap. gain higher than the $250,000 allowance for MFS. You know the arguments concerning money earned, taxed, and invested in a foreign country of residence, so I won't labour the point. But, there is also a chance this individual, being MFS, would owe an additional 3.8% tax on NIIT (Net Investment Income Tax - or Obamacare tax). NIIT cannot be offset by FTC's (wrong part of the Code). If CBT is the equitable tax system for all as is claimed, should an individual be double taxed in order to benefit a programme they are not allowed to join?

You also mentioned the right to renounce. Let's assume the 66 year old individual with the house in London above wishes to renounce. Let's also assume they planned well for retirement and have pensions equal to £50,000 a year. Are they rich? Should they be penalised? When calculating Part V (value of assets) for Form 8854, they will include the pensions. When they use the IRS commutation tables for 8854 for the pensions and add in their value in the house, they will find they are dangerously close to the $2 million asset threshold. Trust me, I spent the last weekend investigating 8854.

And now, my real problem with CBT. In both the cases above (selling the property or renouncing) they are at the mercy of the exchange rate. In the case of selling, we have the purchase exchange rate and the selling exchange rate. In the renunciation, we have to accept a rate on the values determined on the day prior to renouncing. Someone close to the thresholds involved may, or may not, end up owing a great deal of tax depending on where the exchange rate happens to be, and it could be A LOT of tax.

Is this the benefit of an equitable tax system for all as is claimed? I would claim it's no more than a lottery!


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## theOAP

Bevdeforges said:


> Also, why wouldn't this apply to the UK winter fuel allowance?


Good discovery on the information in Pub. 525. I'll have a closer look at this.


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## Nononymous

Before this turns into the OCD Olympics, what is the situation with regards to ease of non-compliance in the UK and other countries? How would this pension or other income be detected/reported to the US authorities? Similarly, how would capital gains be reported, other than voluntarily?

Then there's collection. In Canada the government is on record as saying that they will not enforce administrative penalties (i.e. fines for not submitting FBAR forms) nor assist in collecting unpaid taxes "legitimately" due if the person was a Canadian citizen at the time the tax debt was incurred. Are other countries similarly uncooperative?


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## maz57

BBCWatcher said:


> But if you don't like the U.S. personal income tax system then you can acquire another citizenship and renounce U.S. citizenship, paying $450 for a certificate and settling your final outstanding U.S. tax bill (possibly with a final "mark to market" exit tax if you're wealthy). Alternatively, if you value your U.S. citizenship, you can keep it and all its rights, privileges, and obligations, including its tax obligations. In my view that's not tyranny, that's choice, and it's a reasonable one. Take that deal or don't -- and I defend the right of U.S. citizens to have that choice.


Folks should note that acquiring another citizenship is one of the 7 listed expatriating acts in US law. If the intention was to simultaneously lose US citizenship, then that person is no longer a US citizen; no consulate visit (and no $450 fee) is required. Only the individual can determine their intent.

A consulate visit is necessary to get a CLN. There is no fee for that (yet). There is no legal requirement to inform the US government of expatriation but such notice is part of the process of properly exiting the US tax system. For those who have no US income or US assets, officially exiting the US system is optional. Not properly exiting the US system may potentially cause problems traveling to the US as covered elsewhere on this forum. 

Only US citizens are faced with having to make this choice. If the US continues to insist on this aberrant CBT, at the very least they should come up with a provision to allow long term expat's citizenship to lapse into a "dormant" state. The endless paperwork, impaired foreign financial life, and general assumption of criminality simply by living in another country is not doing individuals or the US government any good.


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## BBCWatcher

theOAP said:


> I suspect we agree on a number of things.


Probably so!

On the home sale, let's keep in mind that the $250,000 exemption (per spouse) comes only after calculating _net_ gains. That word "net" is _extremely_ important. The gains are not the simple difference between the sale price and the purchase price -- far from it. The U.S. tax code is pretty reasonable here in letting you count all sorts of expenses. Judging from all the British home improvement and repair shows flooding my airwaves, this is no small distinction. Never mind the Foreign Housing Exclusion and mortgage interest tax breaks along the way.

Moreover, I'm not sure that a wildly successful home value appreciation experience -- London is a very good example -- is a reason to _exempt_ tax if you're going to have CBT. You start taxing _somewhere_ if the foreign tax authority doesn't, and most people would consider net-of-expenses $250K per spouse to be a fairly meaty chunk of money. Keep in mind I'm someone who favors taxing real gains, so inflation (U.S. CPI) would come right out of the equation. I'd only even consider taxing a home gain if that gain exceeded the CPI.

I would also check the tax treaty to see what it says, if anything, about real estate. My understanding is that some of the tax treaties the U.S. signed exempt real property in the other country from U.S. taxation. Your mileage may vary.

I happen to think that marriage shouldn't matter in the U.S. tax code. Yet it does, both within the U.S. and outside the U.S. If I were sovereign for a day I'd seriously consider scrapping the whole filing status section. Other countries manage to do that.

MFS is usually not so great, and MFJ is usually better. Sure, a NRA spouse might not want to participate in his/her spouse's annual U.S. tax reporting exercise. I totally understand. At the same time one can't really fault the U.S. tax code for that reluctance. If the couple/household value the tax savings for the U.S. citizen in the household, then they'll at least consider MFJ. If not, they'll choose MFS. We happen to be an MFJ couple because the math works better for us, and my lovely wife has already "enjoyed" filings with the IRS before she even met me. (Though note that NRA spouses, even while MFJ'ing, are not FBAR'ed. Weird, but we'll take it.)

I agree with the Medicare surtax issues. That was a way to raise/restore the marginal income tax rates in a way that a dysfunctional Congress could melodramatically, barely accept. Congress should have just raised the marginal rates like adults. In the fullness of time -- after the 2016 election, probably -- I think there's a fair chance those surtax quirks will get fixed. It might happen in the context of a similar "top down" Social Security surtax. We'll see. A lot of European governments did similar things -- a "solidarity tax," for example. It's dumb on both sides of the Atlantic: just raise the damn top marginal rate, or introduce another, higher top marginal tax bracket. (Or don't even have stair step brackets at all and instead have a mathematically smooth increase in the marginal rate. We have calculators and tax tables now. This isn't 1930.)

Let me step back a bit. There is a bit of a burden here in arguing against CBT or even arguing against the quirks -- and there are a few quirks, stipulated. The burden is that if U.S. citizens/nationals living overseas don't pay whatever they're paying now (much less what they legally owe), income taxes on U.S. residents have to increase, ceteris paribus. That's a tough argument to make, politically anyway. I'm not enamored with the U.S. tax system, but I also see problems in Europe, for example. Should wealthy Europeans be able to "check out" at zero cost simply by moving to Andorra, Monaco, or the Bahamas, as examples? That doesn't seem right either. J.K. Rowling has said some interesting things along these lines -- she's a "stay and pay" lady.

Anyway, do I think the U.S. ought to tax a U.K. household receiving ~$16,000/year in passive income (as its only income) and owing zero U.K. tax? No, I don't -- at least as long as the U.S. doesn't have a wealth tax. (If it's ~$16,000/year sitting on a $500 million fortune, maybe I'd feel differently. I at least reserve the right to feel differently.) Fortunately the U.S. does seem to exempt that hypothetical household from U.S. tax via a Section 6013 election. As I've said, I think I'd go a bit further with an enhanced foreign exclusion. Though as I ponder it a bit more I think you'd have to limit BBCWatcher's $48,800 (tax year 2013) foreign unearned income exclusion when you're cashing out Roth IRAs.

It seems politically improbable, but maybe some of the world is going to end up banding together and adopting a common tax collection system -- or at least a treaty simulation. Maybe it'll be some sort of "global minimum tax"? Who knows.

I don't think that ~$16K/year U.K. household ought to be paying 20% VAT (up to $3200/year) either, by the way. Europe's consumption taxes are too high, in my view. They exist in part to compensate for that "check out" problem. If Europe doesn't want to reduce VATs across the board there's probably a technical solution: issue VAT concession cards, one per individual. Your first $5K of spending is VAT free with the card, i.e. you don't pay the first $1K of VAT. Something like that might work.

That's it for now.


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## maz57

Nononymous said:


> Before this turns into the OCD Olympics, what is the situation with regards to ease of non-compliance in the UK and other countries? How would this pension or other income be detected/reported to the US authorities? Similarly, how would capital gains be reported, other than voluntarily?


Even with the onset of FATCA reporting, it is only financial account information that will wind up in the hands of the IRS. To the best of my knowledge, there is no provision for reporting the actual income; i.e. information slips equivalent to US 1099s. I expect that something like a house sale could only be detected by inference by studying the ebb and flow of funds in a particular account. The chances of this seem pretty slim to me; the IRS simply doesn't have the resources to follow up on the data deluge soon headed their way.

I don't expect the situation re: non-compliance or selective compliance to change much if at all. I believe the data stream from FATCA will be incomplete and rife with errors, but there will be no one to look at it anyway so who cares? Even if the IRS discovers 7 million US expats scattered around the world who should be filing tax returns what are they going to do about it? The compliance rate will continue to be very low, renunciations will continue, and most will ignore the whole thing.

P.S. Do you think we regulars on this forum should seek professional help?


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## BBCWatcher

I think you're underestimating the situation, Maz. Failure to file FinCEN Form 114 (FBAR) is quite enough to get the "party" started. As many Americans with large Swiss bank accounts can probably attest.

There are going to be plenty of easy cases for the IRS and the U.S. Treasury to pursue.


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## Bevdeforges

Frankly, the whole point of FATCA and the related "data sharing" programs elsewhere are to find Americans (and others) with "large Swiss bank accounts." 

As far as the "little guys" with a couple of modest bank savings accounts and a dead normal checking account are concerned, I really doubt the IRS is particularly interested - particularly the types of bank accounts that are already controlled and reported to the local tax office anyhow.
Cheers,
Bev


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## maz57

BBCWatcher said:


> I think you're underestimating the situation, Maz. Failure to file FinCEN Form 114 (FBAR) is quite enough to get the "party" started. As many Americans with large Swiss bank accounts can probably attest.
> 
> There are going to be plenty of easy cases for the IRS and the U.S. Treasury to pursue.


Easy at what cost? For the vast majority of expats, there won't be enough assets to make it worth the IRS' efforts. Not to mention the considerable challenges of chasing people in other jurisdictions. So Joe Blow in some Latin American country doesn't file an FBAR; what is the US going to do to him, send in the drones? Chances are Joe Blow doesn't even know he's supposed to file FBARs and he's certainly never heard of FATCA. The really rich guys are so far ahead of this their trail has gone stone cold.

I think you are overestimating the ability of even the US government to reach out to people. The obnoxious threats of FATCA have not put other governments in a cooperative mood. I think the ones really at risk will be homelanders who are offshoring to evade tax. The USG actually has some leverage on people like that.


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## BBCWatcher

They'll send letters, working _down_ their lists. Yes, of course they'll work on the biggest fish first, other things being equal. Who said otherwise? I did not. But they will send lots of letters.

It's a good day today at the DOJ, by the way. They just got $2.6B out of Credit Suisse itself.


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## BBCWatcher

maz57 said:


> I think you are overestimating the ability of even the US government to reach out to people. The obnoxious threats of FATCA have not put other governments in a cooperative mood.


I don't think it's a radical notion to say that having a lot more financial data sharing means some more people are going to get tripped up. I don't think I've expressed a specific quantity except "more." That works. The more painful, awkward, expensive, and inconvenient it is to evade taxes, the less it happens. How much less? I don't know, but less.

Actually, governments are cooperating rather well, some even with zeal. The U.K. is an example of zeal. It seems that access to the U.S. financial markets is worth something.

Let's not underestimate either by dismissing this stuff out of hand. Credit Suisse has been helping Americans (and others) evade taxes for literally a century, so it's a pretty big deal when that particular party ends.


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## hawknest

BBCWatcher said:


> It's a good day today at the DOJ, by the way. They just got $2.6B out of Credit Suisse itself.


Peanuts - they settled on $2.6Bn, when they could have received more!


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## Bevdeforges

hawknest said:


> Peanuts - they settled on $2.6Bn, when they could have received more!


My thought was more that I'll believe they're "serious" about this stuff when the DOJ starts taking after the US banks and brokers for their misdeeds at this same level. Easy to threaten Credit Suisse and collect a fat settlement to assure the continued comfort of the fat cats.
Cheers,
Bev


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## hawknest

Bevdeforges said:


> My thought was more that I'll believe they're "serious" about this stuff when the DOJ starts taking after the US banks and brokers for their misdeeds at this same level. Easy to threaten Credit Suisse and collect a fat settlement to assure the continued comfort of the fat cats.
> Cheers,
> Bev


That's never going to happen. The FED is made up of the ten largest banks in the world. They create the paper (fiat) currency and they control how much they print. The BANKS control America, Canada and most of EU countries. Unless you leave or start hoarding silver & gold coins, you will always be under their palm print.

Coins are sold to the banks at face value. To print a page of hundred dollar bills costs $16.50 and that's all they are worth. No longer backed by silver/gold - only full faith and credit of the govt. So, which would you rather have a bag of 1964 Kennedy half-dollars or five one hundred dollar bills?

It's easier for the DOJ to go after foreign banks - they are easy targets. One thing tho - under Swiss laws - reporting to a foreign govt of who owns what account is ILLEGAL.


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## diharv

Just an update to my situation since I started this thread a long while ago. I received my CLN today. I was told in early March it would be 4-14 months but it came in just under 4 months, coincidently on the first official business day of FATCA here in Canada.I had a momentary feeling of wow its finally done with a touch of sadness , kind of like I felt after I got out of the consulate but when I think of how US citizens abroad are being treated there is no doubt this was my only option. Still a year to go to get out of the system but the end is in sight. I look forward to living a normal life without the stress and worries coming from all the threats from down below.Not to mention the tens of thousands of dollars saved in accounting fees(my situation is too complex for me to do on y own)In fact the last four years of filed returns have not been without problems as I have been audited,told I am not a candidate for the streamlined process , had my returns adjusted and paid a whole whack more in taxes and some more thousands in acct fees to straighten out the mess.A nightmare is a good description of my experience thus far.


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## mitchholt

I am a firm believer that renunciation is not the right approach to dealing exclusively with offshore taxation. Taxation can be negotiated and changed; renunciation cannot. If there are other factors involved in this very personal decision, that could be a different story. There are some great international taxation attorneys here in the states that help expats pay the lowest amount of taxes possible. Let me know if you want some referrals.


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## Bevdeforges

It's not really about paying the lowest amount of taxes possible. (Though that's one of several considerations.) For those of us in the modest income brackets, paying an "international taxation attorney" to find all those loopholes and interpretations of the rules and treaties may not even be an option. Besides, there is also the matter of US taxation vis-a-vis your taxation in your country of residence to consider. 
Cheers,
Bev


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## Nobledreamer

mitchholt said:


> I am a firm believer that renunciation is not the right approach to dealing exclusively with offshore taxation. Taxation can be negotiated and changed; renunciation cannot. If there are other factors involved in this very personal decision, that could be a different story. There are some great international taxation attorneys here in the states that help expats pay the lowest amount of taxes possible. Let me know if you want some referrals.


Nobody that I know has renounced because they really wanted to and it is not done just because of taxation. As far as living in Canada goes, all of our registered tax-deferred savings plans have information reporting requirements and some are liable for taxes. The potential for calculation errors/penalties is an irritant and possibly, harmful. The requirements regarding PFICs are horrendous, what to speak of how punative the US policies are. All the reporting forms involve/affect members of our families who are not US citizens (though they end up being "US Persons" when their personal financial information gets reported to the IRS). Many people experienced/ have problems in their marriages since the enforcement efforts began to surface in the news and now, the implementation of FATCA IGAs. The root of our issues is CBT but to limit the understanding of this to taxation would not be a fair consideration of these decisions.

Yes, all this could possibly be changed but most of us are in our 50-60's and so far,
the government's negative responses (OVDP horror stories/penalties, indifference from the Congress, raising renunciation fee to $2350) most definitely outweigh the positive ones (Streamlined w/out penalty). The most unfair aspect of this situation is the fact we have no real representation in the Congress. I wouldn't hold my breath waiting for a census and the creation of districts with elected representatives for expats.


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## diharv

mitchholt said:


> I am a firm believer that renunciation is not the right approach to dealing exclusively with offshore taxation. Taxation can be negotiated and changed; renunciation cannot. If there are other factors involved in this very personal decision, that could be a different story. There are some great international taxation attorneys here in the states that help expats pay the lowest amount of taxes possible. Let me know if you want some referrals.


I however am a firm believer that expatriation was my only option. To imagine that CBT will be negotiated and changed or abolished is pure fantasy at this point in time.I am just tired of the stress and endless threats and the $3000.00 + that I have spent EACH year for the past five years to be compliant. Money down the drain as far as I'm concerned and not something I want to do each and every year for the rest of my life. To be a USC abroad is toxic to say the least and I am relieved not to be one anymore and will be even more relieved a year from now when I am completely out of the system.


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## JourRoz

Hello!

I'm a Journalism major at Cal State University of Northridge and am writing a feature story for my class on Americans renouncing their citizenships. I am in major need of help!! Would anyone here who feels they fit into this category be willing to talk to me? Would be greatly appreciated!!


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## BBCWatcher

Note that the names of U.S. citizens who renounced their citizenships are (eventually) published in the U.S. Federal Register. If you take a look at those lists and approach those individuals you'd not only be focusing your line of inquiry precisely you'd also have some factual verification of their circumstances.

There are certainly enough globally unique names on those lists that you should have no trouble locating hundreds of such individuals. Whether they then wish to speak with you is a separate question.


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## JourRoz

BBCWatcher said:


> Note that the names of U.S. citizens who renounced their citizenships are (eventually) published in the U.S. Federal Register. If you take a look at those lists and approach those individuals you'd not only be focusing your line of inquiry precisely you'd also have some factual verification of their circumstances.
> 
> There are certainly enough globally unique names on those lists that you should have no trouble locating hundreds of such individuals. Whether they then wish to speak with you is a separate question.


Yes, that is true. I just wanted to see if there was such a person here that wouldn't mind speaking to me, as it would be easier and faster for this school assignment. Thank you though!


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## Verdande

You could start by reading at the *****************.ca where much useful information is available. Note that the lists of persons renouncing are incomplete and many names never appear on the list. "Easier and faster" I understand, but the situation that many US citizens abroad are in, is unfortunately not something that can be treated "easy and fast" . Sounds like you are in an undergraduate course. My suggestion is you read up on the bagground for this horrible situation and limit it to that. You could also check out Phil Hodgens blog - he writes a lot about this. Good luck.


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## BBCWatcher

The Wall Street Journal reported that, according to the U.S. Treasury Department, in 2014 a total of 3,415 individuals either renounced their U.S. citizenships or terminated their long-term U.S. residencies (green cards). That compares to 2,999 individuals in 2013. (One of the 3,415 individuals in 2014 was Roger Ver.)

I've always assumed that these Treasury-reported numbers only included U.S. citizens renouncing their U.S. citizenships, but no, U.S. permanent residents turning in their green cards are also included in these figures according to the Journal article. (I wish separate data were available.)

Are these "record numbers"? Contrary to the reporting, they don't seem to be. There aren't great data available, but there's reasonable evidence that the number of U.S. citizens renouncing their U.S. citizenships was greater than these citizen+green card numbers at least during the Vietnam War era. (The military draft seems to have had a much bigger impact on renunciations. Lithuania just reintroduced its military draft.) On a per capita basis especially they don't seem particularly high. However, it's only been in recent years that the U.S. government has had to keep more accurate data. Congress only passed the "name and shame" law in 1996, and it took a while for reporting to be implemented.

For comparison and perspective, in 2013 a total of 779,929 individuals naturalized as U.S. citizens. That number has been rising, too (2012: 757,434, 2011: 694,193, 2010: 619,913). Naturalization data for the full year 2014 will probably be available sometime in May, 2015. However, if we assume (conservatively) the 2014 number remains at 779,929 then the U.S. new citizen-only inflow is about 228 times the ex-citizen plus ex-permanent resident outflow.

There doesn't seem to be any danger whatsoever that U.S. citizenship is losing its appeal. Quite obviously it's doing just fine.


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## Bevdeforges

According to recent articles, like here: U.S. mass exodus: Record number of Americans renounced citizenship in 2014 - Washington Times it may well be a record. Apparently, prior to the last few years, the high was a little less than 800 (including the Vietnam era).

Comes down to: it's an option. That option is getting more expensive, and is probably most appealing to those with lots of money and thus lots to lose by remaining as US citizens subject to taxation. For the rest of us, there are other options.
Cheers,
Bev


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## BBCWatcher

No, that's not correct. The New York Times reported that about 2,000 Americans per year -- that's U.S. citizens, not co-mingled with green card holders -- renounced their citizenships during the Vietnam War era. Of course the U.S. population was a lot lower 4+ decades ago, so that was probably the recent per capita peak.

I say "recent" because there were other periods in American history when renunciations where likely even higher, but statistics would be very hard to determine. Many, many thousands of monarchists abandoned the young United States, for example. (Many headed to Canada.) But the Civil War must hold the record. Millions of Americans voluntarily (or at least pseudo-voluntarily) gave up their citizenships, and many, many thousands preserved their renunciations even after the war ended.

There are also the quirky cases of Liberia and the Philippines.

Anyway, to net it out, no, the sky really isn't falling.


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## Bevdeforges

All those stats are hard to compare - old "apples and oranges" thing, don't you know.

It didn't used to be necessary to go through the ceremony at the consulate to renounce. And technically, if you committed any of a number of acts, you kind of "automatically" renounced anyhow: serve in foreign army (whether they were on our side or "theirs"), serve in a foreign government, voluntarily take a second nationality (see Phyllis Michaux's book "The Unknown Ambassadors" for the Paris Consulate clerk who kind of went overboard on that one - and they're still looking for the women she deprived of their US nationality). There were probably a few other "automatic" things you could do to lose your citizenship without having to bother with the Consulate.

Don't think the sky is actually falling. (As with so many things, you do have to have a spare $2350 lying around in order to renounce these days.) But comparing figures from different eras doesn't really prove anything either. 
Cheers,
Bev


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## BBCWatcher

Even with absolutely no other factors in play, I think we would reasonably expect renunciations to tick up somewhat as the number of very wealthy people increases, with globalization and air travel increasing the "velocity" of people, with increased international financial liquidity, with increased immigration to the U.S. (which also tends to increase outflows since not everyone stays, especially among green card holders), and with general global development (and fewer wars) making more countries more viable as residences. But there might have been more measles cases in Italy than there were U.S. citizens who renounced U.S. citizenship in 2014 -- it's that unusual. (Measles is actually a problem.)


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## Bevdeforges

BBC, I think the real issue here is just how much of a "problem" is renunciation of US citizenship? Now or ever? It's a choice. And nowadays it's a choice that has been made more difficult (for some reason) by the US Government - if only by the sudden increase in prices to do the deed. 

In some countries, you automatically lose your citizenship when you take a second one. Or, you have to show evidence of having given up your old one before they'll let you naturalize. Obviously, those countries don't worry about it. (And probably don't keep any statistics on it, either.) I'm beginning to think that maybe the countries that claim you can only have "primary allegiance" to one country are onto something. 
Cheers,
Bev


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## BBCWatcher

I don't think it's a problem _at all_. In my view renunciation and termination of permanent residence are fundamental rights, perhaps with tax and other considerations. Rights are at least occasionally exercised. If someone is miserable (or at least upset) with his/her U.S. citizenship and its unique package of rights, privileges, benefits, and obligations, that's OK! Thank goodness there are 200-odd countries. Choice is great.

If the _order of magnitude_ changes, I reserve the right to change my view. But at 200+ to 1 inflow to outflow ratios, _no problem_.


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## maz57

Well you are in good company, BBC. The US government doesn't seem to believe there is a problem either. The US is certainly in no danger of running out of citizens. (And they could spike the numbers of brand new citizens anytime they wanted by offering citizenship to all those illegal immigrants!) They might run out of expats in a few years, however.

What the published numbers don't reflect is the folks who "self relinquish", i.e. those who took on another citizenship with the intention of losing US citizenship but skip the CLN rigamarole. And don't forget those who are technically citizens but never claim it if they don't want to live or work in the US. Those people just melt into the woodwork and go on living their lives unencumbered. So the numbers are at best incomplete, at worst totally inaccurate. 

To sum up; US tax policy clearly causes expat citizens problems. Some expats ditch their US citizenship in response. The US government doesn't really care and except for the suggested relief for duals from birth in that stillborn budget proposal it has never even acknowledged there is a problem. I don't expect any of this to change in this lifetime. Homelanders are so self-absorbed that none of this even moves the needle, particularly with Congress. We are wasting our breath on this forum.


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## BBCWatcher

maz57 said:


> They might run out of expats in a few years, however.


There are approximately 7 million U.S. citizens residing overseas. Assuming that 2,000 of the 3,415 individuals in 2014 were U.S. citizens who renounced their citizenships -- I'm being generous in suggesting more than half -- and assuming zero mortality and zero further moves overseas, at that rate it would take "only" 3,500 years to "run out" of U.S. expatriates.

I assume you were joking.

By the way, the pace of U.S. naturalizations is running well below the pace of immigration. The number of legal permanent residents added per year is about 1 million. There's no evidence of inflated, accelerated, or artificially boosted naturalizations.



> What the published numbers don't reflect is the folks who "self relinquish", i.e. those who took on another citizenship with the intention of losing US citizenship but skip the CLN rigamarole.


They probably don't. But "so what?"

You don't even have to get that complicated. People who died in 2014 aren't counted either. Death would be a demographic problem (at least) if there were no births. But...the United States doesn't have a demographic problem either. (Canada has a much lower birth rate than the United States.)

If your hypothesis is that there's an epidemic of Americans naturalizing as citizens of other countries with the intention of losing their U.S. citizenships, but they haven't bothered to tell anybody about it officially.... What, did I even have to write that to highlight how nutty that sounds? If you want to test that hypothesis, start with looking at the number of naturalizations occurring in other countries. Is there any country that naturalized anywhere near ~800,000 people in 2014?

There are actually rather good statistics about the number of Americans who move overseas each year: about 45,000. Not actually a big number! Even if _every single one_ completely abandoned the United States if every respect, including citizenship, that's _still_ not a problem.



> So the numbers are at best incomplete, at worst totally inaccurate.


The numbers are exactly what they purport to be: the sum total of individuals who obtained CLNs or who terminated their green cards. Some of those 3,415 individuals did so for tax reasons, and some did not. Roger Ver claims he didn't. 



> To sum up; US tax policy clearly causes expat citizens problems.


Well, many policies cause "problems." Canadian passport control policies cause problems, especially for individuals convicted of even minor offenses like marijuana possession. And I really wish I didn't have to show anybody a passport when visiting Vancouver.

That's a low bar you've set there, Maz57. 

U.S. tax policy imposes _responsibilities_ on its citizens. Among its citizens living overseas, about 6% of them have to pay tax. Lithuanian military policy (restarting just now) imposes compulsory national service on its young male citizens. A few of whom might renounce their Lithuanian citizenships, which will surely destroy Lithuania within 18 months, right? 



> Some expats ditch their US citizenship in response.


"Some" is hyperbole. "A very few" is an accurate characterization. It's the number within the 3,415 who were U.S. citizens (not mere green card holders) who renounced U.S. citizenship for tax reasons.



> The US government doesn't really care....


And hasn't for a century-plus. Objectively, why should it?



> ....it has never even acknowledged there is a problem.


That's just it: _this_ really, really isn't a problem.

The tiny cohort that renounces also terminates their political rights. They're frankly poisonous to anybody in Washington. They're not helping, politically, to be brutally honest. One political reaction they might inspire is an increase in (and increase in coverage of) the Expatriation Tax. Indeed, they already have (e.g. the proposed "Ex-PATRIOT Act").

Alternatively, if a substantial fraction of the approximately 7 million U.S. citizens living overseas focused its political power on achieving _reasonable, realistic_ policy changes, there might be some favorable Congressional and Presidential response. There has been before. For example, the physical presence test in the Foreign Earned Income Exclusion didn't exist until 1951. President Kennedy proposed eliminating the FEIE for those living in "developed countries," but after a political debate (including individuals who would be affected voicing their views) that didn't happen. In the 1970s the FEIE was limited quite a bit, but then in 1981 it was made far more generous in the bipartisan Tax Reform Act. (The tax benefits associated with renouncing U.S. citizenship were objectively much, much greater in the 1970s -- and the direct costs of renouncing were much lower. Did the U.S. survive the 1970s? Of course.)

Tax and financial filing _complexity_ is a problem that plagues all Americans, thanks in part to Intuit's lobbyists and a Congress responsive to those particular interests. There are other factors that contribute to this worsening problem. That's an area where Americans overseas have many potential and actual political allies and can make some progress. An IRS "Form 1040XP" would be a good start. My rough estimate is that sort of form would cover 80% or more of Americans living overseas.


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## Bevdeforges

Ah, maz57, great minds think alike. Was considering saying something about "inner emmigration" on this subject, too. (During WWII, some German artists who couldn't or didn't want to leave Germany turned themselves and their work "inward" to avoid showing up on the government radar. Sound familiar?)

All statistics aside, there are still lots of folks amongst the 4 to 6 million *estimated* US citizens living overseas who don't have a clue about their filing obligation, or who in some cases don't even realize they are US citizens. Add to that, those who fly under the radar knowingly or who just tailor their finances (and their reporting thereof) to avoid any conflicts, and I really really wonder how many returns the IRS gets from overseas residents. (And how many of those owe more than a pittance in taxes.) 

In the current economic climate, with government budgets being cut all the time and the apparent plan to close the overseas IRS offices altogether at the end of this tax season, it seems kind of reasonable that there won't be much effort put into "enforcing" tax policy for such a meagre return. 
Cheers,
Bev


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## Nononymous

Bevdeforges said:


> Ah, maz57, great minds think alike. Was considering saying something about "inner emmigration" on this subject, too. (During WWII, some German artists who couldn't or didn't want to leave Germany turned themselves and their work "inward" to avoid showing up on the government radar. Sound familiar?)
> Bev


Actually a reference to East Germany, but point well taken.


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## maz57

One school of thought on how to deal with problems is to simply pretend they don't exist. That seems to be the preferred method prevailing in Washington these days. BBC obviously subscribes to that view.

The Taxpayer Advocate spells it out for them year after year and Congress ignores her. Self-expatriating citizens are simply following Congress' example and adopting official US government methods to solve these problems themselves. 

Fatca will complicate things for a while until folks figure out the workarounds. At that point it can safely be ignored and that problem will go away as well. People really do like their freedom.


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## Bevdeforges

> The Taxpayer Advocate spells it out for them year after year and Congress ignores her. Self-expatriating citizens are simply following Congress' example and adopting official US government methods to solve these problems themselves.


Was just despairing of the news from the US this afternoon. Your post gave me the first chuckle of the day. "Just following the example of our illustrious leaders!" I like it!
Cheers,
Bev


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## BBCWatcher

The IRS has published the "name and shame" list for the first calendar quarter of 2015. There are 1,335 names on the list, though it's possible there are a couple duplicates.

Please note that (contrary to some bad press reporting) this particular list contains the names of both U.S. citizens who renounced their U.S. citizenships and long-term U.S. residents who terminated their U.S. residences. The IRS does not report these categories separately, so each group separately represents fewer than 1,335 people. We don't know how large each group is within the total.

The 1,335 number is a quarterly record for this particular report. However, if we're being perhaps overly generous and assume the number of U.S. citizens within that group was 1,000 (a large majority), that number would represent about 0.5% of U.S. naturalizations (which are currently running conservatively at about 200,000 per quarter, though it may be closer to 250,000 now). Said another way, the "inflow" is about 200 times greater than the "outflow" in a direct comparison. If immigration and emigration rates are held constant, we would expect both numbers to increase given that the U.S. population is increasing about about 0.7% per year. Though the statistics aren't "clean," the available evidence suggests that U.S. citizens renounced their citizenships at a greater rate during and shortly after the Vietnam War era on a per capita basis. (The U.S. really hasn't tracked renunciation numbers all that well until very recently. I wish there were better data available.)


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## maz57

A couple of comments:

1. Even though the list purports to name those who officially abandoned their permanent resident status as well as those who have renounced their US citizenship no ex-green card holder has ever confirmed that their name is on the list. That suggests (but doesn't prove, of course) that only renunciants find their way onto the list. In the case of loss of citizenship State Department will notify the IRS when a CLN is issued; I'm not sure there is any mechanism for IRS notification when one files an I-407 (official abandonment of permanent resident status). 

2. The list will never name those who self-relinquish (i.e. those who take on another citizenship, burn their US passport, and live as a citizen of another country going forward.) Neither will it name those who have never had a US passport.

3. That 1335 names on the Q1 list is less than the number of names which appear on the FBI NICS gun-control database for the same period (1406). The names on the FBI list include only those who renounced US citizenship, not those who relinquished or those who abandoned permanent resident status.

4. The number of names on the list would be much larger if State Department didn't purposely prevent people from renouncing in timely fashion. The waiting lists for renunciation appointments at US Consulates here in Canada is now over a year. (Apparently raising the fee to US$2350 wasn't enough of a deterent; now they have created unreasonable delays before they will even book you an appointment.)

5. Regardless of the exact accuracy of the numbers it is obvious the US is in no danger of running out of citizens. The difference between those who want to become US citizens and those who want to lose US citizenship is that those who want to become US citizens actually want to live in the US; those who renounce do not. It is becoming increasingly difficult to be a US citizen living outside of the US and this is a direct result of the US tax and reporting policy attached to US citizenship. 

6. In view of that fact why doesn't the US allow those who want to shed US citizenship a quick, efficient, and reasonably priced process to do so? Forcing someone to remain a citizen against their wishes guarantees they will not be good, useful, or loyal citizens. Sounds more like punishment to me.

7. Better yet, join the rest of the world and switch to Residence Based Taxation and none of this will be an issue anymore.


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## Bevdeforges

I'm not so sure it's a "contest" - or even a matter of net gain or net loss of total citizens or residents.

The total "pool" of US citizens who could potentially renounce is probably no more than about 4 to 6 million - i.e. those US citizens living overseas who have a second nationality to fall back on (and to be honest, I don't think anyone has that figure). Have never been sure if the numbers bandied about on US citizens living overseas include those "accidental Americans" born overseas who may or may not be aware of their US nationality - or of whom the US is unaware. (The figure always has been a guesstimate based on Consulate registration records which are incomplete at best.)

For those who are looking to get into the US, unless they plan later on to leave again (after having taken US citizenship) the question of renunciation is pretty much irrelevant. I don't see any particular reason to compare renunciation figures with those of naturalizations.
Cheers,
Bev


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## BBCWatcher

I don't think it's possible to rely on quarterly renunciation/residence termination data any more than it's possible to read much into a single month's inflation report. The data are "noisy."

That said, there's noisy and there's noisy. The FBI's data seem to be even noisier than the IRS's. There were several years when the FBI reported zero renunciants. They may still have some catching up to do. 

"Best guess" is that the IRS's list, exactly as they state, includes some long-term non-citizen residents who terminated their citizenships. The IRS list surely doesn't include all of them, though, since another "best guess" is there are 20,000 or more non-citizen long-term U.S. residents who formally terminate their U.S. residences every year (versus the maybe 4,000 or so citizens projected to renounce in 2015). Which of course easily explains why anecdotal "evidence" ("my name isn't on the list") is in short supply -- your chance of appearing on the IRS's list as one of the ~20,000-odd "lucky" ones is pretty low already given the numbers.

I can't find any reliable reports of a one year appointment delay. The latest report I can find is that one U.S. consulate in Canada (Toronto) has/had a 5 month wait for the first available appointment, but if that's too long to wait the other consulates are/were booking appointments within a few weeks, and you can renounce U.S. citizenship at any U.S. consulate or embassy. Are there any reliable reports suggesting otherwise?

Interestingly, according to the Canadian government in 80% of cases it takes the Canadian government about 9 or 10 months (from the appointment) to process a _routine_ renunciation of citizenship. (Non-routine ones take longer.) I haven't seen any reliable reports that the U.S. government takes so long to send out its CLNs. U.S. renunciants seem to be getting their CLNs a lot quicker than that, according to the recent reports I've read. At least the fee is lower (C$100).


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## maz57

BBCWatcher said:


> I can't find any reliable reports of a one year appointment delay. The latest report I can find is that one U.S. consulate in Canada (Toronto) has/had a 5 month wait for the first available appointment, but if that's too long to wait the other consulates are/were booking appointments within a few weeks, and you can renounce U.S. citizenship at any U.S. consulate or embassy. Are there any reliable reports suggesting otherwise?


Last I heard Ottawa was no longer booking ANY appointments for 2015. That was several months ago and I can't seem to find that particular report this morning. Some people have successfully traveled to another consulate when there was a backlog at the closest one; others who have tried to do so were told by the alternate choice that they would only book appointments "for those from our local area". Some consulates will process in 1 appointment; others require 2. 

It all seems to be so haphazard but we are talking about a government bureaucracy. The individual consulates seem to be making it up as they go along. (I was never able to get an appointment at my nearest consulate in any sort of reasonable time frame so I gave up. But this particular one is well known for its obstruction.)

Generally one has to actually initiate the booking process to find out what the time frame will really be. A few have reported getting lucky, hitting a cancellation, and getting their appointment almost immediately. As far as actually receiving the CLN after swearing the oath, this also seems to be wildly unpredictable. There are many reports of people who renounced, waited for a year or even more, finally contacted the consulate, and only then found out that the consulate had been sitting on their CLN for months. The record short time seems to be about 2 months. So 2 weeks to a year for the appointment; 2 months to 2 years post appointment to having a CLN in hand.


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## Pacifica

That’s pretty close to my understanding about Ottawa. Ottawa has not booking appointments in recent months, their standard reply to such request being they are not accepting bookings at this time and you should re-send your appointment request in September or October 2015. (Which got me wondering if they’re all booked through 2015 and plan to open 2016 bookings this Fall – I don’t know this for a fact, but it is a fact they are not making bookings.) This time last year, it was pretty straightforward at Ottawa – you requested an appointment and got scheduled for one to occur within about a month.

Toronto has been around a 10 month wait for appointments in recent months. I’ve been tracking Toronto appointment booking times since late 2011. The delay was about 2 weeks in late 2011. It rose slowly and pretty steadily to about 2 months by June 2014. It then began to skyrocket. By late Summer 2014, it was about 4 to 5 months. By the end of the 2015, it was about 10 months, which is where it appears to have remained, my last news from there being about a month ago.


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## Pacifica

BBCWatcher said:


> Interestingly, according to the Canadian government in 80% of cases it takes the Canadian government about 9 or 10 months (from the appointment) to process a _routine_ renunciation of citizenship.


There is no appointment in the process of renouncing Canadian citizenship. The application is done by mail.

Also, curious about the processing time of “9 or 10 months.” According to Citizenship and Immigration Canada, the govt dept which handles these applications, routine processing time for renunciation of Canadian citizenship is 6 months. (Your link also showed 6 months when I clicked on it.) While a non-routine case may presumably take longer, Canada also has provision for urgent processing in certain circumstances.


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## Bevdeforges

Pacifica said:


> There is no appointment in the process of renouncing Canadian citizenship. The application is done by mail.
> 
> Also, curious about the processing time of “9 or 10 months.” According to Citizenship and Immigration Canada, the govt dept which handles these applications, routine processing time for renunciation of Canadian citizenship is 6 months. (Your link also showed 6 months when I clicked on it.) While a non-routine case may presumably take longer, Canada also has provision for urgent processing in certain circumstances.


I think Ted Cruz got the "express treatment." Can't say as I blame the Canadian Government in that case... :wacko:
Cheers,
Bev


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## Pacifica

Pacifica said:


> ... By late Summer 2014, it was about 4 to 5 months. By the end of the 2015, it was about 10 months, which is where it appears to have remained, my last news from there being about a month ago.


Correction to my earlier post regarding Toronto. That should be "By the end of 20*14*, it was about 10 months ... ."


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## BBCWatcher

Pacifica said:


> Also, curious about the processing time of “9 or 10 months.”


Read the note just below the box. 6 plus 3 to 4 equals 9 to 10.


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## maz57

Bevdeforges said:


> I think Ted Cruz got the "express treatment." Can't say as I blame the Canadian Government in that case... :wacko:
> Cheers,
> Bev


Good one, Bev! Its not often a country gets an opportunity to escort a nut case willingly out the door. I'll bet they jumped right on it before he had a chance to change his mind!


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## iota2014

maz57 said:


> [..]
> 
> 5. Regardless of the exact accuracy of the numbers it is obvious the US is in no danger of running out of citizens. The difference between those who want to become US citizens and those who want to lose US citizenship is that those who want to become US citizens actually want to live in the US; those who renounce do not. It is becoming increasingly difficult to be a US citizen living outside of the US and this is a direct result of the US tax and reporting policy attached to US citizenship.
> 
> 6. In view of that fact why doesn't the US allow those who want to shed US citizenship a quick, efficient, and reasonably priced process to do so? Forcing someone to remain a citizen against their wishes guarantees they will not be good, useful, or loyal citizens. Sounds more like punishment to me.
> 
> 7. Better yet, join the rest of the world and switch to Residence Based Taxation and none of this will be an issue anymore.


This is pretty much the way I saw it when I received news of the existence of CBT (very recently, after long residence in the UK). But after reading more about it, I'm not so sure. In a globalized world where information is power, maybe it's more likely that the rest of the world will look at CBT and think "What a good idea! Why don't we do that?"

I don't really see how the U.S. could decide to relinquish CBT, now that FATCA has been introduced. It would be nice if a way could be found to ameliorate the harsh effects on us small-fry though. The U.S. seems to be in a bit of a double-bind: the real misery being caused to a lot of USCs living abroad, and perhaps the impetus for a lot of the renunciations, comes from the costs and complexity of annual reporting to what for many of us is simply a tax universe we don't understand. Yet to maintain a rationale for CBT, the fiction that we're all just temporarily away from "home" is necessary, and that means trying to impose on us exactly the same tax regime as for U.S. citizens living in the U.S.

I think it would be better if the U.S. would go back to the assumption that a USC who naturalizes in another country intends to lose U.S. citizenship. That would present each of us with the need and opportunity to make an informed decision on the pros and cons according to our individual circumstances and future intentions. Inertia-based dual citizenship is not really appropriate when one country has CBT and the other has RBT.


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## BBCWatcher

iota2014 said:


> I think it would be better if the U.S. would go back to the assumption that a USC who naturalizes in another country intends to lose U.S. citizenship.


That's a constitutional protection, according to the U.S. Supreme Court, and not going to change without an amendment to the U.S. Constitution (or possibly a Supreme Court that changes its mind, though that's unlikely).

I happen to agree with the Supreme Court. No, we really don't want U.S. citizens being deprived of their citizenships in this way. If you want to renounce or relinquish your U.S. citizenship -- and (separately, subsequently) exit the U.S. tax system -- you must and should take care of that (and get those realities properly documented), as a competent adult acting of your own free will. We really don't want to go back to the bad old days when "communists" (for example) were involuntarily, administratively stripped of their U.S. citizenships.


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## iota2014

Not "involuntarily, administratively stripped of their U.S. citizenships". But "presented with the need and opportunity to make an informed decision on the pros and cons according to our individual circumstances and future intentions." 

I agree it's very unlikely to happen.


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## BBCWatcher

iota2014 said:


> But "presented with the need...."


What does that mean? The "need" for what? Who presents what, when? How exactly is that supposed to work? Who pays for these services?

I would posit that the status quo -- in terms of core principles, anyway -- is _exactly_ as it should be. That is, there is a presumption that one's citizenship endures. That simply _has_ to be the default unless and until the adult in question takes some specific, non-trivial, legally competent action to terminate his/her citizenship (or document relinquishment). That's really the only sensible way to conduct business here. We can perhaps quibble about the details, but this really has to be an "opt out" decision, with due care that the adult really is making that terminating decision -- freely and competently.


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## iota2014

I see it differently. No need for "opt out" or "opt in". It's not necessary to fall back on a default outcome. Taking citizenship in another country is recognized as an expatriating act, so it wouldn't (in my view) be unreasonable for the U.S. to draw that to the person's attention, point out the consequences of expatriation, and require an unambiguous response as to whether the person did or did not intend to relinquish U.S. citizenship. Much more straightforward to ask the question about intentions at the time the second citizenship is acquired (making sure the person understands the consequences).


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## USExpat111

Why should taking citizenship in another country be recognised as an expatriating act? Many people take a 2nd citizenship because of working right issues in the foreign country, others do it for marriage/children related issues, others so they can more easily take advantage of the national health system like the NHS. It's changing the citizen based taxation that's best way to deal with FATCA not making egregious assumptions about a person's reason for moving overseas.


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## iota2014

Taking citizenship in another country _is_ one of the "expatriating acts" that allows U.S. citizens to relinquish U.S. citizenship, as I understand it. 

Taking citizenship in another country used to mean losing U.S. citizenship; dual citizenship was not recognized by the U.S. At some point that changed. Taking citizenship in another country no longer means you _have_ to relinquish your U.S citizenship, but it now means you _can_ relinquish your U.S. citizenship, if it was your intention to do so, because taking citizenship in another country is still an expatriating act.

That's my understanding.


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## Bevdeforges

OTOH, there are those who want (or in some cases "need") a dual nationality. The problem is that there are financial and tax penalties to consider for ex-US-citizens if they have investments or retirement funds back in the US. (The main one is the 30% withholding on any and all withdrawals of funds from a US account.)
Cheers,
Bev


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## iota2014

Bevdeforges said:


> OTOH, there are those who want (or in some cases "need") a dual nationality.
> 
> The problem is that there are financial and tax penalties to consider for ex-US-citizens if they have investments or retirement funds back in the US. (The main one is the 30% withholding on any and all withdrawals of funds from a US account.)
> Cheers,
> Bev


Indeed. I believe there is a suggestion, from a lawyer named Harvey who was involved in the 1986 Tax Reform Act, that there should be increased exemptions for citizens abroad, and simplified filing requirements.* Changes of that kind might make it easier for those with continued U.S. involvement to carry on with U.S. citizenship. And, who knows, maybe simplified renunciation procedures could follow, for those of us who want to renounce.

* https://www.law.upenn.edu/live/files/3106-harvey-worldwide-taxation-of-us-citizens


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## JustLurking

Bevdeforges said:


> ...The problem is that there are financial and tax penalties to consider for ex-US-citizens if they have investments or retirement funds back in the US. (The main one is the 30% withholding on any and all withdrawals of funds from a US account.)


In the interest of balance, I'll just note that US withholding is not that sweeping(*). The US tax rate on capital gains for all non-resident aliens is 0%. For interest, dividends, and pension withdrawals the standard non-treaty US tax rate is 30%, but residents of tax treaty countries, of which there are a decent number, usually have a lower US tax liabiility than that, with 0-15% being common.

(*) Well, not _yet_ that sweeping. FATCA does indeed mandate a 30% withholding on payments from the US to non-FATCA compliant banks, and tax treaties be damned. So far this has been restricted to arm-twisting threats to get IGAs in place, rather than any known or actual withholding.


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## Bevdeforges

And, don't forget that the 30% withholding/tax rate also applies to both US Social Security pension benefits and all withdrawals from IRAs and (I think) 401Ks where the account holder is not a US citizen.
Cheers,
Bev


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## BBCWatcher

iota2014 said:


> No need for "opt out" or "opt in".


Sure there is. What's the _default assumption_?



> Taking citizenship in another country is recognized as an expatriating act....


According to whom? Not according to the U.S. Supreme Court.



> ....so it wouldn't (in my view) be unreasonable for the U.S. to draw that to the person's attention, point out the consequences of expatriation, and require an unambiguous response as to whether the person did or did not intend to relinquish U.S. citizenship.


How exactly is the United States government supposed to find out about one of its citizen's acquisition of another citizenship? Do we _want_ the United States government to expend any effort whatsoever gathering such information? Why?


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## iota2014

BBCWatcher said:


> How exactly is the United States government supposed to find out about one of its citizen's acquisition of another citizenship? Do we _want_ the United States government to expend any effort whatsoever gathering such information? Why?


I suspect most of those naturalizing with the intention of losing U.S. citizenship would be keen to acquire their LCN and would take steps to do so.

And it shouldn't be beyond the negotiating skills of the U.S. to persuade countries who have signed FACTA agreements to pass on information about naturalizing U.S. citizens so that the IRS can make sure they're still filing their tax returns if they don't avail themselves of the opportunity to obtain their LCN.


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## JustLurking

Bevdeforges said:


> And, don't forget that the 30% withholding/tax rate also applies to both US Social Security pension benefits and all withdrawals from IRAs and (I think) 401Ks where the account holder is not a US citizen.


Again, Bev, this is usually _not_ the case where the former US citizen and now non-resident alien lives in a tax treaty country.

The 'exit tax' and FATCA both poke holes in the tax treaty here -- the US is much keener on signing treaties than it is on living up to them -- but for many people, and for the moment, the treaty provisions still hold.


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## Bevdeforges

Actually, FATCA and exit tax have little or nothing to do with the 30% withholding on US Social Security payments and/or tax deferred account payments. It's SOP for all such payments or withdrawals from US financial institutions for non-citizens. (Not just for former citizens.)
Cheers,
Bev


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## JustLurking

Bevdeforges said:


> It's SOP for all such payments or withdrawals from US financial institutions for non-citizens. (Not just for former citizens.)


Bev, you're making this out to be a lot worse than it will be for a lot of people.

The 30% US withholding is SOP _unless you are covered by a tax treaty_ -- which many folk are, both ex-US citizens and never-were US citizens. This, _except_ if your treaty rights are undone by the tax treaty overrides of the 'exit tax' and/or FATCA, which reinstate the 30% withholding.

File a W-8BEN with your US financial institution and provided you are not a 'covered expatriate' and not in FATCA's new 'axis of evil', you get payments either without US deductions or, where applicable, at the US treaty rate. This is W-8BEN's primary purpose.


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## BBCWatcher

iota2014 said:


> I suspect most of those naturalizing with the intention of losing U.S. citizenship would be keen to acquire their LCN and would take steps to do so.


Yes, exactly what they can already do today!

If you want a CLN when you naturalize, go get a CLN. They're even free in such circumstances. If you're a competent adult, and that's what you want, then act like one. Not hard.

No, I do not want the United States government -- any government -- to go back into the business of trying to gather data on whether and when its citizens acquired foreign citizenships. I do not support that, with the possible, narrow, individual exceptions of security clearances. Such generalized surveillance is a complete waste of money if nothing else, and I don't believe in wasting public resources. (Wasting or "wasting" your own resources is your right and your business, as long as you don't harm anyone else in the process without their consent.)


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## maz57

BBCWatcher said:


> No, I do not want the United States government -- any government -- to go back into the business of trying to gather data on whether and when its citizens acquired foreign citizenships. I do not support that, with the possible, narrow, individual exceptions of security clearances. Such generalized surveillance is a complete waste of money if nothing else, and I don't believe in wasting public resources. (Wasting or "wasting" your own resources is your right and your business, as long as you don't harm anyone else in the process without their consent.)


The US government doesn't have any problem wasting the money and the resources of other governments and non-US financial institutions around the world during this ongoing FATCA fiasco.

The US government simply doesn't care whether or not one of its citizens has acquired another citizenship. Even if the person in question acquired that other citizenship half a century ago and has resided and paid taxes in that other country all of that time, in the eyes of the US government US citizenship still trumps any other and that person still owes taxes and reporting to the US government. 

Why other countries allow the US to extra-territorially assert this claim on their resident citizens is a mystery to me. It seems like an attempt at outright theft of a portion of the national wealth of these other countries.

Quite tellingly, the US government will not help any other country extract taxes from a US citizen residing in the US. Hence the so-called "savings clause" in most US/xxx tax treaties. The result being that the US will not assist other countries in collecting a foreign tax claim and those countries will not assist the US in the collection of any US tax claim on their own resident citizens. The US can FATCA people all it wants, but there is still really no means of enforcement (other than a nasty letter from the IRS).


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## BBCWatcher

maz57 said:


> The US government simply doesn't care whether or not one of its citizens has acquired another citizenship.


Correct. _Nor should it_.

You've explained how sovereigns work, how each sovereign gets to decide who are and who are not its citizens, hopefully (as with the United States) with the ability for legally competent adults to choose whether to relinquish/renounce if/when they wish.(*) There are a few countries that unfortunately don't protect that right.

(*) Whereupon a sovereign ought to act responsibly, taking reasonable due care that such individuals will not become stateless. That's the other, limited exception to governmental foreign citizenship status non-inquisitiveness that I support.


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## iota2014

maz57 said:


> Quite tellingly, the US government will not help any other country extract taxes from a US citizen residing in the US. Hence the so-called "savings clause" in most US/xxx tax treaties. The result being that the US will not assist other countries in collecting a foreign tax claim and those countries will not assist the US in the collection of any US tax claim on their own resident citizens. The US can FATCA people all it wants, but there is still really no means of enforcement (other than a nasty letter from the IRS).


They do now have a very potent mean of enforcing it on wealthy should-be-taxpayers. The rest of us are just cluttering up the system, from their point of view, but it's going to take time for the implementation to evolve so that the noise - us - can be filtered out. Identifying citizenships is a necessary stage of the filtering. 

My impression, now that I've just about got my head round it, is that FATCA is a primarily a way of acquiring information about transactions flowing through financial institutions operating globally. This is as interesting to the other participating countries as it is to the U.S.


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## Bevdeforges

FATCA is primarily a way to appear to be taking the lead on the tax evasion and money laundering front and probably molding it to US preferences. But all of the OECD is behind the effort: The OECD takes further steps to putting an end to offshore tax evasion - OECD

It would be nice if the US would go with the international standards, but that's not likely to happen in our lifetimes.
Cheers,
Bev


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## iota2014

Bevdeforges said:


> It would be nice if the US would go with the international standards, but that's not likely to happen in our lifetimes.


I agree - much more likely that FATCA will become the _de facto_ standard, I should think, given the size of the U.S. economy and its supreme importance to anybody who's criminally rich or trying to get that way.


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## iota2014

Convergence seems to be well underway. See http://www.oecd.org/ctp/exchange-of-tax-information/taxtransparency_G8report.pdf, Annex II

And http://www.oecd.org/tax/exchange-of-tax-information/automaticexchange.htm which begins:



> Co-operation between tax administrations is critical in the fight against tax evasion and protecting the integrity of tax systems. A key aspect of that co-operation is exchange of information.


and ends:



> In August 2015, the first edition of the CRS Implementation Handbook was published, providing practical guidance to assist government officials in the implementation of the Standard. It sets out the necessary steps to implement the Standard and helps to increase efficiency for financial institutions and governments implementing the Standard by promoting the consistent use of optional provisions, identifying areas for alignment with FATCA and addressing the operational and transitional challenges resulting from the staggered implementation of the Standard. It also contains answers to frequently asked questions (FAQs) received from business and governments, with a view to furthering the consistent implementation of the Standard. The Handbook is intended to be a living document and will be updated on a regular basis.


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## JustLurking

BBCWatcher said:


> If you want a CLN when you naturalize, go get a CLN. They're even free in such circumstances. ...


Not any more. Hat tip to Eric at Isaac Brock Society for flagging this up.

https://www.federalregister.gov/art...ment-of-state-and-overseas-embassies-and#h-15


> Requests for a Certificate of Loss of Nationality on the basis of a non-renunciatory relinquishment have increased significantly in recent years, and the Department expects the number to grow in the future, causing the total cost of this service to increase. At the same time, the Department funds consular services completely from user fees. The Cost of Service Model continues to demonstrate that such costs are incurred by the Department when accepting, processing, and adjudicating relinquishment of nationality cases; therefore, the Department will collect a fee from all individuals seeking a Certificate of Loss of Nationality. Taking into account the costs of both renunciation and non-renunciation relinquishment processes, the fee will be $2,350.


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## BBCWatcher

According to the notice, extension of the $2,350 fee to all U.S. Certificate of Loss of Nationality (CLN) applications will begin starting November 9, 2015, unless the Department of State modifies or rescinds its fee schedule adjustment.

Unfortunately, _if you believe that government services should be financed exclusively or primarily through user fees based on real costs of providing those services_ (I do not), this change is logical and reasonable. Unfortunately. 

For the record, the whole "user fee" movement is entirely about wealthy/high income individuals exercising their already outsized political influence to shift the costs of government (and thus civil society) from themselves onto the poor and middle class, to move away from the premise the government should provide at least some services universally and finance those universal services primarily or exclusively based on ability to pay. I oppose such efforts, for the record -- and even though it's likely that my membership in the "Six Percent Club" would get more expensive if my views on government financing of services were implemented. (Though in reality I'd do just fine. That's the part many people, especially wealthy people, don't understand and appreciate. A strong, vibrant middle class with high social mobility -- and a civil society that functions well -- are essential to wealth creation and preservation. That's one of the great frustrations and disagreements I have with many in this forum included, that civil society, income, and wealth are part of a dynamic system, and that _well-regulated_ capitalism is the finest political and economic system ever devised, including especially for wealthy/high income people.)


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## maz57

Not terribly surprised about the impending change. Its long seemed to me that Dept. of State had it backwards as they charged $2350 for a renunciation (a slam dunk) while they gave away CLN's for a prior relinquishment (requiring far more work/documentation/confirmation) for free. State itself has indicated they are processing more and more of these relinquishment style CLN applications. Its the FATCA of the matter; previously no one worried about it too much.

The Certificate of Loss of US Nationality is turning out to be a very valuable piece of paper and a must have for former US citizens who want to live outside the US. (Nice profit center for State Department, too.) Any bets on how long it will be before they bump the fee due to "inflation"?


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## USExpat111

So is it going to cost $2350 for renunciation and additional £2350 for the CLN? How could one get the CLN without renunciation previously?


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## Bevdeforges

I would hope that if you went the full renunciation route, they'd throw in the proper documentation with the general $2350 fee.
Cheers,
Bev


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## iota2014

USExpat111 said:


> So is it going to cost $2350 for renunciation and additional £2350 for the CLN? How could one get the CLN without renunciation previously?


As I understand it, there is no charge for relinquishment/renunciation. And no charge for the CLN.  The charge is for _*processing*_ the application for a CLN.

Which means that even if a person's attempt to relinquish is unsuccessful for some reason, it still costs them $2350.


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## maz57

USExpat111 said:


> So is it going to cost $2350 for renunciation and additional £2350 for the CLN? How could one get the CLN without renunciation previously?


Just to clarify: 

If one books a consulate appointment and swears the oath of renunciation they collect the US$2350 fee. Eventually, your CLN will arrive in the mail after DC has reviewed the case. 

Presently, if one books an appointment to document a relinquishment due to naturalizing as a citizen of another country, no fee is charged, and eventually your CLN arrives in the mail in similar fashion. As of November 9, 2015, they will begin to collect US$2350 fee to document a prior relinquishment; that is what has changed.

Whether the fee is for the cost of State Department's services or for the piece of paper is moot; the result is the same. Now all seeking a CLN will pay the fee.


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## iota2014

The result isn't quite the same, it seems to me. Under the new rules, if you try for a CLN on the basis of a prior act, and it's refused, you have no option but to pay the fee again in order to renounce. Of course it may be a small risk, if you're sure it won't be refused, and it may get you a significantly earlier relinquishment date, but for others the risk of a double cost may make renunciation the safe course.


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## maz57

Generally, if there is a problem with a prior relinquishment, it will come out in the interview stage. If it appears to be a fatal problem, one always has the option of "switching horses" and swearing the oath on the spot. As you mentioned, that will result in the current rather than an earlier date for loss of US citizenship.

There are many reports of people who were told by Consular officials that their claim of a prior relinquishment was invalid due to such acts as mistakenly filing US taxes due to bad advice, or obtaining a US passport due to threats by US border officials. Unfortunately, many US Consular officials aren't necessarily well versed in the rules themselves.

Depending on the individual facts, many relinquishers have insisted that their file be sent on to DC for review in spite of resistance at the Consular level and successfully received their CLN. After November 9 it will be a US$2350 risk. Those wishing to go that route are well advised to book an appointment before November 9, 2015. (Not possible in Canada with the long wait times, but maybe in Europe?)


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## iota2014

Thanks for that explanation. Not as chancy as I thought, then.



> Those wishing to go that route are well advised to book an appointment before November 9, 2015. (Not possible in Canada with the long wait times, but maybe in Europe?)


I'm currently trying to book. I'm renouncing, so the significant date for me is not November 9 but December 31. Have to wait and see if the fees announcement results in increased pressure on appointments, lessening my chances of a 2015 date.


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## maz57

iota2014 said:


> I'm currently trying to book. I'm renouncing, so the significant date for me is not November 9 but December 31. Have to wait and see if the fees announcement results in increased pressure on appointments, lessening my chances of a 2015 date.


Good luck! It would be nice to terminate your US citizenship in 2015 thereby saving a whole year (2016) of tax reporting. If you are successful note that you do not need to actually have a CLN in hand to wind up your US tax affairs next spring. It merely needs to be "in the pipeline".


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## iota2014

That's useful to know. Thank you for the good wishes. I'll post the appointment date in this thread when I know it.


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## JustLurking

After seven years of prevarication, the IRS has finally issued regulations to implement section 2801 of the 'exit tax'. This is the part the makes US person _recipients_ liable for US tax on gifts and bequests from covered US expatriates and former long term green card holders.

Text may be found here:
Guidance Under Section 2801 Regarding the Imposition of Tax on Certain Gifts and Bequests From Covered Expatriates

These "draft" regulations are "open" for formal comments, but we can probably predict pretty accurately what the response to any comments will be.


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## BBCWatcher

JustLurking said:


> After seven years of prevarication....


I think you meant "procrastination."


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## JustLurking

BBCWatcher said:


> I think you meant "procrastination."


Not really. I think the IRS has been in denial over this stupidity for a while. Perhaps they hoped, of course futilely, that congress might come to its senses on this one. It doesn't take a genius to foresee that the second-order effects of section 2801 will completely negate its intent.

Now that statutes of limitations are starting to run out they are left with no choice but to act. Even if action causes detriment to US financial interests.


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## BBCWatcher

JustLurking said:


> Not really.


That doesn't seem to fit the definition of prevarication, at least not well. Prevarication means "lying." Not writing a rule quickly surely isn't lying. It may be something else bad, though.

I disagree with Phil Hodgen. I think he's left out consideration of some major incentives and disincentives. However, for sake of argument, suppose Hodgen is correct. Then one straightforward way Congress could fix the defects Hodgen alleges is for the U.S. to collect 40% of a covered expatriate's entire global assets above the lifetime exemption ($5.43 million in 2015), i.e. raise the Expatriation Tax for assets above that amount and keep it the same for assets below ($2 million/$680,000 limits). The inheritance tax aspect (the present section) could then be sunset. "Be careful what you wish for."


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## JustLurking

BBCWatcher said:


> "Be careful what you wish for."


Put differently, there is no situation so bad that congressional action cannot worsen it.


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## maz57

Nothing to prevent the expat from financing his heirs' shedding of US citizenship while he is still alive. That US$2350 is a worthwhile "investment" which will pay lifelong dividends.

Hodgen's advice of several years ago still stands: "get out now while the getting out is still semi-good."


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## JustLurking

BBCWatcher said:


> I disagree with Phil Hodgen. I think he's left out consideration of some major incentives and disincentives...


You speculate from a position of no information. Phil Hodgen, on the other hand, has direct experience. He writes: "_Or – and this is what I see – the entire family chooses to expatriate_."

I know which viewpoint I find to be more convincing.


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## BBCWatcher

JustLurking said:


> You speculate from a position of no information. Phil Hodgen, on the other hand, has direct experience. He writes: "_Or – and this is what I see – the entire family chooses to expatriate_."


Wealthy heirs typically already have wealthy children who would also be subject to the Expatriation Tax, and for _everybody_ to exit (with Expatriation Tax) none of them should be Paris Hilton (as an example) with substantial U.S. income and the right to "work" in the United States to continue receiving substantial income. Hodgen never mentioned those factors in his article. Nor did he mention the fact that covered expatriates could also simply transfer more wealth, immediately, to their American heirs _before_ renunciation, with various legal ways to do that -- and such transfers would presumably immediately circulate more funds in the U.S. economy rather than waiting for somebody to die. In other words, exactly the opposite argument he made. Then there's the fact that non-Americans still can and do aid the U.S. economy in various ways, directly and indirectly, and (particularly in infamous cases) they're consuming fewer U.S. public goods and services. All of that is part of the policy calculus, too.

Moreover, Hodgen assumes facts not evidence. He at least implicitly assumes that Congress cares about the revenue that might hypothetically be lost even if his argument were correct. (And I don't think it is.) Occasionally Congress doesn't care about the revenue but wants to set particular tax policies to achieve other policy goals. This case is highly likely to be one such case, that any revenue loss (which cannot be large) is not the only consideration. In short, Congress might feel that renunciants are undesirable, and "good riddance." Even if that objective costs the Treasury a bit of money, so what? There's nothing "stupid" about that. Congress makes direct expenditures and tax expenditures all the time, and this cannot be a big one even if Hodgen is correct. (I don't think he is.)

No matter, though. Without a CBO analysis we're both just guessing about which incentives/disincentives are greater. And even then the CBO is guessing a bit, but they are generally careful in more fully exploring the various incentives and disincentives. I don't think Hodgen's article was at all complete in that respect.


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## BBCWatcher

By the way, Hodgen's initial supposition is fairly easily tested, to some degree anyway. One could take a look at the list of individuals who have terminated (or documented loss of) their U.S. personhoods and look for how often family cohorts appear together. (Provisional answer: "Not often.") Last names will often (but not always) match in such cases. That doesn't help you determine revenue losses to the Treasury, but it's a threshold "spot check."


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## JustLurking

BBCWatcher said:


> One could take a look at the list of individuals who have terminated (or documented loss of) their U.S. personhoods and look for how often family cohorts appear together. (Provisional answer: "Not often.")


That proves nothing. Family members can, and very likely often will, renounce years and perhaps decades apart from each other. It is only when a covered expat is considering making a gift/bequest that the US person taint of their recipients or legatees becomes an issue.


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## BBCWatcher

JustLurking said:


> That proves nothing.


Nothing? Too strong. You're implicitly assuming that one would only look at a single report. There are years of reported names now. Decades, perhaps not, but certainly many years. And if somebody is waiting decades to renounce, "who cares?" That's _even less_ loss to the U.S. Treasury (if there even is a loss). With delay there's a greater chance the person renouncing will be a covered expatriate, for example. Given enough time (and inflation) _everybody_ renouncing will be a covered expatriate because the threshold isn't indexed for inflation.



> Family members can, and very likely often will, renounce years and perhaps decades apart from each other.


Yes, but that's risky if Hodgen's hypothesis is correct. Ex-American benefactors can (and do) die at any time. Escaping the covered expatriate inheritance tax only works if you renounce _before_ your ex-American benefactor dies.

There's also the fact that conventional estate taxes are easier to avoid (much too easy, in my view), while the covered expatriate inheritance tax is much harder to avoid. So even if you think that a few people -- and we're obviously talking about a few people, under any circumstances -- persuade their children and grandchildren to renounce, there are surely other children and grandchildren who refuse (or who procrastinate). In which case, instead of estate tax avoidance the Treasury ends up with covered expatriate inheritance tax collections. That's a good deal for the Treasury!

No, I'm not at all persuaded by Hodgen's hypothesis. Let the CBO score this one if anybody is interested, but I could very easily see how this provision in the tax code would be a net money maker for the Treasury compared to the alternative that it didn't exist. It doesn't require much imagination.


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## JustLurking

BBCWatcher said:


> ... while the covered expatriate inheritance tax is much harder to avoid.


Now you've ventured into fiction. Avoidance is trivial -- pass via a non-US person. There is no third-party reporting to the IRS (nor can there be, realistically), and the regulations only require the US recipient/beneficiary to identify whether or not the gift is from a covered expatriate. How much effort do you think recipients and beneficiaries will make to do this? Seriously.

My bet is that this is a net money loser for the treasury. Like you said upthread, it's probably not intended to make money but rather to send a message, albeit a spiteful and mean-spirited one.

Well, message received and understood.

And for the record, I'm not even slightly convinced by your hypothesis.


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## jbr439

BBCWatcher said:


> ...
> Yes, but that's risky if Hodgen's hypothesis is correct. Ex-American benefactors can (and do) die at any time. Escaping the covered expatriate inheritance tax only works if you renounce _before_ your ex-American benefactor dies.
> ...


Is it before the ex-USC benefactor dies, or is it before his/her estate is officially distributed? If the latter, that's a lot of potential leeway.


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## BBCWatcher

Sure, illegal options happen, but that's not unique.

We're just going to disagree on this one -- or, more precisely, since the CBO hasn't scored anything here, nobody _ought_ to have any firm conclusion on whether the provision is a net revenue generator for Treasury or not. And Congress may not care even then.


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## iota2014

iota2014 said:


> That's useful to know. Thank you for the good wishes. I'll post the appointment date in this thread when I know it.


I received an appointment at short notice, and renounced yesterday. All went as expected.

Now I'm just hoping to receive the CLN before my NS&I bonds mature next spring. If no word by January I will test the waters by applying to re-open my Direct Savings Account -- DS accounts being no longer available to US Persons.


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## diharv

UPDATE
It has been a long while since I started this thread and it was turned into a sticky. I will update my situation without being too long winded like my previous posts. Becoming compliant for five years was a long and expensive process. Even getting the SSN was a major pain in the butt to get. If they want US expats to file taxes why do they make it so difficult to get a damn SSN. I mean why do I have to account for every year I have spent out of the US with documentation ? Who fricken cares and why does it matter? The only thing that should matter for getting that stupid number is the US birthplace .
Renouncing . Boy I am glad I did it when I did . I got an appt relatively quickly in Vancouver . I went in with the intention of renouncing and spending $450 but I wound up with a relinquishment and $450 in my pocket . Apparently spending more than 90% of my life in Canada and becoming a CAD citizen with the intent to relinquish was cut and dry . Not so now from what I am reading , it's $2350 either way.
I was audited also so to straighten that mess out was more work for the accountant and thus more fees and more taxes paid. I do not have a relatively straight forward situation but most years resulted in no tax or little tax paid but I had one year 2009 that was particularly convoluted and likely triggered the audit. Anyway , came out of that one OK.
This year filed last 1040 and 8854. I was told to pay $100.00 in tax , so I did. Last month I received a tax refund of $100.00 so I guess that everything went through and I am all done see ya sayannorah and good riddence .
All told I spent a total of close to $30000.00 in accountant fees , taxes and interest on taxes. Some late and failure to file penalties were actually waived . The bulk of the money spent was on accountant fees. $4000.00 alone for 2014 1040 and 8854 . As I see how all this FATCA crap plays out I will see if it actually has any teeth or if I spent all that money for nothing. Basically a half years take home pay that my family will never see again . My wife says that with all the stress and the grief that the process has caused . I should look at it as peace of mind bought and paid for.
So that is it . I am done and out . I have no regrets and can live in peace without worrying about all the threats and fearmongering , whether they may be credible or not. I will however continue to frequent this site and offer input at times ( and to see if Nony stays off the radar indefinitely). Than you for all the advice and support.


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## Nononymous

So far so good.


----------



## Nononymous

To elaborate on that a little... 

Diharv, sorry to hear that it was so expensive to extricate yourself. Alas you may never know whether or not it was worth it, but at least you have peace of mind going forward, to offset the bitterness at the cost and hassle.

Currently things are fine. It doesn't look like Canadian banks or financial institutions are working terribly hard to gather US-personhood data, though that may change in the future. Right now all my investments are RRSPs, which are exempt from FATCA reporting so none of my data would be sent to the IRS, regardless of citizenship. I had a few unpleasant exchanges with the brokerage firm over the past year, but that was resolved by my cheerfully lying and not checking the "US citizen" box on their customer information form, and they haven't bothered me since. (Note that when initially asked I refused to sign a W8 or any other US form, both on principle - Canadian banks can create their own damn forms, not borrow something from a foreign government - and to avoid potentially perjuring myself. I'm not convinced that "overlooking" that one little box on the bank's own form is going to land me in jail. I'm sure they would rather just quietly close my account and send me on my way, but who knows?)

If present trends continue, and both I and my assets remain in Canada, I would see no reason to become compliant or renounce or take any further action. Staying off the radar is currently very easy, with the aid of the occasional small untruth. (The FATCA court challenge will come along next year, which could change the landscape, for better or worse.)

There are two conditions that might cause me to alter my approach and renounce or otherwise regularize my situation:

First, while I fully expect my remarkable parents to outlive me, it's possible that at some point I will inherit funds outside of an RRSP and be subject to a higher degree of scrutiny by Canadian financial institutions. The worst outcome would be reporting me under FATCA, which doesn't necessarily mean the US would track me down, or could impose any sort of penalty if they did. But probably better to avoid the risk.

Second, my daughter will be 18 in a few years, and she has inherited US citizenship. If she never lives in the US she can probably continue ignoring this - she was born outside the US so FATCA is easily avoided. (We are strongly discouraging any plans to attend university in Texas now that it's legal to carry guns on campus, among other insanity.) She may or may not choose to renounce. If later in life she made a permanent move south of the border then I might need to change my status to avoid the situation where I'm deemed a "covered expatriate" as this could present problems for her with taxation of gifts and inheritance (assuming of course there's anything left for her). 

That's the summary.

Postscript 1: Canadian financial institutions may be taking a closer look at customers with larger balances, particularly outside of RRSPs. My parents were recently asked a number of questions about their time living in the US half a century ago (when I had the misfortune to be born) then my mother discovered an ancient slip of paper in her files and, regrettably, said "oh look I still have my green card" within earshot of a bank employee. That set off alarm bells. It took several conversations and a letter to convince the bank that they were not US persons. The matter is now closed.

Postscript 2: All three of us will be flying to the US next week. As always, I plan on using my Canadian passport but with my US passport in the back pocket in case they ask. I've only needed to pull it out once, about three years ago.


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## maz57

....and another former slave escapes from the plantation. Boy, if I had been lucky enough to not have a SSN, with what I know now, I'd have blown the whole thing off. I don't think I would have bothered to jump through the hoops to get one. No SSN=you don't exist as far as the IRS is concerned. 

Incredible you had any luck with the Vancouver Consulate. They stalled me to the point I was so pissed off I swore I would never set foot in the building (not to mention all their stupid security).

Bottom line? Congratulations on your hard won freedom! You can now get back to your regularly scheduled life, diharv. (Meanwhile the homelanders continue to wonder what all the fuss is about. ("If you don't like being treated like crap you can just renounce".)

As for me, I'm now comfortable with being an "undocumented emigrant", LOL. Like Nononymous' situation, its a bit of an experiment. SFSG.


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## BBCWatcher

Nononymous said:


> Right now all my investments are RRSPs, which are exempt from FATCA reporting so none of my data would be sent to the IRS, regardless of citizenship.


Let's be more precise and careful here, for it is important.

The first part is correct. According to what we know about the agreement between Canada and the United States, financial institutions are not required to report RRSPs.

Your second part is not a given and does not logically follow from the first part. Financial institutions are not _required_ to report RRSPs. That doesn't mean they are _barred_ from reporting RRSPs. They have minimum reporting requirements, but exceeding those requirements is allowed (and would not be surprising).

The Canadian government also can do whatever it wants (within Canadian law), and Canadian financial institutions obviously are already sharing data on RRSPs (and other financial matters) with the Canadian government. Canada and the United States continue to have longstanding agreements on cross-border tax and financial compliance collaboration, and this too has been well known for years. That doesn't change.

For the record, I recommend you don't violate the law, don't talk about violating the law, and don't encourage or aid people in violating the law. Some people nonetheless ignore my recommendations.


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## maz57

BBCWatcher said:


> For the record, I recommend you don't violate the law, don't talk about violating the law, and don't encourage or aid people in violating the law. Some people nonetheless ignore my recommendations.


Yet that is precisely what the people who wrote the Declaration of Independence did. It worked out rather well for them in the end.


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## Nononymous

BBCWatcher said:


> For the record, I recommend you don't violate the law, don't talk about violating the law, and don't encourage or aid people in violating the law. Some people nonetheless ignore my recommendations.


Whose law? I don't think I'm violating *Canadian* law.


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## iota2014

Hard to have any respect for the CBT-FATCA-IGA alphabet as genuine laws, given that the whole smorgasbörd has just been cobbled together as a mechanism for allowing the US to exercise extrajudicial power over selected citizens of other countries.


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## maz57

FATCA inherently has the same fatal flaw as the underlying CBT which gives rise to it. It relies entirely on other (i.e. non-US) jurisdictions and financial institutions for its enforcement.

Other countries already have their plates full enforcing their own laws. There is little enthusiasm for enforcing extra-territorial US law, particularly one which offers no corresponding benefit whatsoever (other than preventing their financial institutions from being sanctioned).

As for the institutions themselves, FATCA represents just another cost that must be minimized in order to maximize their profits. That means unenthusiastic covering of their asses at best. No one at the several institutions that I do business with has ever mentioned FATCA, asked if I am or ever have been a US taxable person, or even reviewed my customer profile. The front line personnel (the ones who know their customers best) are either totally clueless or if they actually know about FATCA simply aren't interested in enforcing a foreign country's law in Canada as long as they don't get in trouble themselves. The standard policy seems to be "don't ask, don't tell". Meanwhile, as awareness grows, customers themselves are figuring out ways to avoid being FATCA-ed.

Canadians love to take the kids to Disneyland or spend a few winter weeks in Arizona, but they otherwise take a dim view of the US government's bullying and total disregard for any interest except its own. FATCA was enacted because CBT was (and continues to be) a failure; doubling down on a failed policy doesn't strike me as a recipe for success.


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## Nononymous

BBCWatcher said:


> Your second part is not a given and does not logically follow from the first part. Financial institutions are not _required_ to report RRSPs. That doesn't mean they are _barred_ from reporting RRSPs. They have minimum reporting requirements, but exceeding those requirements is allowed (and would not be surprising).


That was indeed my concern, which is why I refused to confirm US citizenship even for RRSP accounts that were not reportable under FATCA. I told them that I would give them no citizenship information if they could not assure me that the information would never leave the bank. 

After that exchange they seemed perfectly content with a fairly obvious untruth, so I don't think they're trying particularly hard.


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## iota2014

maz57 said:


> FATCA inherently has the same fatal flaw as the underlying CBT which gives rise to it. It relies entirely on other (i.e. non-US) jurisdictions and financial institutions for its enforcement.
> [..]
> 
> FATCA was enacted because CBT was (and continues to be) a failure; doubling down on a failed policy doesn't strike me as a recipe for success.


And that's why the IGA layer was added.

Before the IGAs, the US was planning to extort the information from the FIs under threat of "withholding" eye-watering sums of money. Sort of a 21st century version of a protection racket. Not "Give us the money or we'll trash your bar" but "Give us your clients' data, even though you can't do so legally, or we'll take your money." 

The IGAs legalize the extortion of the information, in exchange for the (conditional) withdrawal of the withholding threat. Removing the protection of the law from the FIs' clients, and giving it to the FIs instead.


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## dok49

Mitcholt Hi, I was reading your comments in the renouncing citizenship. Is there any way to avoid the high cost as they have raised it to over 2,000 dollars now?

Also you mentioned you could supply some tax preparers to file with? I have the joy of being dual USA and Australia. 

Thanks


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## iota2014

iota2014 said:


> I received an appointment at short notice, and renounced yesterday. All went as expected.
> 
> Now I'm just hoping to receive the CLN before my NS&I bonds mature next spring. If no word by January I will test the waters by applying to re-open my Direct Savings Account -- DS accounts being no longer available to US Persons.


Email from the Amsterdam Consulate today - CLN is in the post. 

Roughly four months from renunciation to CLN. Happy days!


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## Omater

Congrats, Iota! 

I came very close to starting the process for renunciation. When I first moved to Canada I was told by a tax accountant that I didn't have to file US tax if I owed no taxes. He even showed this to me on the IRS website. When the FATCA issues and threats of losing everything were running rampant I couldn't sleep at night. Then I went into a constant state of panic because I had not filed a tax return in many years because I really didn't owe taxes. I also thought I was off the hook when I became a Canadian citizen.

I worried about my Canadian husband being indirectly penalized by my possible large penalty fees and by the outrageous fees that Canadian CPA's were suddenly charging, some as much at $10k for a simple tax return. I read the horror stories of people who had been living outside the US borders for most their lives who were about to lose their retirement money when they had reached an age of being able to finally enjoy it. I read about babies born in the US to Canadian parents and babies born in Canada to American parents suddenly finding themselves libel for taxes even if they had never set foot in the USA. Like others said, I felt very VERY betrayed by the country of my birth and came very close to renouncing the country that had me reporting to a criminal investigative agency as if I had done something wrong. Then something unexpected happened with my husband. All my family lives in the USA and I have nobody here. It was a real wakeup call and I had no choice but to change my mind about renouncing.

To be able to live in Canada under the circumstances I had to make the decision that there are some things I cannot change and stressing over it would take a toll on my mental and physical health. I made the decision to find a way to stop thinking about this until tax time. I file my FBAR and my taxes every year to the BEST OF MY ABILITY and if they come back at me I will deal with it then. I don't pay the outrageous prices of a local CPA, I just bang my head on my desk and do the BEST OF MY ABILITY and I can prove that if anything goes wrong.


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## iota2014

Hi Omater - thanks!

Sorry to hear of your troubles. I had it easy, in comparison. I left America long ago and have lived in the UK for so long I feel more British than American, so I didn't have that horrible feeling of having been betrayed. And I had most of my family and friends near me in the UK. I would have found it much more difficult if I had been in your situation.

I completely agree with you about not stressing over circumstances that can't be changed. Do you end up having to pay any tax when you file? If so, it's possible some of the knowledgeable people here in this forum might be able to help you find ways to get it down to zero.

I've personally come to the conclusion (as many others have done before me) that the IRS is probably not going to put much effort into scrutinizing the returns from us small-fry, because they're very short of staff and resources, and it seems doubtful they could afford to pursue anyone outside the US unless they thought there was a good chance of collecting a significant amount of money - e.g. six figures upwards. Their budget is really stretched, apparently.


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## maz57

My head got so sore I finally decided to give up my US citizenship! But you are absolutely right about doing it yourself. With the help of this forum (and others) I wound up probably knowing more about US tax than 95% of the Canadian based so-called US tax experts.

I heard someone recently say that the most important thing about filing a US tax return is that it must be "processable". This is even more important than being correct because if it cannot be processed by the IRS computer system then it will be kicked out and wind up in the hands of an IRS employee. At that point all bets are off.


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## Omater

Iota, no, I didn't have to pay. I sent a letter of explanation to the IRS and after many months they sent back correspondence more or less excusing me from penalties for not reporting FBAR over the years... which frankly surprised me. A little communication does not hurt.

What is now a problem though, is that I am a signing authority for many of my clients and the gov't wants me to report them... and that makes it very difficult when it comes to getting new clients who, rightfully so, find their info none of the US government's business.


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## iota2014

Omater said:


> Iota, no, I didn't have to pay. I sent a letter of explanation to the IRS and after many months they sent back correspondence more or less excusing me from penalties for not reporting FBAR over the years... which frankly surprised me. A little communication does not hurt.
> 
> What is now a problem though, is that I am a signing authority for many of my clients and the gov't wants me to report them... and that makes it very difficult when it comes to getting new clients who, rightfully so, find their info none of the US government's business.


Report them by filing FBARs, do you mean? 

That sounds like a really difficult situation. Do you think your Canadian M.P. might be able to help? It seems quite wrong that a Canadian citizen should be told they have to report financial information belonging to other Canadian citizens.


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## Ah2g

*Ah2g*

Hi, I am just revisiting this forum after several years when I was first entering the murky waters of US tax and compliancy.

The reason I'm posting now is that the rules recently changed and anyone earning anything over $5 will have to submit a 1040. It was through paying a US tax expert in the UK a substantial fee that I found out I didn't earn enough - I don't earn enough to pay UK taxes either, and only file an FBAR which I've been doing myself for a number of years.

I've found out that it will cost another £1,500+ for the expert firm to fill in a 2018 1040 on my behalf. Is it REALLY possible to do it for oneself? I've read mention of some software that will do it for you? I freeze up with anything numerical - though have managed to overcome this sufficiently to manage the FBARs. I note below that one of the forum members files 'to their best ability'. I'm thinking that this is the best (and most affordable) way to go for someone in my position who has never owed tax in the US.

I would be grateful for confirmation or pointers. I'm definitely going to be renouncing my US citizenship as soon as I have submitted a 2018 1040 (or had done for me).


I really feel for anyone in a similar position.


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## Nononymous

The fact that you paid a substantial fee to have someone tell you that you didn't earn enough to file is a pretty good indication of what an unethical lot the tax compliance mafia have turned into.

If you want to renounce you can just go ahead and do it, there's no need to be tax compliant. Particularly if you have very low income. 

In your case that 1040 would be fairly simple and you should easily be able to do it yourself. Or just don't bother. Assuming you have UK citizenship and are thinking of getting rid of US, it's not like the IRS has any leverage over you, or can in anyway penalize you. Just ignore them.


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## Ah2g

Thanks Nononymous. My British husband would applaud you for your wisdom. He cringes every time I relay my fears and tax firm invoice costs, and feels as helpless as I do. This tax firm is dotting the i's and crossing the ts no doubt. I wondered if they were just using me in a ruthless way. The amount which was several thousand felt galling to say the least. They were very keen to point out the penalties and put the fear of god into me. I'm inclined to try to fill it in, and if I can't, keep my fingers crossed that they don't try to find me!


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## Ah2g

Do you think a 1040 will be enough? the last time I looked into it a few years ago it seemed like lots of forms needed to be filled. I got put off and took on the tax firm because I couldn't find a comprehensive list... everyone I spoke to quoted a different series of forms... it felt like I was in a nightmare.


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## Nononymous

You are aware that any penalties assessed by the IRS cannot be collected from you in the UK? It's a paper tiger, nothing to fear.

I can't imagine why you'd have a complex return if you don't owe tax in the UK, but it's likely more than just a 1040, there could be a few other forms.

Basically you have three options:

1. Continue paying tax advisors to file your returns (though maybe find someone cheaper).

2. Learn how to do it yourself.

3. Don't bother, just ignore it.

I assume that in past years you were earning something very low that didn't require a US tax return, until this year when the limit dropped to $5. You could continue to file nothing, as if you didn't work at all. The IRS does not receive any information about your income in the UK.

Really, you're probably best off saving your money and pretending the IRS doesn't exist.

PS Several thousand to to basically tell you that didn't need to file, or just file simple returns? Yes, you were ripped off.


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## Ah2g

Thanks so much for your help Nononymous.


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## Ah2g

I guess it must have come down to some of my ISAs which were spread out in different mutual funds which had shares in US companies. Still, the amount of interest they accrued was and is very low, therefore not reaching a threshold - until the £5 came in


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## Nononymous

Ah2g said:


> I guess it must have come down to some of my ISAs which were spread out in different mutual funds which had shares in US companies. Still, the amount of interest they accrued was and is very low, therefore not reaching a threshold - until the £5 came in


That would be your paperwork nightmare - ISAs with mutual funds. The US considers it a "foreign trust" with various complex reporting requirements, even if nothing is being earned. Far better not to report them, or call them ordinary savings accounts, or not file altogether.


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## Ah2g

Yes, I agree with you on that! I was advised to get rid of them altogether. I think I will look at this option - move them into something else entirely. I'm not talking about a lot of money here so not worth the pain of it


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## Nononymous

Non-compliance is your best friend.


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## Bevdeforges

I have to say that I concur with what Nononymous has told you.

If you decide you want to file, I would just report the ISAs as "bank" accounts. Declare the interest as bank interest and skip all the fancy forms and declarations. That way you have declared them and the related interest. If they have questions, they'll be in touch. But seriously, don't hold your breath to hear from them. 

But you're highly unlikely to hear anything back as long as your filings show that you don't owe any tax to the US. 

If you're planning on renouncing anyhow, you can just state on those forms (the ones for renouncing) that you believe you are compliant and again, you're unlikely to hear anything further on the subject. 

A friend of mine renounced last year and that's how it went for her. She hadn't filed for many years - didn't owe any tax, but under a strict reading of the rules, I suspect she might have been subject to filing. It took several months to get her CLN (Certificate of Loss of Nationality) but it did show up.


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## Nononymous

Sadly, you fell into the clutches of tax advisors. Their advice was expensive, and not really in your best interests. I expect you can still safely decide to ignore the IRS even if some things have been filed in the past.


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## byline

Ah2g said:


> The reason I'm posting now is that the rules recently changed and anyone earning anything over $5 will have to submit a 1040.


Actually, this is true only for someone in the "married, filing separately" category. For all the other categories the minimum threshold is much higher. Why in the world the "married, filing separately" group got singled out, I have no idea. Does anyone else know?

Before I found this out, I was relieved because, with the standard deduction being raised for the 2018 tax year, I thought I would no longer have to file a 1040. Alas, I am in the "married, filing separately" category, so thanks to that $5 minimum threshold I still had to file.


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## Bevdeforges

byline said:


> Actually, this is true only for someone in the "married, filing separately" category. For all the other categories the minimum threshold is much higher. Why in the world the "married, filing separately" group got singled out, I have no idea. Does anyone else know?.


Married, filing separately has a lower threshold and several other odd restrictions because of the fear that domestic couples could use separate filings to avoid taxes by shifting deductions to the spouse who would benefit the most by taking them. The big example they always mention in tax classes in business school is the requirement that for married people filing separately, both spouses MUST either itemize deductions or both spouses must take the standard deduction. It's one reason that they require you to give your spouse's name and SSN when you file separately - so they can match up the returns to make sure you play by the rules and aren't doing anything "tricky."

Obviously, this is not relevant to those of us married to non-resident aliens who don't have to file. But the system isn't set up for those of us living overseas.


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## JustLurking

byline said:


> Actually, this is true only for someone in the "married, filing separately" category. For all the other categories the minimum threshold is much higher. Why in the world the "married, filing separately" group got singled out, I have no idea. Does anyone else know?


My vote goes to the elimination of personal exemptions in the 2017 TCJA.

For 2017 and earlier, the MFS filing threshold matched the personal exemption, so $4,050 for 2017. Now that the personal exemption has gone, the lowest 10% tax bracket hits the first $1 of taxable income.

Why $5 rather than $0 as the new threshold, then? 10% of $5 is $0.50, which would round up to $1. 10% of less than $5 rounds down to zero. If you earned just $5, the IRS would like $1 of that. (The fact that it will cost them far more than $1 in processing costs to collect it doesn't seem to bother them at all.)


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## underation

JustLurking said:


> My vote goes to the elimination of personal exemptions in the 2017 TCJA.
> 
> For 2017 and earlier, the MFS filing threshold matched the personal exemption, so $4,050 for 2017. Now that the personal exemption has gone, the lowest 10% tax bracket hits the first $1 of taxable income.
> 
> Why $5 rather than $0 as the new threshold, then? 10% of $5 is $0.50, which would round up to $1. 10% of less than $5 rounds down to zero.


Well spotted. 



> If you earned just $5, the IRS would like $1 of that. (The fact that it will cost them far more than $1 in processing costs to collect it doesn't seem to bother them at all.)


Does US law allow the IRS to set a zero threshold? Anyone with no taxable income has nothing to report on an income tax return.


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## Bevdeforges

JustLurking said:


> My vote goes to the elimination of personal exemptions in the 2017 TCJA.
> 
> For 2017 and earlier, the MFS filing threshold matched the personal exemption, so $4,050 for 2017. Now that the personal exemption has gone, the lowest 10% tax bracket hits the first $1 of taxable income.
> 
> Why $5 rather than $0 as the new threshold, then? 10% of $5 is $0.50, which would round up to $1. 10% of less than $5 rounds down to zero. If you earned just $5, the IRS would like $1 of that. (The fact that it will cost them far more than $1 in processing costs to collect it doesn't seem to bother them at all.)


That may be true for MFS, however for the other filing statuses, the threshold was generally the personal exemption PLUS the standard deduction - so around $10,000 or so for Single and close to $20,000 for Joint filers.

The rationale with MFS has always been that they "need" to be able to check that both members of a married couple are treating their deductions consistently (i.e. both take the standard deduction for their filing status, or both itemize deductions, even if that means one partner has deductions less than the standard deduction). What I never "got" was why they wouldn't just allow someone married to a NRA to file as "single."


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## underation

Bevdeforges said:


> That may be true for MFS, however for the other filing statuses, the threshold was generally the personal exemption PLUS the standard deduction - so around $10,000 or so for Single and close to $20,000 for Joint filers.
> 
> The rationale with MFS has always been that they "need" to be able to check that both members of a married couple are treating their deductions consistently (i.e. both take the standard deduction for their filing status, or both itemize deductions, even if that means one partner has deductions less than the standard deduction). What I never "got" was why they wouldn't just allow someone married to a NRA to file as "single."


Wouldn’t they have to create a new status of “Married to a NRA who is not required to file”?

Some NRAs do have a requirement to file US returns, if I understand correctly? If so, they would be itemising deductions so their spouse would not be entitled to claim the standard deduction. 

If I understand correctly.


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## Bevdeforges

underation said:


> Wouldn’t they have to create a new status of “Married to a NRA who is not required to file”?
> 
> Some NRAs do have a requirement to file US returns, if I understand correctly? If so, they would be itemising deductions so their spouse would not be entitled to claim the standard deduction.
> 
> If I understand correctly.


If an NRA is filing a 1040NR then I think all bets are off. There is an option whereby the NRA spouse of a US citizen/taxpayer can elect to file jointly with their US spouse - but it's usually not advantageous, since it calls all of the NRA's worldwide income into the equation. (Filing a 1040NR, one only needs to declare US source income.)

But I fail to see why they could just allow someone married to an NRA to file as single. There is no "proof" of marriage (or divorce) required when changing your filing status.


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## underation

Bevdeforges said:


> If an NRA is filing a 1040NR then I think all bets are off. There is an option whereby the NRA spouse of a US citizen/taxpayer can elect to file jointly with their US spouse - but it's usually not advantageous, since it calls all of the NRA's worldwide income into the equation. (Filing a 1040NR, one only needs to declare US source income.)


But presumably the USC spouse could be filing as single and claiming the standard deduction, while the NRA spouse was filing the 1040NR and reporting only US income. Which would mean the couple were being taxed more favourably than a US-resident couple with similar income. Effectively, they’d be gaming the system.

Perhaps that’s the kind of thing the MFS restrictions are meant to prevent.


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## Bevdeforges

underation said:


> But presumably the USC spouse could be filing as single and claiming the standard deduction, while the NRA spouse was filing the 1040NR and reporting only US income. Which would mean the couple were being taxed more favourably than a US-resident couple with similar income. Effectively, they’d be gaming the system.
> 
> Perhaps that’s the kind of thing the MFS restrictions are meant to prevent.


Admittedly that is what they're trying to prevent - but I'm thinking of something like the Dutch tax system where everyone is taxed separately. A married couple can split the kids however they like (one partner takes all three, or they split them between themselves) - but that's not even relevant given that the personal exemptions are now a thing of the past in the US.

And if the NRA spouse has no US income, they have no filing obligation anyhow. It's actually only a function of the US "citizenship based taxation" thing that the US spouse has to file at all if living outside the US. 

I file my MFS returns, excluding my NRA husband's income and reporting only my own. We also file French returns jointly. How is that "more favorable" than a US-resident couple with similar income? The US is the only country (save Eritrea) that insists on taxing based on citizenship.


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## underation

Bevdeforges said:


> Admittedly that is what they're trying to prevent - but I'm thinking of something like the Dutch tax system where everyone is taxed separately. A married couple can split the kids however they like (one partner takes all three, or they split them between themselves) - but that's not even relevant given that the personal exemptions are now a thing of the past US.


Yes, it’s the same in the UK. The UK is also different from the US in that nobody needs to file unless they have income outside the UK withholding system (or have another reason for needing to file).



> And if the NRA spouse has no US income, they have no filing obligation anyhow.


It might be to their advantage to file, though, if they do have US income.



> It's actually only a function of the US "citizenship based taxation" thing that the US spouse has to file at all if living outside the US.


They don’t (have to file). And most don’t. But if they have US-source income it might be to their advantage to do so - for instance, to claim deductions (standard or itemized) and get a refund of tax already paid on US income via withholding.



> I file my MFS returns, excluding my NRA husband's income and reporting only my own. We also file French returns jointly. How is that "more favorable" than a US-resident couple with similar income?


That’s not what I said. If a USC was filing as single and claiming the standard deduction, while married to a NRA who was filing and claiming a refund on the basis of a treaty - that would (or could) result in the USC-NRA couple being taxed more favourably _on their US income_ than a US-resident couple. That’s what I’m suggesting the MFS rules may be designed to prevent.



> The US is the only country (save Eritrea) that insists on taxing based on citizenship.


Except that it can’t insist. It can and does refuse to provide USCs with a pathway to non-US-tax-residence. But it can only assess US tax on non-US income if (a) the USC reports the income as US-taxable and (b) the income hasn’t already been fully taxed by the residence country.


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## Bevdeforges

It depends on the nature of the US income whether or not it even makes a difference to the NRA spouse whether s/he files or not. An NRA spouse who is drawing a US pension (i.e. US social security) will have 30% of 85% of the payments withheld for taxes. That's precisely what they would owe if they chose to file an NR return - and yes, that is designed to eliminate the filing requirement. "Take the money and run."



> But if they have US-source income it might be to their advantage to do so - for instance, to claim deductions (standard or itemized) and get a refund of tax already paid on US income via withholding.


Again, it depends on the source of the US income. Withholding isn't like in the UK or many other places where having the "right" amount withheld means you don't have to file at all. It's the taxpayer who indicates how much withholding should be taken - and it's the taxpayer who is penalized if withholding was inadequate (subject to certain "safe harbor" rules). In any event, you do have to file, regardless. 

For any income that is reported by the source to the IRS, it's highly advisable to file, but in any event, you'll be entitled to take the standard deduction (or itemized deductions, though that's getting more rare with the recent tax law changes). 



> If a USC was filing as single and claiming the standard deduction, while married to a NRA who was filing and claiming a refund on the basis of a treaty - that would (or could) result in the USC-NRA couple being taxed more favourably on their US income than a US-resident couple. That’s what I’m suggesting the MFS rules may be designed to prevent.


Actually, what the MFS rules are designed to prevent is the situation where the spouse with the higher income takes ALL the deductions, exemptions and whatever is available, and the lower earning spouse has only nominal income. Basically, the MFS status is roughly the same as filing single, with a few choices and options eliminated - more based on domestic possibilities for cheating than on any consideration of the expat situation. The feeling in the halls of government seems to be that "expats" are all free-spending executives on expense accounts, swilling champagne and caviar.


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## underation

Bevdeforges said:


> It depends on the nature of the US income whether or not it even makes a difference to the NRA spouse whether s/he files or not. An NRA spouse who is drawing a US pension (i.e. US social security) will have 30% of 85% of the payments withheld for taxes. That's precisely what they would owe if they chose to file an NR return - and yes, that is designed to eliminate the filing requirement. "Take the money and run."


True - in a treaty country, it depends on what the treaty says. Sticking with social security as an example, the France-US treaty gives taxing rights to the source country, so the withholding agent (the SSA) withholds US tax. The UK-US treaty gives taxing rights to the residence country, so the SSA doesn't withhold tax. Either way, there's no need and no incentive for the NRA to file a 1040NR. Thanks for the correction.



> Again, it depends on the source of the US income. Withholding isn't like in the UK or many other places where having the "right" amount withheld means you don't have to file at all. It's the taxpayer who indicates how much withholding should be taken - and it's the taxpayer who is penalized if withholding was inadequate (subject to certain "safe harbor" rules).


Yes, that's one of the carrots, for USCs with US-taxable income. The US system aims to tax first and then let the taxpayer reduce the tax by filing that all-important 1040 to claim the correct deductions - thus generating a refund and ending up, eventually, paying the correct tax.

Whereas the UK system aims to withhold the correct amount in the first place, making a return unnecessary, for most taxpayers.



> In any event, you do have to file, regardless.


Or, as I would say, if you're receiving US-source income it may be advantageous for you to file.



> For any income that is reported by the source to the IRS, it's highly advisable to file, but in any event, you'll be entitled to take the standard deduction (or itemized deductions, though that's getting more rare with the recent tax law changes).


I would say, for any income for which the US has the taxing rights, the USC should file a return in order to pay the correct US tax.

Same as here in the UK, where I nowadays file a return in order to report my US social security income to the UK and pay the UK tax due. To do otherwise would be tax evasion.



> Actually, what the MFS rules are designed to prevent is the situation where the spouse with the higher income takes ALL the deductions, exemptions and whatever is available, and the lower earning spouse has only nominal income. Basically, the MFS status is roughly the same as filing single, with a few choices and options eliminated - more based on domestic possibilities for cheating than on any consideration of the expat situation.


Yes - I was misunderstanding the NRA / 1040NR situation. Thanks for the correction.



> The feeling in the halls of government seems to be that "expats" are all free-spending executives on expense accounts, swilling champagne and caviar.


I think it's more just an endlessly self-perpetuating cock-up rather than being caused by legislators' views on expats. I don't suppose most representatives give a thought to the problems of people who can't or are unlikely to vote or send serious donations.

It's a shame that some US tax advisers have scared some USC expats into being so terified of the US that they feel scared not to file unnecessry returns and in some cases pay unnecessary tax on income for which the US doesn't have taxing rights.


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## Bevdeforges

underation said:


> Or, as I would say, if you're receiving US-source income it may be advantageous for you to file.
> 
> I would say, for any income for which the US has the taxing rights, the USC should file a return in order to pay the correct US tax.


One tiny quibble here - for a US citizen/taxpayer, you do have the ability to receive your US SS (and most other forms of US source income - other than wages and salary) completely un-withheld. There's a reasonable chance that you would have to do quarterly "estimated payments" but that's a game you can play if you like.



> I think it's more just an endlessly self-perpetuating cock-up rather than being caused by legislators' views on expats. I don't suppose most representatives give a thought to the problems of people who can't or are unlikely to vote or send serious donations.


IMHO it's more a matter of how things were set up in the beginning, with no consideration of any "real American" who would be living outside the US on anything but a temporary basis. Heck, some of the US expat groups who periodically lobby members of Congress back there find that there are plenty of senators and reps who have no idea that citizens living overseas even have to pay taxes.



> It's a shame that some US tax advisers have scared some USC expats into being so terified of the US that they feel scared not to file unnecessry returns and in some cases pay unnecessary tax on income for which the US doesn't have taxing rights.


That's how the IRS works. Even when it comes to USC living in the US. They don't have the resources to control and enforce the regulations they've got - so they use the "shock and awe" approach to scare taxpayers into paying up, and sometimes paying more than they actually owe.


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## underation

Bevdeforges said:


> IMHO it's more a matter of how things were set up in the beginning, with no consideration of any "real American" who would be living outside the US on anything but a temporary basis. Heck, some of the US expat groups who periodically lobby members of Congress back there find that there are plenty of senators and reps who have no idea that citizens living overseas even have to pay taxes.


Understandably. I certainly had no idea that US citizens living outside the US and receiving no US income were theoretically expected by the US to file US tax returns.

There was no way I could have known, and the IRS never bothered to mention it. It simply didn’t matter, if you had no US income. 

That changed at some point in the 80s, after the Reagan tax reforms were brought in. That’s when a little notice appeared in the US passport notifying passport holders that they were required to continue filing.

Not seen by me, until FATCA occurred and I went back through my old passports and found it.

I think now, that it changed because of the Subpart F legislation and the deferral of US corporation tax on foreign earnings. Taxing the expat USC became the key (in some cases) to treating those earnings as if they were US-source; and when the law changed and the transition tax was created, some badly-advised expats got hit very badly.



> That's how the IRS works. Even when it comes to USC living in the US. They don't have the resources to control and enforce the regulations they've got - so they use the "shock and awe" approach to scare taxpayers into paying up, and sometimes paying more than they actually owe.


The IRS never made any attempt to scare me. Scared USC expats did (thinking they were being helpful), after I started asking questions; and no doubt if I’d sought advice from a US tax advisor, s/he would have tried to scare me, but the IRS simply didn’t. That might well have been different, if I’d started filing US returns rather than renouncing. The IRS seems to me to understand very well what it can and cannot do beyond US borders.


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## JustLurking

Bevdeforges said:


> Basically, the MFS status is roughly the same as filing single, ...


Strictly, MFS is roughly the same as half of MFJ. However, half of MFJ is often worse than filing single, thanks to the persistence of the marriage tax penalty:



> The marriage penalty in the United States refers to the higher taxes required from some married couples with both partners earning income that would not be required by two otherwise identical single people with exactly the same incomes.
> ...
> The marriage penalty can be even worse in cases where one spouse is not a citizen or resident of the United States[citation needed]. Although that spouse cannot be required by US law to pay US taxes, since the US person is still required by law to file taxes on worldwide income, two choices are left. The US person may either file as 'Married Filing Separately' (or 'Head of Household' if they have at least one qualifying person who is not their spouse) or try to convince their spouse to voluntarily pay US income taxes on their income by filing a joint return. The former requires using the 'Married Filing Separately' or 'Head of Household' tax brackets, which are less beneficial than 'Married Filing Jointly'. The latter allows that person to use the more favorable 'Married Filing Jointly' tax brackets but requires paying tax on the non-US person's income, which would not be required for two otherwise identical single people.


This also hits nonresident aliens. For 1040NR filers, MFJ and HOH are not options _at all_. The only choices are single, or if married then MFS which is less beneficial than single.


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## Bevdeforges

JustLurking said:


> This also hits nonresident aliens. For 1040NR filers, MFJ and HOH are not options _at all_. The only choices are single, or if married then MFS which is less beneficial than single.


Unless the NRA filing a 1040NR form is married to a US citizen, where there is an election they can make to file jointly. This does, however, bring ALL of the NRA spouse's income into play (well, theoretically anyhow). This is another option that was implemented for a completely different situation - namely when an NRA married to a USC either arrives in the US or departs the US part way through the year. But for some dual-nationality couples it allows them the greater allowances and deductions of filing jointly.


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