# Taxs vs relinquishment



## SuzieF (Feb 3, 2014)

Some opinions please

I feel like im in a never ending circle of "what ifs" and need to make some decisions..
I have 5 years back US taxs done along with fbars ready to file.. 4 only have canada earned income with no tax due,, one has unearned income from a US home sale. The standard deduction subtracted the little gain I had ( as long as IRS accepts my basis cost) for no tax due. So slightly concerned about that year only.. And of of course totally freaked about the possibility exorbitant Fbar fines on my 100k unreported savings acct.

Now my conundrum 

IF I file those five years taxs I CAN NOT Relinquish US Citizen ship, as I filed taxs which shows I accepted being a citizen. If I don't file now, I can relinquish based on taking the canadian oath of citizenship in 2006. But then I still have to file 5 years after I relinquish as for IRS purposes the CLN is effective on the date I have my appointment at the embassy.

OR I can file my five years now, while the STREAMLINED IRS program is still in effect then I could renounce after that.

I know renouncing costs $450, and that is not a factor.

Anyone know if IRS has intention of canceling the streamlined filling program any where in the future?


I'm so confused! And feel like if I wait any longer deciding what to do I may miss out on the streamlined program.


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## Bevdeforges (Nov 16, 2007)

I'm not quite sure what your conundrum is. File the 5 years and the FBARs and get those into the system and accepted. At that point, you can renounce. (Your Canadian oath of citizenship doesn't really matter one way or the other.)

As far as I understand it, you file a final 1040 and then the expatriation tax form for the year your renunciation is effective. And then you're done.

But perhaps someone who has been through the process can further enlighten us here.
Cheers,
Bev


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## SuzieF (Feb 3, 2014)

Thanks Bev.. I have so many thoughts going round and round right now it sometimes is hard to see things clearly.. That's why I'm loving it here where I can get an objective view!


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## maz57 (Apr 17, 2012)

@ SuzieF. If you relinquished in 2006 with the intent of losing your US citizenship, you haven't been a US citizen since the day you became a Canadian. The fact you that didn't notify the US Department of State of your expatriating acts doesn't change that fact. (It sounds as if you didn't.) 

If you have acted like a US citizen in the meanwhile, that would jeopardize your claim of intent. Applying for or traveling on a US passport, filing a tax return, living or working down there, or voting in a US election are the sorts of things that would demonstrate you didn't have the requisite intent. I don't see any reason why you couldn't go to a consulate to try to claim a prior relinquishment and if they denied it, whip out your $450 and ask to renounce on the spot.

Bear in mind that losing your US citizenship is not coupled with your tax situation. They are supposed to not even discuss taxes. You can renounce/relinquish without being IRS compliant. If you don't jump through all the hoops and meet all the deadlines re: final tax return and Form 8854 you become a "covered expatriate" which complicates things somewhat. 

But I don't see why you couldn't file all those returns and 8854 after the fact. (Strangely there is no mention of FBARs in the expatriation procedure. At least one lawyer believes FBARs are not necessary to properly exit the US tax system because they fall under another section of US law.) Or you could just blow off the whole damn thing if you are willing to take the gamble that the US government might ban you from entering the US forever.


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## Nobledreamer (Sep 8, 2013)

SuzieF said:


> Some opinions please
> 
> If I don't file now, I can relinquish based on taking the canadian oath of citizenship in 2006. But then I still have to file 5 years after I relinquish as for IRS purposes the CLN is effective on the date I have my appointment at the embassy.
> 
> ...


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## SuzieF (Feb 3, 2014)

Thank you all.. Looking at all my options!

Noble I was under the impression that for tax purposes the IRS used the date you actually went to the embassy and submitted the papers? Not the backdated date on the CLN.

I did use my US passport once to go to the US for a few days before it expired. That may disqualify me from relinquishing. No US voting 


I just want to get this behind me, I don't do stress well, and have NEVER done anything dishonest in my life.. And now finding out I was supposed to be filing US taxs is just such a shock! My health isn't worth not dealing with it ASAP.. It looks to me like the streamlined method will be my best bet.. I just hope they don't discontinue it! And that it really does take into consideration that many of us Canadian Citizens had no clue that the US taxed on world wide income! 

I have been in Canada since 2001 and had no clue I was supposed to be filing to the US for wages I made in canada. And fbar,,, I still can't quite wrap my head around that my bank I can walk to is a Foreign Financial Institution.


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## Nobledreamer (Sep 8, 2013)

SuzieF said:


> Thank you all.. Looking at all my options!
> 
> Noble I was under the impression that for tax purposes the IRS used the date you actually went to the embassy and submitted the papers? Not the backdated date on the CLN.
> 
> I did use my US passport once to go to the US for a few days before it expired. That may disqualify me from relinquishing. No US voting



Suzie, that only applies if you renounce. A CLN is always backdated for relinquishments. Let me double check with a couple of people I know who relinquished after you (one in 2011 and another in 2013). . Most of the people I know who have done this have CLN's backdated to the 1970's and there have been no tax filings involved.

One of the people I will be checking with had been forced to use her US passport in order to enter. When she was at the Consulate here in Toronto, it came up. The consul checked on it and came back saying it was alright. I don't think one time is likely to invalidate your relinquishment. Very different from someone like me who had exercised many of citizenship privileges. I enjoyed being dual after all.....

You are certainly not alone in having been unaware of the obligations to file, especially FBAR. It is one of the things that bothers me the most about all this-it is clear from the numbers alone, that many people simply did not know. Given the fact that we are not tax-evaders where we live, at least they could have promoted complying without the heavy-handed scare tactics. There is very little I have been able to find to prove what actions they took to let the diaspora know. It is hard to live with but you will get through this. You will probably start to feel a lot better once you actually take some action. It is the unknowing and not moving forward that makes the anxiety so awful. But it does go away. :happy:


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## maz57 (Apr 17, 2012)

SuzieF said:


> I did use my US passport once to go to the US for a few days before it expired. That may disqualify me from relinquishing. No US voting
> 
> 
> I just want to get this behind me, I don't do stress well, and have NEVER done anything dishonest in my life.. And now finding out I was supposed to be filing US taxs is just such a shock! My health isn't worth not dealing with it ASAP.. It looks to me like the streamlined method will be my best bet.. I just hope they don't discontinue it! And that it really does take into consideration that many of us Canadian Citizens had no clue that the US taxed on world wide income!
> ...


Relax, you haven't been dishonest. No one in their right mind could ever imagine the US had such "loopy" tax rules. (That's not my word; it comes straight from The Economist magazine, about as credible a source as you will ever find!) 

This is simply a problem you discovered which needs to be solved and there is no rush to solve it. 2013 returns aren't due until June 15 (June 30 for FBAR) and everything else is already long past due. 

I fully expect the Streamlined program will continue forward indefinitely. The only question is choosing between Streamlined and a "quiet" filing, the difference being you are knocking on the IRS' door to hand them your package vs. just leaving it on the doorstep. (Also the questionnaire you file with Streamlined.) 

The advantage of quiet is that you could probably get away with 1 FBAR vs. 6 for the Streamlined. It's not easy to get all of that bank account info dating back many years. (Note that if it's hard for you it would be even harder for the IRS.)

As for the passport, if it ever becomes an issue, just tell them the border guys incorrectly insisted that you use a US passport.

Once you have been to the consulate you can go ahead and file all the tax stuff. You can honestly answer yes to the Form 8854 question which asks if you are compliant with your tax filings for the last 5 years. No need to wait for the IRS to tell you that you are; chances are you will never hear anything from them.


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## Pacifica (Oct 19, 2011)

(1) If the relinquishing act occurred in 2006 and the person notifies US govt of it (eg. signs the form DS-4079 statement at the consulate) in 2014, IRS considers the person a US taxpayer until the day they notified the US govt in 2014. [Google 26 US Code 877A (g)(4)(B)]

The text of 877A(g)(4) is also included in the 8854 Instructions, at page 1, top of column 2.

So, the 5 years tax forms would be from 2009-13 plus the partial year 2014 and the 8854 in that case. These would due by June 15th of 2015. 

As Maz57 pointed out, citizenship status is not dependent on tax status, so one does not need to file taxes before renouncing/applying for CLN. [Also, FWIW, if you never file them, the citizenship itself remains terminated and CLN remains in effect.]


(2) Relinquishing Acts Pre-2004. The date of the relinquishment is significant for relinquishing acts which occurred prior to 2004 because this law did not exist before that time. Therefore those people were not US citizens when the law came into effect, so the logic is this does not pertain to them. Note - I have no expertise in US tax law. But you can find information about this by googling these 
Michael J. Miller, Expats Fear the Malevolant Time Machine - and also the articles under "Important If Your Relinquishment Act Was Before June 4, 2004" in the Sidebar on the Isaac Brock Society website.

[For some reason it's not letting post links today -- thinks I'm a new member -- strange]


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## SuzieF (Feb 3, 2014)

Once again.. Thanks all!

I'm leaning towards filing three years back taxs ( 2010,2022,2012) and the 6 yr fubar forms using the streamlined process.. That just may be enough if I don't have any red flags with them already, and if I do.. I'm already flagged so then I will have to go back a few more years and do a proper form for that year I sold the house, showing I actually had a loss on the sale. 

I know doing the taxs shows I am being a US citizen so no relinquishing but I will be "compliant" and after I get my head back on straight I can always renounce at a later date should I decide.


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## maz57 (Apr 17, 2012)

@ Pacifica. I experienced the same link problem.


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