# renouncing + annual leave



## coconutwater (Jan 17, 2019)

Hi again

I have two questions that I'm hoping all you better informed folks can help me with 

I'm desperate to renounce my US citizenship, but am visiting family in the States for 27 days next month. I decided to hold off renouncing until after I visit them due to the issues that can arise when traveling in the 'in between' period between renouncing and CLN. Can anyone advise whether there will be negative tax implications if I renounce in, say, April, having been in the USA 27 days in that time period? Is it advisable to renounce before going, or at the end of this year, if there are going to be problems?

Second, can anyone confirm that as long as I'm not working in the USA, and am on annual leave from work in NZ, then the USA doesn't consider that any income was 'earned' while in the USA?? That might sound funny, but I've been advised that I can't work remotely in the USA for my NZ employer because it's no longer foreign earned income. Then I got really nervous that annual leave might also be considered 'earned income.' 

I am so ready to be out of this distressing Orwellian nightmare!!! 

Thank you


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## Bevdeforges (Nov 16, 2007)

I'd say you should hold off initiating the renouncing formalities until you're in a period of time where you don't anticipate any sort of travel to the US in the foreseeable future.

While there are no "travel restrictions" associated with renouncing, there is always the hassle of attempting to enter the US on a foreign passport. (I forget if they take your passport for the duration of the processing - they do return it to you in cancelled status.) And, don't forget that there are still rules on the books saying that you "may" be refused any sort of a visa (even a "visa waiver") for the US as an "ex-American." They normally only invoke that with extremely rich people who they suspect only renounced "for tax reasons." But with the current administration you never know what they "might" do.



> I've been advised that I can't work remotely in the USA for my NZ employer because it's no longer foreign earned income.


On the form 2555 they do ask you for the dates of any travel to or time spent in the US during the tax year. You're presumed to be "working in" whatever country you are in while physically doing the work. It shouldn't affect the taxation of your salary if you are in the US on vacation or pleasure travel. But once you renounce, you don't report your foreign income any more and won't need to fill out form 2555. 

But no, remote working shouldn't count as working "in the US."


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## coconutwater (Jan 17, 2019)

Thanks Bev. Do you happen to know whether renouncing early in the year, having been in the US 27 days during 2019, will mean I end up with a negative tax situation? The information online doesn't state the 2555 has to be filled out after renouncing, but I would assume so. In that case, I'm not sure I'd qualify for the exemption because I'd have been NZ citizen three months, in the US one month. This might be a dumb question but I can't figure it out. 

Second, yes, I was shocked to hear that if I work remotely for NZ company in the USA then it would have to be counted as US earned income and excluded from the 2555. This information came from a tax professional. I didn't think about the annual leave aspect until later though. I assume there's no way it could be counted as 'income earned' because I earned the annual leave while in NZ.


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## Nononymous (Jul 12, 2011)

Don't listen too much to "tax professionals" as they have a by-the-book approach that can cost you a lot of time and money. It makes sense to delay renunciation until after your trip to the US, but honestly I wouldn't worry about any implications of working remotely - just say you were on vacation and the IRS won't know otherwise, it's not like they have a record of when or how you were paid. After you renounce, just file exit returns that are as simple as possible, or don't file at all if you feel so inclined. (If you've already been compliant, it probably makes sense to wind things up with an 8854 and so on; if you've never been compliant, there's no need to start, even if you renounce. Provided of course you don't have US assets to worry about.)


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