# Ignore USA tax?



## Kiwinomad1

I’m a dual USA/NZ citizen.
I’ve retired home to NZ.
I’m wondering about just stopping filing my USA tax return from now on.
Does the USA chase expats living overseas and can they extradite me for any taxes due?
Thanks


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## 255

Kiwinomad1 -- I suppose it depends on what assets you maintain in the USA. If you have 100% decamped to New Zealand, closing all U.S. bank accounts, brokerage accounts and no longer have any real estate to seize, you are probably safe. On the other hand if you have trust distributions: IRAs, 401ks, private pension plan payments, there will be a paper trail via "information returns" from the Trustees. If you have none of these and only U.S Social Security -- you won't owe anything anyway (you'll be under the standard deduction,) unless parameters change.

I haven't heard of any attempt to "chase expats," however, if we're talking about large numbers, especially, they can deem you owe taxes, based on the information they have and can put liens on property and can freeze accounts. I personally know a couple of folks that had their social security retirement checks garnished for defaulted student loans that were decades old. Cheers, 255

P.S. You also have the option to renounce your U.S. citizenship, which quite a few forum members have done. Then your U.S. reporting obligations disappear.


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## Moulard

There are probably more US persons outside of the US not filing than filing - and even fewer filing correctly.

The IRS does not have the resources to actively chase expats at random, and that would only ever happen if you came onto their radar because they became aware of taxable income through other channels. In which case they would file a substitute return and would notify you at the last known address they have for you.

If you have retired, then all of your income would now not be considered earned income, and to offset any US tax liability you would need to use foreign tax credits. 
KiwiSuper can be problematic, because the distribution is tax free in NZ and thus you would have no tax credits available to offset. 
How problematic would depend on how you treated contributions when you were filing...


The US-NZ tax treaty has an exchange of information and administrative assistance clause which conceptually the IRS could use to obtain income information from IRD on your income, which could be used as the basis for a substitute return. There is however, no mutual enforcement clause, so the IRS cannot rely on IRD to collect it on their behalf - so the IRD could not, for example place a lien on your income to recover any US tax or related penalties. 

I would expect that the risk of any of the above would be extraordinarily low for a "normal" person with a normal income profile.

As to extradition... technically yes, practically no. 

The US-NZ extradition treaty includes articles that could be used as the basis for extradition, (and the US-Australia extradition has been used for such) but in practice to do so, would probably cost more than could be recovered - and thus not considered.

The only tax related extradition cases that I am aware of relate to tax fraud (not simply not filing) and have dealt with sums in the order of many millions in tax liability.


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## Kiwinomad1

Thanks


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## Kiwinomad1

Moulard said:


> There are probably more US persons outside of the US not filing than filing - and even fewer filing correctly.
> 
> The IRS does not have the resources to actively chase expats at random, and that would only ever happen if you came onto their radar because they became aware of taxable income through other channels. In which case they would file a substitute return and would notify you at the last known address they have for you.
> 
> If you have retired, then all of your income would now not be considered earned income, and to offset any US tax liability you would need to use foreign tax credits.
> KiwiSuper can be problematic, because the distribution is tax free in NZ and thus you would have no tax credits available to offset.
> How problematic would depend on how you treated contributions when you were filing...
> 
> 
> The US-NZ tax treaty has an exchange of information and administrative assistance clause which conceptually the IRS could use to obtain income information from IRD on your income, which could be used as the basis for a substitute return. There is however, no mutual enforcement clause, so the IRS cannot rely on IRD to collect it on their behalf - so the IRD could not, for example place a lien on your income to recover any US tax or related penalties.
> 
> I would expect that the risk of any of the above would be extraordinarily low for a "normal" person with a normal income profile.
> 
> As to extradition... technically yes, practically no.
> 
> The US-NZ extradition treaty includes articles that could be used as the basis for extradition, (and the US-Australia extradition has been used for such) but in practice to do so, would probably cost more than could be recovered - and thus not considered.
> 
> The only tax related extradition cases that I am aware of relate to tax fraud (not simply not filing) and have dealt with sums in the order of many millions in tax liability.


Thanks 
Will have no assets in the USA shortly 
Only a small SS payment that is about the same as NZ Superannuation so if they seized that I pick up the NZ Super.
Just concerned they might chase me here but hard to see it being worth their while. Trouble is tax departments world wide often don’t consider that.😉
I’d relinquish my US citizenship but it both costs too much and they would want all taxes due paid first!
Thanks again


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## Nononymous

Kiwinomad1 said:


> I’m a dual USA/NZ citizen.
> I’ve retired home to NZ.
> I’m wondering about just stopping filing my USA tax return from now on.
> Does the USA chase expats living overseas and can they extradite me for any taxes due?
> Thanks


Realistically, they won't (or can't) chase you. Once you've moved your assets out of the US, you can stop filing. If they send you a nasty letter, tell them to ****** off. That's the end of it.

You can make it official by renouncing, which costs $2350, but if you collected the $3200 stimulus benefit this year they've paid for it themselves. Renunciation is completely independent of your tax status. Doesn't matter if you've never filed or owe them a pile of money, you can renounce. No need to settle up before, or after.

Also, you said you'd "retired home" to NZ. I assume that means you were not born in the US, and possibly even speak with a delightful Kiwi accent (per the America's Cup coverage: "the difinder has sivin sicind lead after the sicind lig"). If this is the case, ensure that you do not disclose your US citizenship to any financial institutions, so that you are not subject to FATCA reporting or limitations on services offered.


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## Kiwinomad1

Nononymous said:


> Realistically, they won't (or can't) chase you. Once you've moved your assets out of the US, you can stop filing. If they send you a nasty letter, tell them to **** off. That's the end of it.
> 
> You can make it official by renouncing, which costs $2350, but if you collected the $3200 stimulus benefit this year they've paid for it themselves. Renunciation is completely independent of your tax status. Doesn't matter if you've never filed or owe them a pile of money, you can renounce. No need to settle up before, or after.
> 
> Also, you said you'd "retired home" to NZ. I assume that means you were not born in the US, and possibly even speak with a delightful Kiwi accent (per the America's Cup coverage: "the difinder has sivin sicind lead after the sicind lig"). If this is the case, ensure that you do not disclose your US citizenship to any financial institutions, so that you are not subject to FATCA reporting or limitations on services offered.


Thanks 
I quickly looked at the renunciation form and it’s worse than a tax return form! Nosey sods want to know too much!


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## Nononymous

Kiwinomad1 said:


> Thanks
> I quickly looked at the renunciation form and it’s worse than a tax return form! Nosey sods want to know too much!


Which form is that exactly? If it's IRS Form 8854, that's not for renouncing, that's for wrapping up your US tax affairs afterwards, but that step is essentially optional, you can ignore it if you so choose.

The form for actual renunciation is very simple, just a few questions about where you were born and how did you acquire US citizenship. There's a longer for (DS-4079) that asks more questions but that's to document past relinquishment and should not be used for renunciation.


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## Kiwinomad1

Nononymous said:


> Which form is that exactly? If it's IRS Form 8854, that's not for renouncing, that's for wrapping up your US tax affairs afterwards, but that step is essentially optional, you can ignore it if you so choose.
> 
> The form for actual renunciation is very simple, just a few questions about where you were born and how did you acquire US citizenship. There's a longer for (DS-4079) that asks more questions but that's to document past relinquishment and should not be used for renunciation.


Thanks 
I’ll have another look


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## Moulard

The two forms that must be signed by you in the presence of the consular official.

Form DS-4080: Oath/Affirmation of the Renunciation of the Nationality of the United States 

Form DS-4081: Statement of Understanding Concerning the Consequences and Ramifications of Renunciation or Relinquishment of U.S. Nationality


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## Kiwinomad1

Thanks


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## Hudeus

FYI, all embassies around the world have currently closed citizenship renunciations due to "COVID" and have no plan or set date on when they will reopen these services. I'm trying to renounce and can't.


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## Nononymous

Hudeus said:


> FYI, all embassies around the world have currently closed citizenship renunciations due to "COVID" and have no plan or set date on when they will reopen these services. I'm trying to renounce and can't.


It's going to be years before they clear the backlog. This sucks if you are having banking problems due to FATCA, but most future renunciants have no reason to be filing US tax returns so that at least isn't a concern.


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## Kiwinomad1

Nononymous said:


> It's going to be years before they clear the backlog. This sucks if you are having banking problems due to FATCA, but most future renunciants have no reason to be filing US tax returns so that at least isn't a concern.


Thanks 
I’ve looked at the process and it shows they will not accept your renunciation without your taxes being up to date.
I’m likely to just stick my head in the sand and ignore it all and hope….
Cheers


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## Nononymous

Kiwinomad1 said:


> I’ve looked at the process and it shows they will not accept your renunciation without your taxes being up to date.


Care to provide the source? That information is dead wrong.


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## Bevdeforges

Kiwinomad1 said:


> I’ve looked at the process and it shows they will not accept your renunciation without your taxes being up to date.


That may depend on where you do your renunciation, but the process itself merely "reminds" you multiple times that you are supposed to be up to date on your taxes. The actual process only includes a couple of brief "reminders" that you should file a form 8854 with your final 1040s in the year of your renunciation. Though if you don't have significant US financial assets, it's really no big deal if you "forget."


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## Pacifica

Kiwinomad1 said:


> I’ve looked at the process and it shows they will not accept your renunciation without your taxes being up to date. .


That is not correct. You can renounce if you have not filed taxes. The CLN is issued regardless of your status as a tax-filer. 

This is the relationship between Department of State and the Internal Revenue Service:

*(1) Dept of State*

Dept of State basically doesn’t care about one’s tax status as the citizenship itself (and the issuance of the CLN) is not dependent on one being tax compliant. DoS’s involvement/connection with tax is the following:

*(a)* At the consulate the person signs DS-4081, Statement of Understanding of Consequences; one of the 12 items on it is Item 10, that renouncing “… may not exempt me from US tax income taxation [etc] …”

*(b)* The DS-4079, which is relevant and required for relinquishments, is not used for renunciations. However, some consulates have used it for renunciation (while DoS discourages its use with renunciation, they do not forbid it 7 FAM 1264 Your local consulate will let you know which forms they require, either on their website or when you send in an appointment request).

This questionnaire, DS-4079, asks at q. 13 (e) “Do you file US income or other tax returns?” This question is on the DS-4079 is there as an indicator of your ties and connections to the US, which is important if you’re claiming to have relinquished some years ago (in which case you’re trying to illustrate your lack of ties/connections/citizenship behaviour). For renunciations, it’s irrelevant if you have ties/connections/citizenship behaviour or not – and your answer has no bearing on if you can renounce or not.

*(c)* Dept of State is to provide IRS with a copy of each CLN they issue as per DoS Interagency Coordination and Reporting Requirements, 7 FAM 1243(a).

*(2) IRS*

To log out of IRS and avoid covered expatriate status, IRS requires that the person file their exit tax form (8854), their final year form, and has “complied with all federal tax obligations for the 5 tax years preceding the date of your expatriation” basically, for most people, file, unless your income was below the minimum threshhold which requires filing), by June 15th of the year following the renunciation.

If a person does not file, the citizenship itself remains terminated and the CLN remains valid.

In the past 10 years (we began tracking these matters at the Isaac Brock Society in 2011), I’ve observed it’s quite common for people with no financial ties to the US to just renounce and ignore the IRS side of things. I think a person’s decision-making regarding this comes down to, given I have no US income, will doing the IRS paperwork simplify my life or complicate it? will filing with IRS give me more stress or less stress? So far, no who has no US income and renounced and not filed has reported to the Brock site that they’ve heard anything, let alone being harassed, by the US govt.


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## Hudeus

Unless you want a "clear break" then you should file taxes and after renunciation you should complete the final form. That's the only way to guarantee yourself that you will be fine with any assets in the USA and when you're visiting friends or family or business. The only way I can recommend that you do nothing is if you can check all of the following:

1. No USA assets
2. No USA business relations
3. No friends & family to visit in the USA
4. No future plans of any kind related to the USA.

I think that's hard for most people posting here.


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## Nononymous

Hudeus said:


> ... The only way I can recommend that you do nothing is if you can check all of the following:
> 
> 1. No USA assets
> 2. No USA business relations
> 3. No friends & family to visit in the USA
> 4. No future plans of any kind related to the USA.
> 
> I think that's hard for most people posting here.


You'd be surprised. I'm a hard no for 1, 2 and 4; for 3 there's a very small number of people or places I'd occasionally consider visiting, but I could happily live without. I don't think that's uncommon for an Accidental American, rather than an expat who settles somewhere as an adult.

Here's the US government report in which the IRS claims that 40 percent of those who renounce do not correctly file Form 8854, and admits that they do not follow up at all.


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## Hudeus

Yes I saw you posted that. The data is interesting. I still have family in the USA and my primary business partner is a USA company so unfortunately in my situation I'm scared not to comply with Uncle Sam. This year has been a nightmare for me trying to figure out how to do my taxes without costing me an arm and a leg and also avoiding potential penalties.


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## Pacifica

Hudeus said:


> FYI, all embassies around the world have currently closed citizenship renunciations due to "COVID" and have no plan or set date on when they will reopen these services. I'm trying to renounce and can't.


They resumed having renunciation appointments in Canada in December 2020. But there was a multi-month backlog even before they shut down for Covid in March 2020. The last I heard, two months ago, they were still handling the cancelled appointments, and of course people continued to send in their applications during the shut-down. So, if booking now, it’ll undoubtedly take some time to get an appointment. Wherever one lives, if one intends to renounce, it's worth checking if their local embassy is taking bookings at this time and get a place on the list


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## Hudeus

Pacifica said:


> They resumed having renunciation appointments in Canada in December 2020. But there was a multi-month backlog even before they shut down for Covid in March 2020. The last I heard, two months ago, they were still handling the cancelled appointments, and of course people continued to send in their applications during the shut-down. So, if booking now, it’ll undoubtedly take some time to get an appointment. Wherever one lives, if one intends to renounce, it's worth checking if their local embassy is taking bookings at this time and get a place on the list


I've checked at over 10 embassies and the answer is the same everywhere. They don't take appointments and they also don't want to put you in any sort of line or que. They tell you to "keep checking" with them.


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## Nononymous

Hudeus said:


> I've checked at over 10 embassies and the answer is the same everywhere. They don't take appointments and they also don't want to put you in any sort of line or que. They tell you to "keep checking" with them.


Canada has a queue. They won't tell you how long it is, but they will confirm its existence.


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## Lancashire_Lass

Nononymous said:


> Which form is that exactly? If it's IRS Form 8854, that's not for renouncing, that's for wrapping up your US tax affairs afterwards, but that step is essentially optional, you can ignore it if you so choose.
> 
> The form for actual renunciation is very simple, just a few questions about where you were born and how did you acquire US citizenship. There's a longer for (DS-4079) that asks more questions but that's to document past relinquishment and should not be used for renunciation.


Hi. As a current GC holder, relinquishing later this year to retire to France by way of 12 months in UK, my understanding is I need to fill out 8854? I do have a couple small 401(k) and Social Security for ten years here (that will be subject to reduction via WEP of course) so while I could just let them take the 30% withholding and not file, would the IRS not be asking where my returns are without the 8854? I know I will need to do a return in 2023 for this year but additionally wondered about for 2024 and beyond? 
on another note, am assuming need to do FBAR one last time in 2023 also? I will be NR but I think it is for previous year like the Form 1040(NR)? It is such a long process am looking forward to not having to rationalize the UK accounts with the US tax year! So really just trying to get rid of as much paperwork exercises as possible as will also have UK and then French returns to navigate also.
Thanks for any insights.


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## 255

@Lancashire_Lass -- Your question: "my understanding is I need to fill out 8854?" Only if you wear a long term resident (resided in the U.S. for 8 of the last 15 years, or a treaty country.)

When you file your I-407, to relinquish your green card, the IRS will be notified of your filing date. Record of Abandonment of Lawful Permanent Resident Status . Once you are no longer a Long Term Resident of the U.S., you'll have zero future reporting requirements. Personally, I'd just file any requirements (they are primarily informational only,) and just leave with a "clean slate." Cheers, 255


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## Lancashire_Lass

255 said:


> @Lancashire_Lass -- Your question: "my understanding is I need to fill out 8854?" Only if you wear a long term resident (resided in the U.S. for 8 of the last 15 years, or a treaty country.)
> 
> When you file your I-407, to relinquish your green card, the IRS will be notified of your filing date. Record of Abandonment of Lawful Permanent Resident Status . Once you are no longer a Long Term Resident of the U.S., you'll have zero future reporting requirements. Personally, I'd just file any requirements (they are primarily informational only,) and just leave with a "clean slate." Cheers, 255


Thank you for the information. I am unfortunately a long term (8 years this year ☹) but I think will be under the threshold when I file the 8854. Always a worry that there is something I am not aware of, but have been reading and it seems I need to declare everything I own and will be good. Although feel very aggrieved that they want to know about my UK pension and count it (I know, sigh, WW income and all that but still…😡). 
I have a recommendation for a dual qualified US/UK tax preparer so will talk to him also when I get his contact sent over. If he proves to be helpful and charges a reasonable fee will let you all know as I have seen a few requests for that info - although he isn’t France qualified. Timing would seem to be everything when deciding dates of UK return and cashing in accounts and hope he can help with this.
Take care all and thank you again for the awesome help on this forum.


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