# Maximally Extending Payments



## JohnSmithIV (9 mo ago)

In a hypothetical situation where one renounced citizenship based taxation in early 2021 (0 time in country for a decade), with said country claiming they owe ~150k in taxes on capital gains and retirement account distributions for the months in 2021 before they renounced, if they file but don’t pay for 3-10 years, the statute of limitations kicks in and 0 taxes are owed. They could file an extension before June 15th to have until October 15th to file. Or not file anything. They could try hard to get on a payment plan or allow wages to be garnished and statute of limitations kicks in at some point.

But if filed, consequences (freeze utile but near empty bank accounts and garnish wages) would kick in sooner. Should they file (to avoid an extra 25% penalty) or wait till a letter comes in, then file but not pay, and let their wages be partially garnished to pay over the longest possible time frame? This person has 0 plans to ever return to the country. 

It’s more about extending over the longest possible time frame. The payment plan options seem off limits to those owing over 100k in taxes.


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## Harry Moles (11 mo ago)

What sort of wages are we talking about here - from a US or foreign employer?

If it's a US employer then there would be some risk of garnishment. If it's a foreign employer the IRS can't do a thing.

This is a very difficult post to understand. What I think is happening is that someone has dual citizenship, is not living in the US but owes the IRS a pile of money. If this someone has no US assets or income or plans to ever return they can probably walk away from the debt without filing anything further, and will be at near-zero risk of penalty. (It can be a bit complicated but if they are a citizen of their country of residence then they are essentially bombproof.) Renunciation isn't really necessary - it's useful to avoid FATCA and banking restrictions - but if deemed desirable at least be aware that tax compliance is not required.


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## JohnSmithIV (9 mo ago)

Harry Moles said:


> What sort of wages are we talking about here - from a US or foreign employer?
> 
> If it's a US employer then there would be some risk of garnishment. If it's a foreign employer the IRS can't do a thing.
> 
> This is a very difficult post to understand. What I think is happening is that someone has dual citizenship, is not living in the US but owes the IRS a pile of money. If this someone has no US assets or income or plans to ever return they can probably walk away from the debt without filing anything further, and will be at near-zero risk of penalty. (It can be a bit complicated but if they are a citizen of their country of residence then they are essentially bombproof.) Renunciation isn't really necessary - it's useful to avoid FATCA and banking restrictions - but if deemed desirable at least be aware that tax compliance is not required.


Thank you. I appreciate your reply.

This person already renounced in early 2021 and has a small bank balance in USA, nothing else. They don't owe anything yet but had taxable events in 2021. They're "supposed" to file to report these taxable events and confirm final tax compliance before June 17th, 2022 or October 17th, 2022 if they file an extension but they haven't filed anything and the due date for non-US residents hasn't occurred yet so nothing is owed yet. They're planning about possible ramifications of different ways of dealing with these final taxable events.

These are wages from a US employer while working overseas but are minimal. There's 0 stress if wages or the bank balance are garnished. It's preferable to the bank account being frozen because the US bank account is useful, even if the balance is low (<1% of the taxes owed).

The reason they'd rather maximally extend the payment than not pay is that I fear they'll arrest them if they cross any allied country.


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## Bevdeforges (Nov 16, 2007)

JohnSmithIV said:


> The reason I'd rather maximally extend the payment than not pay is that I fear they'll arrest me if I cross any allied country and then "suicide" me or lock me in a cage.


Pick up any US newspaper from this weekend or so and you'll find stories about how totally backlogged and overwhelmed the US IRS is. They are NOT going to be worrying about someone with a small bank account who is overseas. Most folks who renounce don't bother to file the "final" US tax returns - and never suffer any particular consequences, certainly not on entering "allied" countries.


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## JohnSmithIV (9 mo ago)

Bevdeforges said:


> Pick up any US newspaper from this weekend or so and you'll find stories about how totally backlogged and overwhelmed the US IRS is. They are NOT going to be worrying about someone with a small bank account who is overseas. Most folks who renounce don't bother to file the "final" US tax returns - and never suffer any particular consequences, certainly not on entering "allied" countries.


Just checked, wow. Backlogged for years. So waiting for the letter seems the best choice. I deeply appreciate you. Very comforting.


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## Harry Moles (11 mo ago)

A couple of points.

If the taxable events in 2021 occurred after this person renounced, then the rules for non-resident alien would apply, not US citizen or resident. The moment the renunciation fee is paid and the oath is sworn, future tax obligations disappear or change (though past tax debts are not wiped out).

This person also has the option of not filing the final-year return and Form 8854 - not bothering with the formal exit from the US tax system. Again, as stated above, they are NRA from the moment of renunciation, only past tax obligations remain unsettled. According to a treasury audit done last year, over 40 percent of those who renounce do not file Form 8854, and the IRS lacks the resources to even follow up with a letter.

In light of the above, this person could make a reasonable decision to simply walk away - stay quiet, file nothing. Fear of arrest is not a real-world concern. You need to be in the billionaire / oligarch class of tax criminal before the US government will spend time and money chasing you abroad.


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