The renunciation issue - as tax strategy and other

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Old 1st January 2014, 06:35 AM
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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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Old 1st January 2014, 07:02 AM
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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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Old 1st January 2014, 09:37 AM
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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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Old 1st January 2014, 05:17 PM
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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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Old 1st January 2014, 11:16 PM
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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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Old 2nd January 2014, 05:25 AM
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Quote:
Originally Posted by diharv View Post
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.
Jadzia, RTL44 and LMAshton like this.

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Old 2nd January 2014, 06:45 AM
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Quote:
Originally Posted by swisspinoy View Post
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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Old 2nd January 2014, 07:40 AM
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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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Old 2nd January 2014, 11:48 AM
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@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.


Last edited by Pacifica; 2nd January 2014 at 11:59 AM. Reason: typo
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Old 2nd January 2014, 02:40 PM
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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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