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Discussion Starter · #1 ·
I have a few questions about completing the Net Worth balance statement for Form 8854, specifically to determine in I meet the 2M threshold for being a covered expat & thus subject to the Exit Tax.

If it helps - born USA, became dual Canadian citizen at age 18, lived solely in Canada since then. Renounced US citizenship this year (2021) and now working on completing Form 8854.

How would I evaluate the value of my Canadian pension plan from my employer for the Net Worth statement, line 7? (I'm not referring to CPP or OAS, but to my workplace pension plan? I have been retired for a few years, receiving my pension, and did not start receiving CPP or OAS as of my expatriation date.)

Thanks in advance for any assistance.
 

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How would I evaluate the value of my Canadian pension plan from my employer for the Net Worth statement, line 7? (I'm not referring to CPP or OAS, but to my workplace pension plan?
The following blog post from the ever-reliable Phil Hodgen goes into some detail on this topic:

Pension Valuation for the Net Worth Test

The tl;dr is that for a defined contribution pension the process can be relatively straightforward, but for a defined benefit pension you may find things difficult to impossible.

My own personal suggestion is that no matter what method you use, you should ensure (via creative accounting, or even non-filing, if necessary) that you do not meet the definition of 'covered expatriate'. The US's exit tax is an appalling travesty. It is unworthy of a civilised society, and nobody should ever pay it.
 

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In your situation the easiest thing would have been to file no US tax returns and simply renounce, thus avoiding the Form 8854 business. But if you've been compliant up to now and you can wrap things up without it costing you any money, might as well finish the job.

It's pretty clear that the IRS barely reads the things - a recent audit report reveals 40 percent of those who renounce don't file Form 8854 and there is no follow up at all, even in cases where there was money owed - so just put in whatever numbers look reasonable that do not push you over the net worth limit and subject you to any exit tax. (Nobody knows of any real-world consequences to having "covered expatriate" status but might as well avoid it too.)

Can I ask where and how you managed to renounce this year, with the pandemic closures across Canada? I've been in the queue since late 2020 and have heard nothing. (For what it's worth, I don't file US tax returns so it will be renunciation only, not bothering with the Form 8854 process.)
 

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Discussion Starter · #5 ·
In your situation the easiest thing would have been to file no US tax returns and simply renounce, thus avoiding the Form 8854 business. But if you've been compliant up to now and you can wrap things up without it costing you any money, might as well finish the job.

It's pretty clear that the IRS barely reads the things - a recent audit report reveals 40 percent of those who renounce don't file Form 8854 and there is no follow up at all, even in cases where there was money owed - so just put in whatever numbers look reasonable that do not push you over the net worth limit and subject you to any exit tax. (Nobody knows of any real-world consequences to having "covered expatriate" status but might as well avoid it too.)

Can I ask where and how you managed to renounce this year, with the pandemic closures across Canada? I've been in the queue since late 2020 and have heard nothing. (For what it's worth, I don't file US tax returns so it will be renunciation only, not bothering with the Form 8854 process.)
I'm appreciating all of the responses - thanks. How I got in - I submitted my paperwork in January or early Feb 2020, just before the pandemic major disruptions. Since I had to travel to visit a consulate, I switched my preferred consulate to one that had one of the shortest wait periods and got in the queue for there. Out of the blue I got a call this summer that things had started to open up again and had an appointment about a month from that call.
 

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I'm appreciating all of the responses - thanks. How I got in - I submitted my paperwork in January or early Feb 2020, just before the pandemic major disruptions. Since I had to travel to visit a consulate, I switched my preferred consulate to one that had one of the shortest wait periods and got in the queue for there. Out of the blue I got a call this summer that things had started to open up again and had an appointment about a month from that call.
Interesting. Looks like well into next year for me, which is fine, this is not urgent. Thanks for the report.

To the earlier point, don't overthink Form 8854. Put down something that looks reasonably consistent with any returns you've filed but which keeps you under the $2 million net worth limit. No reason to pay the exit tax.
 
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