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Old 12-12-2015, 03:23 PM   #61
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I have considered renouncing my US citizenship if I move back to the UK, but my net worth is now over $2M so I would have to pay a large exit tax bill.
I completely agree that should be fixed and the process should be simplified and staffed to make renouncing as quick and painless as possible.
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Old 12-12-2015, 03:34 PM   #62
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If someone has dual citizenship, I do not see what the big issue is in revoking US citizenship.
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Depending on the country, renouncing can be a big deal.

Brett, you made these comments in back to back posts. What am I missing here?
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Old 12-12-2015, 05:36 PM   #63
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It was poorly worded.

What I meant was that on a personal level only, renouncing citizenship is not such a big deal. Typically the person is no longer living in that county and has no plans to return. Unfinished business if you will.

But, the actual process of renouncing citizenship, if required for tax/financial reasons, can be a PITA. It certainly is if one is denouncing US citizenship. It is not only the IRS filing and waiver issues but also finding a capable person where you happen to be residing that understands how to put the IRS package together. Filing if you will. For US citizenship it is not as simple as handing back your passport or signing some sort or revocation document.
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Old 12-12-2015, 09:44 PM   #64
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I completely agree that should be fixed and the process should be simplified and staffed to make renouncing as quick and painless as possible.
There is no "fix" to this. It was done intentionally to keep US citizens from renouncing their citizenship. I think it was aimed most to stop tax protest renunciations, but it hits many people, not just the rich. I have been so disgusted at recent political changes in the US that I looked into it, sort of off-handedly, and was amazed at the tax hit I would take to leave. I think the only real option would be to leave, renounce, refuse to pay and become a tax criminal, and never come back. I don't want to do that, as I have family here, so I'm stuck at this point. It would be nice if this was something that could be "fixed", but that's not going to happen.
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Old 12-13-2015, 09:41 PM   #65
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It was poorly worded.

What I meant was that on a personal level only, renouncing citizenship is not such a big deal. Typically the person is no longer living in that county and has no plans to return. Unfinished business if you will.
That's what I thought and that is what I was agreeing with in my original post. Then things quickly morphed into comments about administrative and tax issues regarding renouncing citizenship.
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Old 12-14-2015, 08:15 AM   #66
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I think the only real option would be to leave, renounce, refuse to pay and become a tax criminal, and never come back. I don't want to do that, as I have family here, so I'm stuck at this point. It would be nice if this was something that could be "fixed", but that's not going to happen.
As an immigrant to the US who would be a covered expat if I tried to leave the tax system now, I found my only option was to become a citizen. It made me feel pretty terrible that they forced me to do this. I needed the protection for my family of the unlimited marital deduction and the likely un-grounded fear that they could take away my green card and trigger the exit tax. Then of course my citizen children would face the only inheritance tax in the US as I would always be branded as 'covered'.
I have to just put up with all the form filling at tax time and the risk of big fines. In 4 more years I can start emptying my foreign pensions.
I didn't want to leave but it sure is upsetting to realize you can't. Of course they added all these rules while I was here.
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Old 12-14-2015, 08:21 AM   #67
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Just a clarification. The IRS defines a "US Person" as one who must comply. Citizenship has nothing to do with it. Born in the US and holding a green card once upon a time both count.

We have had to complete a detailed questionnaire with every Canadian FI so they can claim compliance. Penalties for being a non-compliant FI are onerous.

The main cost for the innocent is hiring a tax lawyer to file IRS returns for 3 years. No renouncing is needed.
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Old 12-14-2015, 12:29 PM   #68
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Just a clarification. The IRS defines a "US Person" as one who must comply. Citizenship has nothing to do with it. Born in the US and holding a green card once upon a time both count.
You've made a good point. Citizenship (nationality/immigration) is entirely separate to Code Sections 877 and 877A which defines US Persons. Most Americans don't realise this.

Some of those renouncing, especially Accidental Americans, sometimes decide to exercise one (citizenship) to obtain a CLN in order to be able to freely bank in their country of residence, and ignore the other (877/877A). That automatically leads to covered expatriate status which in addition to the exit tax regime can have serious implications,....and they last forever, even past death.

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We have had to complete a detailed questionnaire with every Canadian FI so they can claim compliance. Penalties for being a non-compliant FI are onerous.
Yes, I too have had to complete several of these. They always come with the warning that failure to comply with the FIs request could result in closure of the account.

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The main cost for the innocent is hiring a tax lawyer to file IRS returns for 3 years. No renouncing is needed.
Not always simple if PFICs are involved. The cost can be severe, not only for the 3 years, but for the year after, and the year after that, and the next year, and on and on.
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Old 12-15-2015, 10:07 AM   #69
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Yes, I too have had to complete several of these. They always come with the warning that failure to comply with the FIs request could result in closure of the account...
I have an expat Texan friend who asked his FI what would happen if he refused to complete the form. They told him that they would just indicate that when they report to the CRA.

Of course, he was already filing with the IRS anyway.
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Old 12-15-2015, 11:04 AM   #70
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Wow.... did not know this also applied to non citizens.... looked in 877...

So if you lived here a long time and are going back to your country... get ready for that big tax bill....

(e) Comparable treatment of lawful permanent residents who cease to be taxed as residents
(1) In general
Any long-term resident of the United States who ceases to be a lawful permanent resident of the United States (within the meaning of section 7701(b)(6)) shall be treated for purposes of this section and sections 2107, 2501, and 6039G in the same manner as if such resident were a citizen of the United States who lost United States citizenship on the date of such cessation or commencement.
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Old 12-15-2015, 11:59 AM   #71
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Wow.... did not know this also applied to non citizens.... looked in 877...

So if you lived here a long time and are going back to your country... get ready for that big tax bill....

(e) Comparable treatment of lawful permanent residents who cease to be taxed as residents
(1) In general
Any long-term resident of the United States who ceases to be a lawful permanent resident of the United States (within the meaning of section 7701(b)(6)) shall be treated for purposes of this section and sections 2107, 2501, and 6039G in the same manner as if such resident were a citizen of the United States who lost United States citizenship on the date of such cessation or commencement.
Yes, rules like this and citizen based taxation make being a US citizen or having been a long term permanent resident a real hardship when living outside the USA.

I came to the US on an H1-b and after I got married to a US citizen I applied for a green card and then citizenship to make immigration issues easier. If I was to return to the UK now I would probably just keep my US citizenship as renouncing is more trouble (and expensive) than dealing with the complications of US expatriate taxes. However, it has taken a number of years and careful planning for me to understand how to efficiently organize my finances for any move to the UK as a UK/US dual citizen. But I would still anticipate some problems with bank accounts and finances and be excluded from tax advantaged accounts in the UK due to my US citizenship. Also if I return to the UK and qualify for UK Government tax free benefits like heating allowances or disability, those payments will be taxable by the US because of my US citizenship.
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Old 12-15-2015, 01:06 PM   #72
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My wife and I will be in a similar situation to what nun describes next May when we return to the UK. We haven't considered renunciation as we still plan on spending plenty of time in the US ongoing.

I've reorganized our finances to minimize the tax impact of filing in both countries but opening new bank accounts, getting UK credit cards, buying a house etc while being US citizens with the new FATCA laws in place is going to make things interesting to say the least. As seniors we'll get some benefits and those resulting in tangible money such as heating allowance will be taxable in the US but I don't expect to be US taxed on non tangibles such as free bus passes and free prescriptions and eye tests etc.

We'll be able to have our US investments treated as regular equities since US companies like Vanguard have most/all of their ETF's report into the UK "IRS" so they won't be treated as PFICS but the US has no such reporting system so we will avoid anything other than cash investments in the UK. (I have 2 UK private pensions and will collect UK SS in a few years)
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Old 12-15-2015, 01:51 PM   #73
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The tone of this thread has made an interesting and informative turn.

It started as "London Mayor Boris Johnson to renounce US citizenship"

And changed to "London Mayor Boris Johnson held captive by USA"

This has been an interesting read.......

Edit: Did a bit of Googling and discovered that the infamous dual-citizen major is going ahead with his renunciation and has paid the IRS. The Forbes article also gives a simplified explanation of the costs of renunciation.

http://www.forbes.com/sites/robertwo...s-citizenship/
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Old 12-15-2015, 01:54 PM   #74
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These regs are a burden, that's for sure. They are affecting too many individuals that don't contribute meaningfully to the tax system.

There must be someone in Treasury or the IRS looking for a way to reduce the workload. For themselves, I mean, as neither has the workforce needed to ensure compliance, and the complexity here makes that a highly skilled labor intensive operation.
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Old 12-15-2015, 01:59 PM   #75
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I personally see no reason to renounce as I had all my "ducks in a row" before I left the USA. My two son's are citizens by default and some time in the future (8 years for the oldest and 20 years for the youngest), I will have to discuss it with them. For now they will collect their SS benefits and enjoy life here in Peru.

As an aside I think it is more of an issue for those in Developed countries. Here, expats never talk about Fatca, we have developed simple workarounds for those on tourist visa's to open bank accounts,acquire and dispose of property,etc. They only "hitch" I have heard of is they will not accept American checks down here anymore, but that too can be overcome as many SAmericans
maintain accounts in the USA (tax shelters) and are more than happy to exchange with you and avoid any paperwork.
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Old 12-15-2015, 02:27 PM   #76
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These regs are a burden, that's for sure. They are affecting too many individuals that don't contribute meaningfully to the tax system.

There must be someone in Treasury or the IRS looking for a way to reduce the workload. For themselves, I mean, as neither has the workforce needed to ensure compliance, and the complexity here makes that a highly skilled labor intensive operation.
You make an excellent point MichaelB, but there seems to be a war on anything foreign. That's not unique to the US, the UK for example has tightened up residency rules for tax purposes significantly. What does make the US much more unique is its citizenship based taxation, the only country in the world to have this system of taxation.

The US Tax Payer Advocate has campaigned for a change specifically to current rules for expats for the last 3 years. Both political parties' overseas organizations are campaigning against current rules, and expats have literally (and I do mean literally) bombarded both the Congress and Senate with pleas for review of the system.

The problem is obvious. No Senator or Congressperson wants to propose a Bill that would do away with CBT. It would be political suicide. We also have had several Treasury/IRS Directors who are adamant on penalising anything foreign, with the knowledge that it is harming US expats abroad. It appears they're afraid of relaxing the rules even slightly will encourage the "rich" to take advantage.

CBT, for the near term, is here to stay and Congress keeps attacking the "rich" with no regard for expats. Look at the just passed, and signed by the Pres., Transportation Bill. It contains several tax aspects, with the revocation/cancellation of passports for those with a tax liability. Not necessarily difficult for someone living in the US, but of extreme difficulty for an expat living abroad. (The threshold is $50,000, but the penalties relating to anything foreign can have someone there quite easily.)
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Old 12-15-2015, 02:31 PM   #77
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.... but that too can be overcome as many SAmericans maintain accounts in the USA (tax shelters)......
Most don't realise that the US is now the 3rd largest tax haven in the world, behind only Switzerland and Hong Kong.

US overtakes Caymans and Singapore as haven for assets of super-rich | Politics | The Guardian
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Old 12-15-2015, 02:40 PM   #78
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These regs are a burden, that's for sure. They are affecting too many individuals that don't contribute meaningfully to the tax system.

There must be someone in Treasury or the IRS looking for a way to reduce the workload. For themselves, I mean, as neither has the workforce needed to ensure compliance, and the complexity here makes that a highly skilled labor intensive operation.
It seems it would also be wise for the USA to consider eliminating the practice of having all children born in the USA automatically be US citizens. I had never thought it, but apparently that practice turns out to be a horrible burden to many of those made citizens by birth such as Mayor Boris Johnson. It's costing him a ton of money and grief just to get the unwanted citizenship, slapped on him involuntarily at the moment of birth, undone.

Perhaps our rules could be changed so that the default status of the newborn is determined by the citizenship status of the parent(s) and would follow the laws of the parent's country.
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Old 12-15-2015, 03:53 PM   #79
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Thanks for the discussion.

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