Renunciation

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Turncoat
Posts: 4
Joined: Fri Mar 09, 2007 10:26 am

Renunciation

Post by Turncoat »

nelsona (and certainly many others) have noted "heavy" consequences for renouncing US citizenship. I'm curious: what evidence do you have to support this assertion? Is it not situation dependent?

In my case, I am a long-term Canadian citizen and resident, although I still hold US citizenship. I have no US assets and only moderate income and investments -- well below the income thresholds set for tax avoidance. I have reported faithfully, and though I have not had to pay US tax yet, I find the recent expatriate tax changes worrisome -- and I find the tax-reporting process difficult, intrusive, and frankly unjust. I have no plans to live in the US again, and, assuming I am not labeled a "tax avoider," I suspect that short-term visits would not be an issue (I am a Canadian passport holder, after all). This article certainly makes me wonder if renunciation is not the way to go:
[url]http://www.aicpa.org/PUBS/JOFA/sep2005/lifson.htm[/url]

It is a big decision, in any case.
nelsona
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Post by nelsona »

I would not confuse the tax consequences of renunciation of GC or US citizenship with the immigration consequences of renunciating citizenship.

While expat re-entry has been made easier in the past several years, each entry would be scrutinized (your name would be in the database along with other unsavory renunciatiors like war criminals etc). I don't think it would as smooth as now.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Skoorb
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Joined: Mon Feb 21, 2005 8:44 pm

Post by Skoorb »

Though quite unfamiliar with the tax problems you're going through (I can imagine!), unless you're really old or you just bought your dream house in Canada and would never, ever consider leaving it, I would personally put up with the difficulty each year for the flexibility of being a dual citizen. US citizenship is among the most cherished in the world, if I had it I'd need a really special reason to renounce that. Right now it may not be that useful but the world is viscous, who knows what world climate we'll have in 10, 20, 30 years? It could be a fall-back.
Turncoat
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Joined: Fri Mar 09, 2007 10:26 am

Post by Turncoat »

A climate change argument? That is thinking out of the box -- I like it! The sad thing is, you just could be right, although I suspect the fall-back could be for Canadians living in the States.

I agree the United States passport is cherished, but so is Canada's.

Everyone's circumstances are different. I have no intention to return to the US at this point in my life. My wife, my children, and virtually every other aspect of my life is Canadian. All of my investments are in Canadian dollars, and our house is paid for.

US citizens abroad have seen several tax tightening measures in the past decade -- when is it going to end? We have little input, if any, into these pronouncements. In additioin, I grew up in the States, and I believe a fair number of folks -- possibly even a majority -- see expatriates (renouncers or not) in a negative light. So, the situation could worsen. Even renunciation could become more difficult.

But nelsona is right. I don't at all feel comfortable about INS policy towards renouncers the future, but I also wonder about IRS policy towards US citizens abroad. I'd like to visit, but it's not essential. I'm trying to weigh the trade-offs.

However, I am still researching the possibilities. For example, I am not sure if the "renouncer's" section of Federal Register is publically available -- I have not been to locate it. In any case, it could be made publically available, if it's not already. That could cause problems for my US relatives.
nelsona
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Post by nelsona »

Despite all the changes, none have resulted in a penny of tax for you, so i wouldn't worry much about US taxes.

I belive that the federal register is all public, otherwise it would not be called the register.

I don't see why your name on the register (as well as the CBP list, which is a separte entity) would specifcially cause your family problems.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Turncoat
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Joined: Fri Mar 09, 2007 10:26 am

Post by Turncoat »

Two concerns for me: (1) I am now exceeding the FEIE, and expect to even more in the future. I fully max out my RRSP each year. Up until now, I have gotten by with simple, but unknowingly incomplete forms -- though I recently made some corrections for 2005 -- but things are getting more complicated. And (2), I just don't want the hassles. I've spent weeks trying to get up to speed, but I'm not there yet -- especially with foreign tax credits. I even tried TurboTax Premier, but I have to wonder if the forms might not be easier. (Yet I find QuickTax quite manageable.)

While I very well could end up turning to a firm like yours to do this for me, I'm having trouble getting around the idea of paying for something like this. And I don't like the thought of paying even small amounts to the IRS. Just out of curiousity, if I need to file the following, what should I expect it will cost me?

No US-source income
Canadian wages (mid 90s)
Canadian interest, capital gains, dividends, charities --typical stuff
Married filing separately, two US citizen children
Canadian wife (who would prefer to be kept out of this)

I can handle 8891, 2555, and TDF 90-22.1 easily enough. Thanks.
Skoorb
Posts: 30
Joined: Mon Feb 21, 2005 8:44 pm

Post by Skoorb »

Sorry Turncoat, I didn't mean climate change like the icecaps turning everything into the ocean but rather a political one. Maybe terrorists will start wiping entire nations out or we'll have WWIII or whatever, that kind of thing :)
Gofigure49
Posts: 12
Joined: Fri Oct 29, 2004 9:03 am

Post by Gofigure49 »

I am a renouncer. I am on the Federal Register list of those who have chosen to relinquish their U.S. citizenship. It is a public document. I cherish my Canadian citizenship and no longer had ties to the U.S. nor did I want to file U.S. tax returns and pay U.S. taxes (yes, unfortunately I had to) to a country that I left when I was 11 years old and never earned a penny in. Because I left at such an early age, my children were not eligible for U.S. citizenship, nor would I ever be eligible for Medicare. I could vote, live in the U.S. and pay U.S.taxes. Not enough reasons for me to keep my U.S. citizenship For me, the choice was simple. I found it difficult to have loyalties to two countries. For others, it may be easy to share their loyalties to multiple countries. I do travel to the U.S. frequently and have, on occasion, been asked about my citizenship, as your place of birth is shown on a Canadian passport. I have never been turned back. The border guards are more curious than anything else. I can still buy real estate in the U.S., just like any other Canadian. From my perspective, the risk is limited.
nelsona
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Post by nelsona »

Turncoat,

I noticed you said you had 2 kids. Well, right off the bat you have $2000 credit from IRS coming to you just for filing, so the tax issue should not be of concern.

To get the credit you simply need to file without 2555. 2555 is not so god anymore anywyas with anti-stacking provisions.

With foreign tax credit, re-sourcing where needed, and the child tax credit, you should have no problem gettinga a check from IRS every year.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Turncoat
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Joined: Fri Mar 09, 2007 10:26 am

Post by Turncoat »

nelsona, according to my income (and using the worksheet), my salary limits the child credit to $500. That is then eaten up by tax and the AMT. While I'm new to using tax credits, I plugged all of my paid foreign taxes into TurboTax as a credit and come out having to pay around $800. My RRSP contribution reduces my Canadian tax substantially -- which is not to say I'm doing this correctly yet! Obviously, I pay nothing with FEIE.

Gofigure49, thanks for your insights. Was is a relatively easy process for you?
nelsona
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Location: Nowhere, man

Post by nelsona »

I meant to add: filing jointly.

While in the past you may have paid nothing with FEIE, are you sure you still are? FEIE chaged drastically in 2006.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
marcharry
Posts: 15
Joined: Wed Sep 23, 2009 10:45 am

Post by marcharry »

I am a Dual citizen and business owner living in Canada (40+ years). Can anyone give me a good reason not to renounce my US Citizenship?

Aside from the opportunity to work in the US, what other benefits do i derive from being a us citizen. The drawbacks in terms of tax hassle and potential liability are obvious.
nelsona
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Location: Nowhere, man

Post by nelsona »

Be warned that renunciation will not absolve you from tax implications. If living in Canada, you will still be on the hook for 10 year after you renounce, including estate tax.


http://travel.state.gov/law/citizenship ... p_776.html
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
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Post by nelsona »

The rules have relaxed slightly, but renouncing citizenship usually means not being allowed to visit US.

Also, renouncing now, still ties you to US for 10 years.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
ExpatAmerican
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Joined: Tue Aug 11, 2009 10:48 am

Post by ExpatAmerican »

Another thing to keep in mind. The US, unless something changes going forward, is in quite a precarious situation regarding somehow matching future revenues and future liabilities. Social Security Fund has been looted for decades, Medicare and military spending seemingly out of control. Some economists estimate massive tax increases down the road to help close the yawning gap. US ex-pat citizenship could come at a much higher price than we see currently. There is absolutely no reason whatsover that that they couldn't eventually change the ex-pat laws and tax all Americans on worldwide income by disallowing the Canadian tax paid exclusion. We are hardly a sympathic lot (a.k.a. we could be taxed with few repercussions to the political class). Furthermore, if you truly believe the danger that exists from the evil muslims (overstated propaganda, in my mind, to keep us fearful and thus easily controlled/taxed), wouldn't you want to avoid the US instead of gravitate towards it? They do not seem to attacking Norway, incidentally.
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