Monthly Archives: July 2015

Thoughts on: Major updates to Foreign Affairs Manual on U.S. citizenship renunciation procedures

In a well researched post, “Eric” at the Isaac Brock Society writes about updates to the U.S. FAM “Foreign Affairs Manual” on RENUNCIATION (not relinquishment) procedures. The revised procedures are here:
It appears that  “two interviews” will be required, but that only the second interview (actual renunciation”) must be in person.
On balance, it’s clear that the State Department is directing it’s attention to the question of whether the would be “renunciant” really does intend to relinquish U.S. citizenship (after going through all the work of tax compliance, paying the fees, etc.).
The following changes are notable:
1. In the view of the State Department the “intention” to relinquish U.S. citizenship requires an “understanding of the consequences” of no longer being a U.S. citizen.

: When faced with a potential renunciant, a consular officer must make a judgment whether the individual fully understands what he or she is seeking to do, including the consequences such as losing the right to reside in the United States without documentation as an alien. Absent such an understanding, it cannot be said that the individual intended to relinquish his or her U.S. nationality when he or she executed the oath of renunciation. You must also assess whether the person is acting of duress, coercion, or undue influence from others and without reservation. (See 7 FAM 1290 for guidance about minors,persons with mental incompetenceor mental or developmental disability, prisoners, criminal defendants or convicts in pleabargain cases, members of cults, and other …

2. There is NO “intent to renounce” if you intend to continue to live in the United States

Potential renunciants may also express the intention to continue to reside in the United States or its territories and possessions without documentation as aliens. Since this right of residency is a fundamental right that U.S. citizens and nationals possess, potential renunciants who wish to retain this right do not possess the intent necessary for an effective renunciation. Consular officers must not take renunciations from any individual who seeks to retain the right to reside in the United States or one of its territories or possessions.

3. No lawyers – “whether the person is acting of duress, coercion, or undue influence from others and without reservation”

In order for the consular officer to ascertain whether the renunciant’s action in relinquishing his or her U.S. citizenship is a product of his or her own free will, a parent, guardian, attorney, legal representative, or other representative should not participate in any interview, including a telephonic one, conducted by the consular mission member or attend the administration of the oath of renunciation.

4. Interesting – The State Department views U.S. citizenship as ALLEGIANCE to the United States

If possible, the renunciant should stand and raise his or her right hand while taking the Oath of Renunciation. This formality and the symbols of the United States underscore that the renunciant is severing all ties of allegiance to the United States and in doing so loses the protections that the U.S. Government provides to citizens and noncitizen nationals

5. It’s possible that a RENUNCIATION might not be approved by the State Departement

If a renunciation is undertaken but not approved by the Department, the fee is not refundable.

6. U.S. citizenship continues to be primarily about taxation and renunciants should be warned about the Reed Amendment

a.If a would – be renunciant indicates a desire to renounce U.S. citizenship for the purpose of tax avoidance, (see INA 212(a)(10)(e) and any pertinent guidance adopted by the Department), you should consult 7 FAM 1262.4(i) regarding recordation in the consular officer opinion of the purpose stated by the renunciant, and should inform the person that:
(1) Renunciation may not exempt him or her from U.S. income taxation; and
(2) If the Department of Homeland Security determines that the renunciation is motivated by tax avoidance purposes, the individual will be found inadmissible to the United States under Section 212(a)(10)(E) of the Immigration and Nationality Act (INA 212(a)(10)(E), 8 U.S.C
1182(a)(10)(E)), as amended.

7. The Consular officer has the right to postpone the “renunciation interview” (those who are renouncing prior to age 18 1/2 should take particular note of this provision)

Consular Officer Discretion
Prior to administering the Oath of Renunciation and recommending loss, the consular officer must exercise his or her judgment that the renunciant is acting voluntarily and with the intent to lose U.S. citizenship. The consular officer has discretion to request a further period of reflection should this not appear to be the case.

8. Form 4079 is NOT required for “renunciation cases” – but may be useful for the DOS…

While Form DS – 4079, Request for Determination of Possible Loss of United States Citizenship, is not standard or typically necessary for renunciation cases, where there is a question about intent it may prove useful.
Further, the DS -4079 may serve as a helpful tool for information gathering in appropriate cases regarding, for example, ties to the United States and the host country, or possible earlier commission of an expatriating act. In short, consular officers should not seek completion and signature of the DS – 4079 in renunciation cases as a matter of routine but only if pertinent as described above.

Hmmm…. It strikes me that renunciants should NOT seek to complete the form either. Clearly, nothing good can come from it. On the other hand, Form 4079 will continue to be vital for those claiming “relinquishments”. Clearly, the Department of State is beginning to separate “renunciations” from “relinquishments”.

"Coming Into Tax Compliance Book" – How Americans can come into U.S. tax compliance in a FATCA world

Are you “Coming To America” by entering the U.S. tax system as an American Abroad?

The “How To Come Into U.S. Tax Compliance” book for Americans abroad

John Richardson, LL.B, J.D.

I have contributed to establishing the new “Citizenship Taxation” site. As part of launching that site, I have written a series of posts providing relevant information (in a broad sense) about how Americans abroad, who did not know about their U.S. tax obligations, can come into U.S. tax compliance.

Sooner or later, it’s likely that many people will receive a FATCA letter. In your panic, you should be careful. There are a number of things Americans abroad should consider before consulting a lawyer or tax professional.

This series of posts developed from my “Educational Outreach” program for Americans abroad. It is an effort to respond in a practical way to the questions that people have.

The chapters of “Coming Into Compliance Book” are:

Chapter 1 – “Accepting Cleanliness – Understanding U.S. Citizenship Taxation – To remain a U.S. citizen or to renounce U.S. citizenship

Chapter 2 – “But wait, I can’t renounce U.S. citizenship if I’m not a U.S. citizen. How do I know if I am a U.S. citizen?”

Chapter 3 – “No matter what, I must come into U.S. tax compliance – Coming into U.S. tax compliance for those who have NOT been filing U.S. taxes

Chapter4 – “Oh no, I have attempted U.S. tax compliance by filing tax returns. I have just learned that I have made mistakes. How do I fix those mistakes?”

Chapter 5 – “I don’t want to renounce U.S. citizenship. How to live outside the United States as a U.S. tax compliant person

Chapter 6 – “I do want to renounce U.S. citizenship. This is too much for me. How the U.S. “Exit Tax” rules might apply to me if I renounce

Chapter 7 – “I really wish I could do retirement planning like a “normal” person. But, I’m an American abroad. I hear I can’t invest in mutual funds in my country of residence. The problem of Americans Abroad and non-U.S. mutual funds explained.

Chapter 8 – “We all have to live somewhere. Five issues – “The problem of Americans Abroad and non-U.S. real estate explained

Chapter 9 – “Receiving U.S. Social Security – #Americansabroad and entitlement to Social Security

Chapter 10 – “Paying into Social Security – #Americansabroad, double taxation and the payment of “Self-employment” taxes

Chapter 11 – “Saving the children – INA S. 301 – “Residence” vs. “Physical Presence” and transmission of US citizenship abroad

Chapter 12 – “Issues surrounding 401k, IRAs, Roths and Americans Abroad

Chapter 13 – “Married filing separately” and the “Alien Spouse” – the “hidden tax” on #Americansabroad

Chapter 14 – “The Obamacare “Net Investment Income Tax” – Pure double taxation of #Americansabroad

Chapter 15 – “To be “FORMWarned is to be “FORMArmed” – It’s “FORM Crime” stupid!!

Chapter 16 – “Most “Form Crime” penalties can be abated if there is “reasonable cause”

Chapter 17 – “How to get “credit” for taxes (foreign) paid to your country of residence

Chapter 18 – “I don’t pay taxes in the country where I live. Can I “exclude” my foreign income from the U.S. tax return?

Chapter 19 – “Is it better to take the “Foreign Tax Credit” or the “Foreign Earned Income Exclusion” – a discussion

Chapter 20
– “The child tax credit: take it, leave it or how to take it

Chapter 21 – “How #Americansabroad can continue to use the #IRA as a retirement planning vehicle

Chapter 22 – “To share or not to share” – Should a U.S. citizen share a bank account with a “non-citizen AKA alien spouse? – Reporting Edition

The “Coming Into Compliance Book” is designed to provide an overview of how to bring some sanity to your life.
 Coming to America

You may remember the old Eddie Murphy movie about “Coming To America”.

Welcome to the confusing and high stakes rules for U.S. taxation and Americans abroad.
The United States has the most complex, confusing, most penalty ridden and most difficult anti-deferral regime in the world. McGill Professor Allison Christians has noted that Americans abroad are both:

“deemed to be permanently resident in the United States for tax compliance and financial reporting purposes” …

and are

“subject to the most complex aspects of the U.S. tax code regardless of any activity in the United States, and facing extraordinary compliance costs and disclosure risks even for nil returns”

Although Americans abroad are deemed to be resident in the United States, their assets are treated as “offshore”. In addition Americans abroad are subject to taxation in their country of residence.

All of this means that:

1. Americans abroad are subject to the worst and most punitive aspects of the U.S. tax system (there is no Homelander who is treated as badly as an American abroad); and

2. Denied most benefits of the tax systems of their country of residence.

To put it simply, Americans abroad get the worst of all possible tax systems.

The most horrific aspects of the U.S. tax system are saved for Americans abroad. Prepare to be shocked. As one commenter at the Isaac Brock Society site recently said:

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