Looking for insights into renunciation of US citizenship.
August 31, 2020 3:23 PM   Subscribe

I am a dual citizen of the US and an EU country, currently resident of a third country (also EU). As I have no intention of returning to the US, and will have the possibility of gaining citizenship in my resident country in the future, I would like to cut ties and renounce my US citizenship. I'm interested in information from those who have gone through this process -- feedback, anecdotes, advice, difficulties -- either in terms of first-person experiences or online resources regarding the process. (Most recent AskMe I could find was from 2011, and the circumstances are a bit different.)

I have not properly resided in the US since 2007, though due to my EU citizenship have also never registered as an expat with any US agency. I am now in a position to sever my financial ties with the US and divest myself of citizenship at the same time.

While I am committed to this decision for several reasons, I would like to understand the process a bit more before pulling the trigger. The irrevocability of the decision isn't my concern; rather I'm apprehensive about the costs and red tape, as well as privacy issues. (I do have a tax lawyer in the US and will be consulting with them as well.)

I'd like to understand whether there are tax obligations beyond the usual yearly ones (the itemisation of all foreign as well as domestic assets in Form 8854 seems ominous, if not opportunistic), and what happens wrt current-year taxes. As the preceding sentence indicates, I do have some assets in the EU and am unclear as to whether declaring said assets to the IRS will result in a tax penalty. As all of this comes in over and above a hefty flat fee levied simply for the privilege of no longer having to be an American, I want to have an idea of what I'm getting into before beginning the process. (If it's relevant I'm not a wealthy person; my total net worth is well under $1m.) My reasons for renunciation are functional and ideological rather than fiduciary, but does this actually matter?

An additional wrinkle is that I use a different names in the two countries, so there isn't a clean through-line from one location to the other. For personal reasons I prefer this, both because I am in general a private person and specifically I have estranged family in the US who I would prefer to not be able to easily locate me abroad. I presume this would need to be divulged during the process, but am uncertain how this may impact the process, and the public record.

It is also my understanding that one is subject to closer financial scrutiny under this process, presumably due to concerns regarding tax evasion. How much scrutiny, in the US and abroad, can I expect to be subjected to? I'm admittedly not wild about the prospect of my life abroad being nosed into by American authorities, particularly when my finances outside and inside the US have no relation to each other. (Yes, I understand the IRS sees things differently.)

Lastly, is the process 'final' from the US side? If I fill out all my forms, pay whatever is required, get approval and terminate my relationship with the US, is that the end? Or can the IRS come back in 10 years and say "we've discovered some incorrect information from your paperwork and now you owe us X amount plus interest"?
posted by anonymous to Law & Government (4 answers total) 8 users marked this as a favorite
You need a lawyer. Anything we say here could lead to you being financially ruined.
posted by aramaic at 6:13 PM on August 31, 2020 [13 favorites]

About your last question - The ability of the IRS to come after you later is based on the number of years since you filed the return in question. If you elect to defer tax payment on certain assets until they are sold or if you deferred compensation or an interest in a non grantor trust, you will have to keep filing form 8854 with IRS until they are resolved so for sure, they continue to have the right to audit the information on the most returns for as long as you still have a future tax obligation.

For normal returns, for any given IRS filing, the IRS usually has three years to audit your filing. However, if they think you significantly under-reported your income (by 25% or more) they have six years. If they find that it is flat out fradulent, then there is no statute of limitations. (This fact is easy to find - here is one source)
posted by metahawk at 10:53 PM on August 31, 2020

Based on your question, I suspect you may have not been properly complying with your US filing obligations. You say it's "opportunistic" that the IRS is asking you to list all your foreign assets on the renunciation form and are wondering about "declaring said assets to the IRS"; but assuming these assets are above a minimum threshold (varying from around 10k-75k depending on the form) you were supposed to have been reporting all those assets to the US government on forms such as the FBAR, form 8938, and form 3520, so the US government already knows all about them...right?

The statute of limitations for failure to file the FBAR is six years; there is an unlimited statute of limitations for failing to file forms 8938 and 3520.

The good news is that if you really paid all your taxes properly, and simply failed to report your assets, you will almost certainly get off with a warning. If you paid almost all your taxes but left off stuff like interest payments on bank accounts, you will still probably get off with a warning, but you should consult with a tax attorney who has dealt with many people in exactly your shoes.

Your taxes aren't public record and will not be published.
posted by phoenixy at 2:40 AM on September 1, 2020 [1 favorite]

My mother went through this last year. I know she'd be happy to talk to you - PM me if you'd be interested in being put in touch.
And as aramaic says - I'm pretty sure one of the things she'll tell you is don't try to get through it without legal help; they do not make it easy or simple.
posted by BlueNorther at 12:17 PM on September 5, 2020

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