With the recent enactment of the Foreign Account Tax Compliance Act (FATCA), more and more U.S. citizens are looking into renouncing their U.S. citizenship’s to avoid the burdensome and increasingly complex U.S. filing requirements.
It is important to note that section 212(a)(10)(E) of the Immigration and Nationality Act allows the U.S. government to bar individuals who have renounced their U.S. citizenship for tax reasons from entering the U.S. To my knowledge this provision is rarely enforced, but a person should consider this possibility before renouncing their U.S. citizenship.
Renouncing your U.S. citizenship can appear confusing and daunting, but if you follow the steps described below, the process is actually quite simple.
1) Be a citizen of another country and possess an up to date passport for that country
In order to renounce your U.S. citizenship you will need to be a citizen of another country.
I have not encountered a situation where an individual attempted to expatriate from the U.S. and did not possess the citizenship of another country. But my understanding is that it is not possible to expatriate from the U.S. without the citizenship of another country as you would be rendered stateless and unable to obtain a passport.
You are required to have Form DS-4079 completed before your appointment with the U.S. consular office (see step 3 below).
The form is fairly self-explanatory and simple to fill out. A copy of the form can be found here. The form should be read carefully as it discusses the irrevocable consequences of renouncing your U.S. citizenship and expatriating.
Do not sign the form once you have completed it. The form is to be signed in front of the U.S. consular officer.
3) Book your renunciation appointment with a U.S. consular or diplomatic officer
There is a U.S. consulate office in most of Canada’s major cities. A list of addresses and contact information can be found here.
4) Attend your renunciation appointment
Be sure to bring the completed Form DS-4079 and your Canadian and U.S. passports.
At the appointment, you will complete several other forms. Ensure that you proof read and understand everything and ensure that all the signatures are in the right spots.
At the end of the appointment you will receive a certificate that officially states that you are no longer a U.S. citizen.
For your final year as a U.S. citizen you will need to file Form 1040, Form 1040NR and Form 8854 (Dual Status Return and Statement) as well as any other applicable forms (FBAR, 8891, 8938, 5471, etc.).
Form 8854 is a fairly detailed and complex form. If you are considered a “covered expatriate” based on Part IV Section A of the form (section 877A of the IRC), you will have to possibly pay expatriation tax. Due to the complexities of Form 8854, it is recommended that you have a qualified professional with experience preparing this form complete it.
Hutcheson & Co. LLP has extensive experience helping clients successfully renounce their U.S. citizenship and expatriate. If you have any questions about the process or would like to book a consultation, please do not hesitate to contact one of our qualified professionals.
The information contained in this article is for general use only and should not be viewed as professional advice. Accounting and tax rules and regulations regularly change and individuals should contact a competent professional to obtain accounting and tax advice based on their specific situation.