Renouncing your U.S. citizenship is easy – sort of.
As a U.S. expat, having to file tax returns in your country of residence and back in the States can be a time-consuming past-time and an expensive one if you have to pay tax in both. You may even be considering renouncing your American Citizenship as a way to reduce the paperwork.
At Mir Taxes, we can take the hassle out of filing in the U.S. and ensure you receive all the applicable deductions, but we cannot advise if renunciation is the best course of action for your circumstance. We can, however, present you with pros and cons and list the steps you have to take if you do decide to change nationalities. Click here to book a free 15-minute consultation with our advisors to discuss your circumstances.
To renounce or not to renounce, that is the question.
The main advantage to renouncing your American citizenship is that you will no longer have to file tax returns in the U.S. once your renunciation is complete. You will also no longer have to let the IRS know how much money you have in your offshore bank accounts. Please note, however, that you cannot renounce citizenship for tax or financial reasons. Not having to file taxes is a benefit only if you have other reasons for renouncing.
In some countries, you may have to renounce your American Citizenship if you want to:
- be a citizen of their country as they do not allow dual citizenship
- buy land
- vote in that country’s elections unless you are a citizen.
Other reasons for renunciation are a matter of personal belief.
Some of the disadvantages to renouncing your American citizenship include:
- It is not cheap; you have to pay a fee (currently US$2350) and can be hit with an exit tax.
- You still have to file a tax return up to and including the year you renounce (the official date). It is not a way to avoid penalties for missed returns.
- Once you renounce, you can’t change your mind; it is forever.
- Any children born after the date you renounce will not be able to apply for American citizenship.
- You have to surrender your American passport and will have to apply for a visa should you wish to visit/return to the States again.
- You will no longer be under the protection of the American Government should anything go wrong in your new country of residence and you need help from a consulate.
- You can still be called on to serve in the military should compulsory military service be enacted.
- You are no longer eligible to vote in U.S. elections.
- Your decision to renounce is not a private affair. The IRS publishes a list of U.S. citizens who renounce their citizenship quarterly.
Okay, I want to renounce my American Citizenship. What do I have to do?
Renouncing your U.S. citizenship is not simply a matter of filling out a form and saying, “see you later, alligator.” The biggest and first hurdle to overcome is the requirement to obtain a passport from your new country of residence. The U.S. State Department will not consider your application without one. Be prepared for it to take some time for the application of a new passport to be approved.
Once you have received your new passport, the next step is to complete the following forms and arrange a time to meet with a State Department representative (yes, there is an interview).
At the time of writing, the forms below were required to be completed to renunciate U.S. citizenship. You can access them in digital format from here:
- DS-4079: Questionnaire – Information for determining possible loss of U.S. citizenship.
- DS-4080: Oath of Renunciation of the Nationality of the United States.
- DS-4081: Statement of Understanding concerning the consequences and ramifications of relinquishment or renunciation of U.S. citizenship.
- DS-4082: Witnesses’ Attestation Renunciation/Relinquishment of Citizenship.
- DS-4083: Certificate of Loss of Nationality of the United States.
Once completed (except for signing the forms), you are all set to call your nearest embassy or consulate office and make an appointment to present your case for leaving. Do not sign any of the forms until you are in the presence of a consular agent. Note, if your entire family wants to renounce their citizenship, they have to make individual appointments, and you need to let the office know that you are part of a family group.
Appearing Before the U.S. Consulate
On the day of your appointment, make sure you have everything you need, including:
- your American passport
- your new passport
- your original birth certificate
- your certificate of naturalization in your new country of residence
Once at the Consulate, you will be given more forms to complete. Take the time to read them carefully, noting any additions/amendments made and that you sign in all of the places indicated. Applications can be rejected or delayed if anything is missing or incorrectly filled out.
At the end of your appointment, you will receive a copy of Form DS-4083. This is your certificate for Loss of Nationality (CLN) and is an essential piece of paper. Please keep it safe as it is the only record of proof you will be given that you have begun the renunciation process with the State Department. The form should be signed and carry the official seal of the appointment by the State Department. Note, your renunciation of citizenship is not complete until you receive final approval from the U.S. State Department, which could take several months. In the meantime, the CLN is proof that renunciation is in progress.
Filing Your Final Income Tax Return
The final step in the process is to file your last U.S. tax return, which will include the date from January 1 through to the date you received your CLN. If the date of receiving your CLN was other than December 31 (highly likely), you may also need to file a Form 1040 and a 1040NR (if applicable) as your final tax returns. The forms don’t end there; however, you will also need to complete Form 8854, the Expatriation Information Statement. This form is the “exit tax” form and is filed along with your final tax return. The “exit tax” is determined by your net worth of all assets.
So many forms! And some are dependent on whether you meet the wealth criteria as defined by the IRS. It is easy to see why it pays to hire the services of a Tax Accountant to ensure that all requirements are met, and there are no causes for your application to be deferred or incur extra expense. We also suggest you contact a U.S. attorney specializing in citizenship to advise if renunciation is the right course of action for your circumstance. At Mir Taxes, we have the knowledge and experience to help you with the tax implications of renouncing your American Citizenship. We can’t promise that it will be easy, but we can take the hassle out of the process for you. Contact us today for a free 15-minute assessment of your needs.
