5 ms·

> most people won't be penalized An American couple I know, ordinary people with ordinary lives and nothing special level of income, who live in Canada pay ~$5

> most people won't be penalized An American couple I know, ordinary people with ordinary lives and nothing special level of income, who live in Canada pay ~$5000 in legal fees every year to do their non-resident U.S. tax return and stay in compliance with U.S. law. They pay zero U.S. tax. But saying that filing the U.S. tax is merely "annoying" doesn't cut it. I would say $5000 per year can be described as being penalized.

DrJokepu 10y ago
Yes that does not sound right. My wife is a US citizen, we live in the UK, I prepare her US tax returns every year myself. It takes about a Saturday afternoon every year and it costs me $0. It's rather complicated, but not paying-someone-else-five-thousand-dollars-every-year-to-do-it complicated. Your friends' tax advisor is taking advantage of them.
tluyben2 10y ago
Why would you do that? Maybe it's a weird question and it's coming from someone who doesn't see upside to having a US passport in the first place, but why keep it if it's that painful?
- Symbiote 10y ago
  They may not have any other citizenship. It often takes years, and can also costs $1000s, to acquire it.
- kalleboo 10y ago
  It's actually illegal to get rid of your US citizenship for tax reasons.
  - tluyben2 10y ago
    Really? But how would they know you did it for that reason?
  - owenversteeg 10y ago
    That's incorrect and misleading. There are two things here: US law, and what the State Department does, which are sometimes contradictory. Current US law says citizens can renounce citizenship regardless of tax obligations, although it does not remove these obligations - the IRS could still take steps to get their money back. In practice, the State Department slows down or blocks people renouncing citizenship for all kinds of reasons (tax reasons, they may be under duress, age, lack of second passport, etc etc.) This does not change the law, and ultimately if you're wealthy and persistent enough to go through the enormously complex procedure of renouncing citizenship, you will be able to get it renounced despite tax obligations. Once that happens (rich person is no longer a citizen & owes taxes) they'll face many consequences, and the two largest are 1) the IRS will take steps to get their money and 2) they will be barred from entering the US if their renunciation was for tax purposes. Note that in 2) the Attorney General must state that your renunciation was for tax purposes, so if the AG is busy with other things, you're not high-profile enough, or nobody cares, you will probably be able to return to the US. In reality, of course, things are a bit more complex: the State Department officers are usually unfamiliar with renouncing citizenship and mess up with one or more steps. Some people are never put on a list of renunciants and some do not have their US passport taken away or cancelled. Even some high-profile renunciants have not been put on the list - or were not put on the list until people complained. If anyone wants to read more, this [0] is mostly factual and pretty well researched. I am not a lawyer, I am not a renunciant (and never will be), and if you make any decisions about renouncing your citizenship based on this comment you are insane. Sidenote: renouncing citizenship is not a right everywhere (many countries don't allow it.) [0] http://www.renunciationguide.com/expatriation-process/renunciation-step-by-step/ http://www.renunciationguide.com/expatriation-process/renunc...
- arcticbull 10y ago
  There's a renunciation fee, plus a renunciation tax that requires you to pay the IRS taxes equal to the tax burden due if you'd disposed of all of your US possessions on the date of disposition. In addition, they will not allow you to renounce if it would otherwise leave you stateless.
  - FabHK 10y ago
    Also, if you ever apply for a tourist (non-immigration visitor's) visa to the US, form DS-160 asks "Have you ever renounced US citizenship for the purpose of avoiding taxation?" Not sure whether they still let you in though, anyone knows? PS: check out the form, btw, it has several interesting questions. http://photos.state.gov/libraries/jamaica/231771/PDFs/DS-160%20Instructions.pdf http://photos.state.gov/libraries/jamaica/231771/PDFs/DS-160...
techstrategist 10y ago
They are paying too much unless there is some unique complication. I'm a US expat in Europe and pay ~ $1000 for my US and foreign tax preparation.
rahimnathwani 10y ago
You say they pay zero US tax. This means either: 1) Their income level is low enough that this is legitimately the case. If so, they can save $4900 per year by switching from paying 'legal fees' to buying a copy of 'Turbo Tax Deluxe'. OR 2) They (legally) ought to be paying some US taxes, but they're paying fees to someone to help them evade taxes. If so, then perhaps it's worth $5000 per year to them. But perhaps they'd rather pay $5000 than spend a day with Turbo Tax? If so, then that's their choice.
- mysterypie 10y ago
  I very much doubt that Turbo Tax Deluxe can do dual-country U.S./Canadian tax returns and take care of nuances of cross border tax issues (how U.S. pension/401K/IRA is treated under Canadian law, how a Canadian RRSP or tax free savings account is treated under U.S. law) and special reporting requirements for non-resident U.S. citizens.
  - robk 10y ago
    He says he pays $5000 for the US return and I can confirm Turbotax works just fine for filing US tax returns while living abroad. They're overpaying.

DrJokepu 10y ago

Yes that does not sound right. My wife is a US citizen, we live in the UK, I prepare her US tax returns every year myself. It takes about a Saturday afternoon every year and it costs me $0. It's rather complicated, but not paying-someone-else-five-thousand-dollars-every-year-to-do-it complicated. Your friends' tax advisor is taking advantage of them.

tluyben2 10y ago

Why would you do that? Maybe it's a weird question and it's coming from someone who doesn't see upside to having a US passport in the first place, but why keep it if it's that painful?

Symbiote 10y ago
They may not have any other citizenship. It often takes years, and can also costs $1000s, to acquire it.
kalleboo 10y ago
It's actually illegal to get rid of your US citizenship for tax reasons.
- tluyben2 10y ago
  Really? But how would they know you did it for that reason?
- owenversteeg 10y ago
  That's incorrect and misleading. There are two things here: US law, and what the State Department does, which are sometimes contradictory. Current US law says citizens can renounce citizenship regardless of tax obligations, although it does not remove these obligations - the IRS could still take steps to get their money back. In practice, the State Department slows down or blocks people renouncing citizenship for all kinds of reasons (tax reasons, they may be under duress, age, lack of second passport, etc etc.) This does not change the law, and ultimately if you're wealthy and persistent enough to go through the enormously complex procedure of renouncing citizenship, you will be able to get it renounced despite tax obligations. Once that happens (rich person is no longer a citizen & owes taxes) they'll face many consequences, and the two largest are 1) the IRS will take steps to get their money and 2) they will be barred from entering the US if their renunciation was for tax purposes. Note that in 2) the Attorney General must state that your renunciation was for tax purposes, so if the AG is busy with other things, you're not high-profile enough, or nobody cares, you will probably be able to return to the US. In reality, of course, things are a bit more complex: the State Department officers are usually unfamiliar with renouncing citizenship and mess up with one or more steps. Some people are never put on a list of renunciants and some do not have their US passport taken away or cancelled. Even some high-profile renunciants have not been put on the list - or were not put on the list until people complained. If anyone wants to read more, this [0] is mostly factual and pretty well researched. I am not a lawyer, I am not a renunciant (and never will be), and if you make any decisions about renouncing your citizenship based on this comment you are insane. Sidenote: renouncing citizenship is not a right everywhere (many countries don't allow it.) [0] http://www.renunciationguide.com/expatriation-process/renunciation-step-by-step/ http://www.renunciationguide.com/expatriation-process/renunc...
arcticbull 10y ago
There's a renunciation fee, plus a renunciation tax that requires you to pay the IRS taxes equal to the tax burden due if you'd disposed of all of your US possessions on the date of disposition. In addition, they will not allow you to renounce if it would otherwise leave you stateless.
- FabHK 10y ago
  Also, if you ever apply for a tourist (non-immigration visitor's) visa to the US, form DS-160 asks "Have you ever renounced US citizenship for the purpose of avoiding taxation?" Not sure whether they still let you in though, anyone knows? PS: check out the form, btw, it has several interesting questions. http://photos.state.gov/libraries/jamaica/231771/PDFs/DS-160%20Instructions.pdf http://photos.state.gov/libraries/jamaica/231771/PDFs/DS-160...

techstrategist 10y ago

They are paying too much unless there is some unique complication. I'm a US expat in Europe and pay ~ $1000 for my US and foreign tax preparation.

rahimnathwani 10y ago

You say they pay zero US tax. This means either: 1) Their income level is low enough that this is legitimately the case. If so, they can save $4900 per year by switching from paying 'legal fees' to buying a copy of 'Turbo Tax Deluxe'. OR 2) They (legally) ought to be paying some US taxes, but they're paying fees to someone to help them evade taxes. If so, then perhaps it's worth $5000 per year to them. But perhaps they'd rather pay $5000 than spend a day with Turbo Tax? If so, then that's their choice.

mysterypie 10y ago
I very much doubt that Turbo Tax Deluxe can do dual-country U.S./Canadian tax returns and take care of nuances of cross border tax issues (how U.S. pension/401K/IRA is treated under Canadian law, how a Canadian RRSP or tax free savings account is treated under U.S. law) and special reporting requirements for non-resident U.S. citizens.
- robk 10y ago
  He says he pays $5000 for the US return and I can confirm Turbotax works just fine for filing US tax returns while living abroad. They're overpaying.