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Giving Up Your U.S. Citizenship Is Not A Simple Task

02/02/2016 03:07 EST | Updated 02/02/2017 05:12 EST
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Accidental Americans may want to renounce their U.S. citizenship rights but there is a process

There are thousands of Accidental Americans in Canada who hold U.S. citizenship that they don't necessarily want or even know they have. For most people, the issue is not the unexpected citizenship -- it is the tax filing obligations that may come with it. The U.S. tax system is based on both citizenship and residency so even if you don't live in the U.S., it doesn't mean the IRS is not expecting something from you.

You can choose to give up your U.S. citizenship but expatriation is not a program to get into tax compliance. Renouncing your U.S. citizenship does not negate your obligations to the IRS but you can expatriate without being tax compliant.

If you are considering expatriation, you should consult legal counsel that understands U.S. citizenship issues. You need to understand the implications that come with expatriation and that it may not solve any issues you have with the IRS.

In order to renounce your citizenship, you must do so voluntarily in person before a U.S. consular or diplomatic officer at a U.S. Embassy or Consulate and sign an oath of renunciation. If your renunciation does not meet those two criteria, it is not legal. U.S. laws do not allow you to renounce your citizenship by mail or through an agent or while visiting the U.S. In addition, U.S. courts have held certain attempts to renounce U.S. citizenship to be ineffective on a variety of grounds.

You can also relinquish your U.S. citizenship. Relinquishment happens when you voluntarily perform one or more potentially expatriating acts with the intent of giving up your U.S. nationality. Some of these acts can include fighting for another country engaged in hostilities with the U.S. or obtaining naturalization in a foreign state.

Relinquishment follows the same procedural steps as renouncing or by submitting a signed statement to the U.S. State Department confirming the performance of an expatriating act and your voluntary intent to relinquish U.S. citizenship. But you still need a Certificate of Loss of Nationality from the U.S. State Department accepting your relinquishment.

Parents cannot relinquish U.S. citizenship for minor children. Kids under 18 have to convince a U.S. diplomat or consular officer that they fully understand the nature and consequences of the oath of renunciation, they are not under duress to make the declaration and they are seeking to renounce their U.S. citizenship. Yes, those are the actual rules. One would assume that most young children are unable to fulfill the obligations.

If you do intend to renounce or relinquish your U.S. citizenship, you should have a foreign nationality before you do. Failure to have an alternate citizenship will leave you stateless and lack the protection of another government or a passport to travel. You may also require a visa to travel to the U.S. in the future.

Renunciation and relinquishment are irrevocable in most cases with an exception of minors. A minor can recant and have their U.S. citizenship restored if they do so within six months of turning 18.

The act of renunciation is a multi-step process and cannot be completed in one day. It generally consists of at least two interviews, a recitation of the Oath of Renunciation and the signing and submission of many documents. And you will remain a U.S. citizen until the Department of State recognizes the renunciation. You will be issued a Certificate for the Loss of Nationality of the United States (CLN) and it will have the date for your expatriation to use for tax purposes.

The Department of State cannot require submission of any tax forms as a condition for renunciation. The current U.S. law allows a person to renounce U.S. citizenship regardless of tax obligations. If you renounce without being 5 years compliant, you will be considered a covered expatriate and initiate the calculation of a potential exit tax. The IRS has the right to request and receive any unfiled returns and impose penalties and interest as allowed under the Internal Revenue Code.

Unfortunately, renouncing or relinquishing does not solve your tax problems. It creates a complicated situation and one that requires specialized legal advice. You should not attempt to handle this type of decision by yourself. If you are an Accidental American, research your options before you determine how you want to move forward.

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