Over the last few years, the tax specialists at AGT LLP have engaged with many U.S. Citizens who are living in Canada that are considering renouncing their citizenship. While the renunciation process was already complex, recent developments in the U.S. Congress hint that the process of renouncing ones U.S. citizenship will be even more difficult in the future.
In June 2013, U.S. Senators Jack Reed (D-RI) and Chuck Schumer (D-NY) proposed an amendment to the immigration reform bill. It is described by the two US senators as an “expatriate tax dodger” measure. While this amendment did not pass, let us take a look at the changes that would have been made if it had.
Under current law (based on the “Ex-PATRIOT Bill” proposed by Schumer in 1996), one needed to prove to the IRS that the individual did not in fact renounce citizenship with the purpose of avoiding tax. Under the failed Reed-Schumer amendment to the Ex-PATRIOT Bill, the renouncing individual would need to prove to the Department of Homeland Security (DHS) by “clear and convincing” evidence that he or she did not renounce with the intent of avoiding tax. If found to have been renouncing for tax avoidance purposes, the DHS could permanently bar the renouncing individual from reentry into the United States. Under the original Ex-Patriot Bill only U.S. citizens would be barred, but the amendment extends this treatment to “Covered Expatriates”. The fulfillment of any of the following criteria would have classified a renouncing US citizen as a ‘Covered Expatriate’:
• The individual has an average annual net tax liability for the five preceding years of more than $155,000 USD
• He/she has a net worth of over $2,000,000 USD
• The individual fails to certify on Form 8854 that he/she had complied with all U.S. Federal tax obligations for the five years preceding the date of expatriation
Mr. Reed stated the following in support of the amendment: “American citizenship is a privilege. But it seems that a privileged few are trying to game the system by accumulating wealth and benefiting from the greatness of the United States and then renouncing their citizenship to avoid paying their fair share of taxes. They are welcome to leave our country, but they should not be welcomed to return without playing by the rules and paying what they owe.”
Although, the Reed-Schumer Amendment was not made into law, the issue of U.S. citizenship is now once again receiving the U.S. Congress’s immediate attention. Any individual wanting to renounce their US citizenship or green card should seek out the professional advisors at AG Tax LLP in conjunction with a tax and/or immigration lawyer so as to make an informed decision.
AG TAX LLP Can Help
If you have any other tax-related queries, and/or need assistance with tax planning/filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canada and other international tax laws.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
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Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.