Renunciation of U.S. Citizenship

United States of America and Canada

U.S. citizenship is greatly prized throughout the world. However, for some people, including many Canadians, it can be an unwanted burden due to the tax and bank reporting requirements. Persons may be U.S. citizens even though they have little current connection to the United States. This includes the following groups of people:

  • People born in Canada whose parent or parents may be U.S. citizens, and who are dual citizens at birth, but may never have lived in the U.S.
  • People born in the United States whose parents are Canadian, and who returned to Canada shortly after birth and who have lived in Canada all their lives.
  • People who immigrated to Canada many years ago and have become Canadian citizens, but never formally renounced their U.S. citizenship.

U.S. law requires that all U.S. citizens must report their worldwide income on annual tax returns if their income exceeds a minimum amount. They must also file various information returns including reports on foreign bank and brokerage accounts, if all such accounts exceed $10,000 in the aggregate. These reports are called FBARs. RRSP accounts must be reported as well on tax returns. There are stiff possible penalties for failure to file these reports. For instance, there is a $10,000 penalty for each non-willful failure to file an FBAR, andΒ  penalties of $100,000 or more if the failure is willful. While these penalties are seldom if ever enforced to the maximum extent the law allows, they remain a source of concern to many U.S. citizens living overseas. Recent news reports along with a recent voluntary disclosure initiative from the Internal Revenue Service have heightened concerns.

An option considered by many Canadians is renunciation. An effective renunciation will relieve a person of the obligation to file future U.S. tax returns and other U.S. reporting requirements. However, it will not excuse pass omissions to file, and may also trigger a new departure tax, which, in some cases, may be very costly. Anyone considering renunciation must consider the tax consequences, as well as the non-tax consequences of renunciation. Non-tax consequences include possible difficulties in travel to the U.S.; inability to work in the U.S.; and inability to sponsor children and other relatives for U.S. green cards.

In some cases, U.S. citizens who naturalized in Canada (or elsewhere) with the intent of relinquishing their U.S. citizenship, or performed other self-expatriating acts, may be able to obtain a Certificate of Loss of Nationality dated retroactively, rather than renouncing their U.S. citizenship. This would avoid the need to file past U.S. tax returns.

We offer the following services to persons considering renouncing their U.S. citizenship:

  • We can help you determine if you are in fact a U.S. citizen.
  • If you were never a U.S. citizen or lost your U.S. citizenship in the past, we can help you document your non-citizen status.
  • We can refer you to qualified U.S. tax accountants who can determine the tax consequences, if any, if you decide to renounce.
  • We can counsel you on the non-tax consequences of renunciation.
  • If you decide to renounce or apply for a Certificate of Loss of Nationality, we can represent you throughout the process.

Are you considering renunciation? We can provide you with the information you need to make the best decision.