not filled out US tax return since I left

So even if I didn't make over the equivalent of $80,000 a year (not even close), they can still come after me just to try and squeeze any penny out of me and be the notorious thieves they are? Or take my passport away from me?!

As a US citizen you at liable to US tax on your worldwide income. To claim the Foreign Earned Income Exclusion or credit for UK tax you've paid you have to file US taxes. If your income is below the filing threshold them you don't have to file, but it's probably best that you do to keep you current with US tax policy.....you might even get some tax credits or be able to build up a US tax free basis in some investments.

Getting irate about the situation won't help. You probably won't owe any US tax, but you should learn how your UK financial status interacts with US tax rules and organize things sensible and file regularly.


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..... - which was in 1965!

I've only just found out, because when I went to open a savings account I was told I had to supply a U.S. tax reference.

I have dual citizenship, so I think my best course of action is to renounce my U.S. citizenship.  Does anyone know what filing I will have to do in order to be allowed to give up citizenship?  I won't owe any taxes, I'm sure - it's just the filing.

Welcome to UK Yankee, although I'm sorry you had to find us through unfortunate circumstances.

Time for a deep breath, and to step back from your unexpected discovery for a moment. I'm sorry to say you will need to do some research first before commencing any definitive course of action. It is needed, and you'll be in much better shape to decide how to proceed.

You have a lot of unanswered questions which may have a major bearing on your situation. Those questions would include (and you need not answer now): were you born in the US; when did you become a dual citizen; what is your employment background; what are your plans until (and even after) you die; and do you understand the difference between renunciation and relinquishment; have you actually opened the new account yet; do you understand recalcitrant account holders; do you have a current US passport, and if not, when did you last have one? Those are for starters.

Renunciation occurs when you've decided you no longer want, or need, US citizenship. It occurs after all other avenues of ridding US citizenship are exhausted. Unfortunately, in many cases it is the only solution if you wish to continue. Are you also aware there is a fee of $2,350 charged by the US Embassy to renounce?

IF renunciation is the solution to your situation, then you'll need to understand the method of renouncing; do you want to do so totally in line with becoming tax compliant; do you understand the Exit Tax; and do you understand the consequences of being a covered expatiate? Do you understand how to come into compliance first (if you chose to do so, it's the most recent 5 years of filing form 1040, etc., and 6 years of past FBARs)?

So, in order:
1) Make sure you are still a US citizen.
2) Understand relinquishment verses renunciation.
3) Decide if you wish to rid yourself of US citizenship, or might you want to become US tax compliant for now and renounce later (or maybe never).
4) If you do, how will you proceed.

The following article may help you answer some of your questions. It is Canada-centric, but most applies to the UK as well as Canada.

http://maplesandbox.ca/2014/omg-irs-wants-me/

And, please feel free to ask us any follow up questions you may have after reading this post and a rummage through the above site.

Welcome to UK Yankee, although I'm sorry you had to find us through unfortunate circumstances.

Time for a deep breath, and to step back from your unexpected discovery for a moment. I'm sorry to say you will need to do some research first before commencing any definitive course of action. It is needed, and you'll be in much better shape to decide how to proceed.

Thank you so much for your welcome, and for your advice to take a deep breath.  You're right, I need to stop panicking.  (breathe)

You have a lot of unanswered questions which may have a major bearing on your situation. Those questions would include (and you need not answer now): were you born in the US; when did you become a dual citizen; what is your employment background; what are your plans until (and even after) you die; and do you understand the difference between renunciation and relinquishment; have you actually opened the new account yet; do you understand recalcitrant account holders; do you have a current US passport, and if not, when did you last have one? Those are for starters.

I was born in the U.S. to U.S. citizen parents in 1940.  I spent a year in England in 1960-61, as a student on a Year-Abroad programme.  A few years later, after I had returned to the U.S. and finished my degree and spent some time working, I went back to England to see my English friends (1965).   Ended up marrying one of them (1966).  Granted ILTR.  Settled down, worked, raised my family, divorced (1985), and retired (1995).  Remained a U.S. citizen though not intending to return to live in the U.S.  Registered children as U.S. citizens in order to be able to take them into the U.S. on visits.  Always paid UK taxes via PAYE, no significant income apart from salary. 

In 2006 I had some problems coming back into the UK on my U.S. passport after a holiday in Belgium (forgot to take proof of ILTR with me).  Consequently I decided to apply for British citizenship and get a UK passport.  American passport has since expired.  I haven't been back to the U.S. at all since 1995, and have no plans ever to go again as no close family remaining.

I didn't proceed with opening a new savings account.  I will stay with what I've got - a couple of current accounts, both of which I've had for many years, and some savings totalling about £20,000.  I'm guessing that I won't actually owe any U.S. tax.  It's the cost of "coming into compliance" (scary voice) that's panicking me.

I don't know what a recalcitrant account holder is - hope I am not one!

I guess I mean "relinquish" U.S. citizenship instead of "renounce".  Both seem quite difficult to do. My current understanding, which could be completely wrong, is that I first need to go through this Streamlined procedure to file three years back taxes plus (if required) six years FBARs, and then wait two more years, filing each year, and then I might be able to relinquish.  Does that sound right?  It would be great if there's an easier, cheaper way.

Thanks so much for the link to the Canadian site.  I will go now and start rummaging.  Thank you for your help!

@lota

Your story is not unusual these days. There are many just realising their situation, and there will be a great many more over the next year or two. I have to again urge you not to panic and to tackle this in a business-like way. For now, since you didn't open the account, nothing has changed for you until you make the first move or the IRS discovers you and acts first (which is highly unlikely as long as you are not identified by FATCA through a Foreign Financial Institution [FFI]). As is noted in the link above, right now, "it is not certain you have a tax problem, you have a compliance problem."

Renunciation is one form of relinquishing US citizenship. There is a fee to renounce, and there is no fee if you relinquish. According to a recent claim by the US Dept. of State, 75% of those applying for a CLN (Certificate of Loss of Nationality) are through relinquishment and only 25% are through renunciation. Personally, we've seen sooo much conflicting information from the US Government on this issue, it's hard to believe any statistics.  It's also worth pointing out that at this time the act of renouncing is not prevented by your US tax situation. They are two separate issues, although there are consequences of renouncing without becoming tax compliant. (That's why you need to do the research as to how all this applies to your unique situation).

You are aware that your children are US citizens as well and, therefore, may have exactly the same concerns that you now have (unless they are already compliant with US tax). They may be in a slightly better position than you (no US place of birth), but it may be an opportunity for all of you to work together on this.

I will not encourage any action which may result in your being at odds with the US and its' laws and regulations. Each person in this situation must act according to their own judgements. BUT, you have a number of options available, depending on how rigorously you intend to follow the rules. This is why you need to do your research.

A recalcitrant account holder is someone who has a foreign account, yet refuses to co-operate with the FFI in identifying their "US-ness" (refuses to give a US Tax Identification Number). The downside is the FFI may withhold up to 30% of all gains (or interest) generated by the account.

The streamline programme is independent of the act of renouncing, but it IS used to assist those who wish to become compliant before renouncing. The programme only asks for 3 years of past returns, whereas Form 8854 (The Exit Tax form/questionnaire) requires 5 years. Therefore, those using the streamlined programme may wish to include 5 years of declarations, and file a final US return in the following year.

I have my own very, very amateur opinion of your situation (any unqualified stranger on the street). Since you did not acquire UK citizenship till 2006, renunciation will probably be the route for you. If you had acquired UK citizenship within the first two decades of living here (prior to 1982 - 86), you would have a strong case for relinquishing. US law forbade dual citizenship, and upon attaining UK citizenship, you would have forfeited US citizenship. Although the US reversed this stance in 1986 (you automatically re-attained US citizenship), you could have made the case for relinquishment and most probably, been granted a CLN based on the date of acquiring UK citizenship. Oh well,......

Since you are retired and possibly have no earned income, you need to assess the sources of your income, as well as any recent actions you may have made which would be reflected on a US tax return. Sale of a property (although tax free in the UK is not necessarily tax free in the US), pension payouts, mutual funds including stocks and shares ISA's, and US tax thresholds verses UK tax free thresholds all require investigation as to the US tax consequences before becoming compliant. Because we pay tax at a higher rate in the UK does not assure no additional US tax is due. 

 

 

With the relinquishment vs. renunciation issue, did you (Iota), when naturalising in the UK, express any intent that you were to give up your US citizenship? If so then you have a case for going the relinquishment route if you no longer want US citizenship regardless of when you naturalised. On the other hand, if you have exercised any of the privileges of US citizenship (i.e. traveled to a country other than the US on a US passport, voted in a US election, sought consular protection from a US embassy, etc.) since you naturalised then that shows you did NOT intend to give up your citizenship and will probably have to go the renunciation route (and pay the hefty fee) if you want to rid yourself of your US citizenship.

With the relinquishment vs. renunciation issue, did you (Iota), when naturalising in the UK, express any intent that you were to give up your US citizenship?

In support of the post from Kelly85, have a look at the following recent thread, especially reply #2 from lucy w:

http://talk.uk-yankee.com/index.php?topic=85517.msg1123181#msg1123181

Note that filing a US tax return after "relinquishing" is mentioned.

For reference, the following video on YouTube from CNBC International (in the US) discusses renunciations in regards to FATCA requirements by foreign (to the US) banks/building societies.

Of particular notice is a comment from Diane Gelon, at 4:27, which is:

"When you get caught between two [tax] systems, you don't get the benefit of either system, and that becomes where the problem is for Americans living abroad."

Hi Kelly85, thanks for your reply.

With the relinquishment vs. renunciation issue, did you (Iota), when naturalising in the UK, express any intent that you were to give up your US citizenship? If so then you have a case for going the relinquishment route if you no longer want US citizenship regardless of when you naturalised.

No, at that time I wasn't intending to give up my U.S. citizenship.

On the other hand, if you have exercised any of the privileges of US citizenship (i.e. traveled to a country other than the US on a US passport, voted in a US election, sought consular protection from a US embassy, etc.) since you naturalised then that shows you did NOT intend to give up your citizenship and will probably have to go the renunciation route (and pay the hefty fee) if you want to rid yourself of your US citizenship.

Nope, haven't done any of those things since becoming a UK citizen. 

You're not "fined" for renouncing your citizenship - it's a "processing" fee (but way too high for that IMO). It's no more than a "fine" than the fee to obtain a passport.

In support of the post from Kelly85, have a look at the following recent thread, especially reply #2 from lucy w:

http://talk.uk-yankee.com/index.php?topic=85517.msg1123181#msg1123181

Note that filing a US tax return after "relinquishing" is mentioned.

Thanks OAP.  I wish I had done as lucy did and relinquished my US citizenship when I became a UK citizen, but unfortunately I did not.  Too late now.

I appreciate very much your help and advice.
Be well.  :-)

You're not "fined" for renouncing your citizenship - it's a "processing" fee (but way too high for that IMO). It's no more than a "fine" than the fee to obtain a passport.

OK - sorry if I caused offence.  I've edited the post.

I wish I had done as lucy did and relinquished my US citizenship when I became a UK citizen, but unfortunately I did not.  Too late now.

Whatever you do, don't let this get you down!!!

It's a rum game when a retired person, at this stage in their life, wishes to open a new account to try to better their now limited funds only to discover this pile of muck awaiting.

There are usually 4 very basic options for someone in this situation. There could then be alternatives to each of the options.

1) The person could attempt to relinquish due to acquiring UK citizenship with the purpose of relinquishing US citizenship (as has been noted), even if it was in the past, as long as they have evidence that they wished to do so. Or, they may have had UK Govt. employment in the past, and have the evidence that this required an oath to the UK (the oath could be a relinquishing act).

In both cases, one would need strong evidence, and even then, the attempt may be not be accepted by the US Dept. of State as a relinquishing act. If such an act were accepted, and the act was after 2004 (don't you have all the luck), tax returns (varies to 2008) are likely required, unless they wish to also combine with option#3 on the tax front. There would be no fee involved.

2) They become compliant via the Streamlined Program if not already compliant, file 5 years of past 1040 returns, file 6 years of past FBARs (FinCEN 114), renounce US citizenship and pay the fee, and file a final dual return including Form 8854 (the Exit tax) the following year. This is a clean separation from the US and any obligations, as well as allowing full use of UK financial opportunities.

3) They renounce US citizenship and pay the fee. Since this is a stand alone act, they ignore their obligations to file with the IRS. They now become a covered expatriate. They will always be liable if found (don't go to the US!) and there would be penalties and possibly an abnormal amount of tax due if discovered. It would also affect any inheritance they wished to leave for someone resident in the US. It's risky.

4) They have been flying under the US radar for many years without filing a tax return. Nothing has changed as long as they never acknowledge they are a US citizen (say, to a bank or building society if asked). They simply deny they were ever a US citizen, although a US place of birth may easily give the game away, and they don't have a CLN. This is obviously a very risky proposition although some may be willing to risk it. It creates problems in both the US and the UK (lying to a UK bank).


There are really no additional options other than becoming compliant (Streamlined Program) and keeping US citizenship (and filing returns and FBARs) for the rest of your life.

In your case, other than the problem opening an account, you have been flying below the radar for 50 years. There is no need to now take drastic immediate action. Give this whole mess some thought for a while before acting.

And you, be well!!!     

 

@theOAP - What would happen as far as the bank and/or the UK government are concerned if you said you aren't a US citizen when you are? (Not that I plan on doing that, but I'm curious as to whether there would be non-US consequences for saying you're not a US citizen or not.)

Whatever you do, don't let this get you down!!!

. There is no need to now take drastic immediate action. Give this whole mess some thought for a while before acting.

Excellent advice, and I am going to follow it. 
Many thanks, OAP, for your steadying words of advice and guidance.  I am truly grateful! 
 

@theOAP - What would happen as far as the bank and/or the UK government are concerned if you said you aren't a US citizen when you are? (Not that I plan on doing that, but I'm curious as to whether there would be non-US consequences for saying you're not a US citizen or not.)

Good question. The following is only IMHO.

Clause 222 of the UK Financial Act of 2013 is the UK law that requires UK FI’s (financial institutions) to comply with the US law on FATCA.

The UK/US IGA (intergovernmental agreement), along with HMRC guidance, prescribes how and when UK FI’s must comply, through HMRC.

I’ve recently received a letter from a UK FI (savings account) which contains the “we believe that you may be a citizen of the United States” salutation.

A pamphlet enclosed with the letter also contains these words:
“If we’ve asked you for more information, it’s your responsibility to give us accurate details.”

What happens if you don’t respond? According to the pamphlet:
“If you don’t respond, we’ll conclude (based on the information we have) that you’re a tax resident in another country and forward financial information about you to HMRC.”
US citizens are always a tax resident of the US, and the pamphlet notes that fact. The above is the prescribed dealings for a “recalcitrant” account as detailed in the IGA. A 30% withholding may follow.

Will the FI then close the account, or worse, freeze the account? Not necessarily, but it’s at the pleasure of the FI. HMRC will forward the account holder information to the IRS, as required. What happens then? Who knows.

Incidentally, there was no mention, in either the letter or the pamphlet, of a $50,000 threshold.

Edit to add: The letter also contained these words: "If our records are wrong, please complete Section B and indicate those countries where you are tax resident or a citizen. You'll need to provide evidence to support this......."
A CLN perhaps?