Robert Wood – Should You Renounce Your U.S. Citizenship? – interview – Goldstein on Gelt

Robert Wood – Should You Renounce Your U.S. Citizenship? – interview – Goldstein on Gelt


Douglas Goldstein, CFP®, Financial Planner
& Investment Advisor Rob Wood is a tax attorney with 35 years experience
in the field. He works with people all over the world and knows a great deal about cross
boarder investing. Douglas Goldstein, financial planner & investment
advisor, interviewed Wood on Arutz Sheva Radio. Douglas Goldstein: Is it true that once you
filed for renunciation you’re still required to file US tax returns for 10 more years? Rob Wood: It actually isn’t true. It’s
isn’t true any longer unfortunately and this does give rise to lots of confusion.
The US tax law on expatriation has changed multiple times over the last 30 years and
there was a time as the rule changed in 2004, they changed again in 2008 but under current
law, if you’re expatriate now, you do not need to keep filing US tax returns. However,
it’s important to say that if you still have US source income even if you’re an
Israeli living in Israel or wherever you are and not having a US citizenship or a US green
card, you still might have to file because if you have US source income, you’d be filing
a 1040NR, the non-resident return but it isn’t a sort of a tail if you will that follows
you for 10 years the way it used to. Douglas Goldstein: Let’s say that the US-Israel
citizen living in Israel 10, 15, 20 years and no longer has any particular ties to the
United States so he gives up his citizenship but he does like having a brokerage account
or a bank account or maybe has an IRA in the states, is that going to cause him to have
to file the 1040NR? Rob Wood: I think it depends. I think in most
cases the answer is going to be yes. I think it depends on whether there is income but
I think it’s reasonable to assume that if you have your Israeli citizen in that example
is going to have income generated from those accounts and therefore is going to have US
source income. In some ways, I’m sure I’m not the only one saying this, the US maybe
shooting itself in its foot by many of the rules including FATCA that are prompting many
more people to look at expatriation but that’s what is going on and the numbers are spiking. Douglas Goldstein: One of the fears that people
have is they’ve heard that if they give up their US citizenship, the IRS is going
to take half of their wealth, let’s say if they die and they have to pay the state
tax the moment they give up their citizenship, true or false? Rob Wood: Unfortunately, I won’t be popular
for saying it this way but it depends. Many people including dual US-Israeli citizens
and many other people around the world with US citizenship or holding a green card have
been trying to fix their very complex US filings. I’m sure many of your listeners have had
FBAR, the foreign bank account reporting forms and the global tax return that the IRS expects.
A lot of people haven’t done a good job in the past about that and since 2009 when
UBS and Credit Suisse and many other banks including Bank Leumi and other banks in Israel
have had to focus on fixing things in a way to the IRS and US Justice Department will
accept. So there’s a lot of cleanup in the past and let’s say if somebody has been
scrupulous about their tax returns and other reporting in the past and sometimes that means
having really competent tax people helping them then they probably don’t pay much if
anything . On other hand if they have a bunch of cleanup to do and this maybe counter intuitive
but generally speaking to do with “right” the way the IRS wants it, you have to clean
up the past and then you exit. You don’t just sort of exit and have an un-cleaned past. There are people who are doing sort of off
the grid, not for example filing US tax returns at all even though they’re US citizens living
abroad somewhere and that kind of a person say in some cases quite understandably “Look,
I haven’t file US tax returns in 25 years. I live in X and I’m a citizen there as well
as US citizen, sort of an accident that I’m a US citizen. I don’t want to file years
or even three years or five years of US tax returns to fix it all and risk. You just said
losing half my wealth or more, so I’m just going to do a consular expatriation, turn
in my passport at US embassy somewhere and do whatever I have to do. Get the certificate
of loss of nationality” which is people abbreviate it and called it CLN and I’m
not going to file anything with the IRS. I have seen a few clients do that and I have
not heard of them having problems, however, it’s clear that if you do that, you are
not cleared by the IRS and they could come after you. I think most people think in most
cases, that’s probably not likely but it’s possible. So sort of the way to do it probably
is to file all the right stuff and yes, it can mean that you can lose a lot of your assets. Douglas Goldstein: One of the things you said
which actually was interesting to me is that you pointed out how lot of the non-US banks
were being forced by the United States government to submit information about their clients.
If you’re a US
person who is living outside the US, it can be very complicated to manage your money in
the way that you may have been doing it for decades. Rob Wood: You may have seen more of it but
I have seen it too and I hear many complaints from US persons living outside the US and
many of these people feel not only entirely disenfranchised because if they’re not living
in a US states, they don’t have representatives, they don’t have senators, they don’t have
congressman that they can call and complain to and because they are living in Israel or
Paris or wherever they’re living. There’s this great deal of discrimination that it’s
not nearly that the banks worldwide do not want noncompliant Americans which one can
give on FATCA’s sort of very huge and scary footprint. One can understand that I think
but I think it’s hard to understand how the foreign banks are saying “We don’t
want any Americans. It’s just too much paperwork, too much hassle” and as you say many are
doing that. By the way, there are several lawsuits about
FATCA. There’s one in Canada for example some Canadians are suing the Canadian government
saying that the agreement that Canada get with the US is unconstitutional under Canadian
law. I read recently Rand Paul, the candidate in the US is suing I believe the undo FATCA,
obviously the republican party has said it wants to undo it but for now as I’m sure
people are finding, it is a royal pain in the neck and that worldwide Americans must
disclose everything and must hopefully get their banks happy with them. Douglas Goldstein: Is it true that giving
up your US citizenship means you’ll never be allowed to visit the US again? Rob Wood: Not at all and I have to put on
my careful lawyer hat and say that is not a tax question, it’s of course an immigration
question so I usually when I’m dealing with a client who is expatriating, I usually ask
them to also consult an immigration lawyer because it can vary where they also have a
passport. That is you cannot give up a US passport without having another passport so
you can’t be stateless. So if you had for example another passport from some countries
that was not easy to travel on in the US, you might be in trouble. For most people,
I think the answer is yes you can travel. As what immigration lawyers tell me, there
is no sort of blacklist or something like that that says if you want to give up a green
card or give up a US passport that they’re going to not allow you in, you’re just subject
to the usual rules for that country’s citizens. Douglas Goldstein: If you give up your US
citizenship, will you lose your social security and Medicare benefits? Rob Wood: The tax treaties and obviously since
you’re speaking from Israel, there is a US-Israel tax treaty. In the case of Israel,
I would predict that you don’t lose them. I know I’d looked for some other countries.
I have looked at some countries where you do. For example, my memory is that if you
are a Chinese/US person and you give up your US and then you do lose them as I recall.
So I think you need to do some homework because obviously they can be leaving money on the
table. One thing I do need to correct that I crossed
over and I should correct and that is US exit tax. So I think I was focusing on compliance
and you need to look at whether you’ve complied in the past but let’s just take a person
who is a dual citizen and wants to now give up US passport and just come to the US occasionally
as a visitor to visit family for example. There is under existing law an exit tax and
depending on how much money you have and how much money you make, it can result in a capital
gain tax as if you sold your assets the day before you left the US. People might want
to get IRS form 8854, the instructions in that form is basically how you say that you
shouldn’t pay an exit tax or how you pay it. It’s a capital gain tax, there are some
exemptions generally if you have less than $2 million of assets, you don’t pay it.
There are number of other exemptions but the bad thing is you could if you’re a person
with substantial assets and substantial income, you could get stuck paying tax on even though
you’re not selling anything, you could get stuck on the appreciation in assets that you
have and that’s a controversial tax but it is still in the law. Douglas Goldstein: How can people learn more
about you and the work that you’re doing? Rob Wood: They can go to my website which
his www.woodllp.com. There are a lot of articles there and there’s I believe an index and
a search window, you can type exittax or expatriation or something like that and you should pull
up a bunch of different articles that will have lengths about different resources you
can see.

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