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Confrontation with bureaucracy, part 3

7 December 2008 by Mike Gogulski
Posted in diary | 14 Comments »

On Friday I had a 9am appointment at the US Embassy with the Consul to move ahead with my renunciation of US citizenship.

The Consul, an affable man about my age, did his duty. He made certain all the forms were filled out properly, and discussed with me what I am doing. Part of his job is to advise potential renunciants of the consequences, to make certain that they are not insane, under duress or lacking sufficient knowledge of the law to appreciate their action, and to explore all of the un-thought-of possibilities which might lead one to back away from the decision. We chatted a bit about prior renunciants he is aware of. Apparently there have been a good number of them who renounced back in the Vietnam War era as a political protest, only to regret doing so later on and attempt to reclaim their citizenship via the courts, to little avail. Additionally, and interestingly, there have apparently been cases in which cult leaders induced followers to give up their citizenship as part of binding themselves more closely to the cult. When these become deprogrammed and attempt to put their lives back together, they may find sympathy in US courts voiding their renunciation and restoring them to citizenship status.

Anyway, I jumped all the hurdles and through all the hoops he offered, and he accepted that I know what I’m doing — or, at least, that I am well aware of all the risks. Inquiring as to my motives I told him that I’m after a political divorce, and that, no, it doesn’t matter that Obama won the election, as his administration will no doubt continue doing the real work of the people who actually own and direct the American system. I signed all of the documents, read aloud from the Oath of Renunciation a bit to satisfy a “swearing” requirement, and handed all of it over to him.

The final item, not previously known to me, is to fill in and submit an IRS Form 8854, a delightful document entitled “Initial and Annual Expatriation Information Statement”. The IRS wants a full accounting of my situation for the past five years, a statement of assets and liabilities and an income statement. According to the instructions to the form, because I will answer “no” to the question “Do you certify under penalty of perjury that you have complied with all of your tax obligations for the 5 preceding tax years?”, I will become subject to “section 877″, which among other things will require me to file an updated copy of Form 8854 every year for the ten years following my expatriation. The “Penalties” section of the instructions contains this gem:

If you are subject to section 877 and required to file Form 8854 for any tax year, and you fail to file or do not include all the information required by the form or the form includes incorrect information, you will owe a penalty of $10,000 for that year, unless it is shown that such failure is due to reasonable cause and not willful neglect.

I will have to answer “no” to that question, and thus I will be subject to this penalty, because since 2005 I have not filed a US income tax return. Even though I have had no income subject to US taxation in the last several years, the filing requirement still exists. By the sound of things, and since I do not plan on ever filing an IRS form again after this one, it looks like that by 2019 I will have accumulated $100,000 in penalties, simply for failing to do government-mandated paperwork. A blog doesn’t really allow one to communicate a sense of profound indifference to the fullest extent. Is it possible, grammatically, to be highly willfully neglectful?

So, a bit of weekend work ahead for me as I slog through the 8854 in order to clear the hopefully last bureaucratic hurdle. I have another appointment with the Consul at 2:15pm on Monday, at which I will hand in the Form 8854 and surrender my passport.

  1. 14 Responses to “Confrontation with bureaucracy, part 3”

  2. By azraelsjudgement.blogspot.com/ on 7 December 2008

    Fill out paper work for another 10 years plus fines that seems ridiculous sense you are no longer a citizen. Of course the empire claims to rule people regardless of their official citizenship.

  3. By Kent McManigal on 7 December 2008

    How can you be subject to “laws” from a country you are not subject to? And what can they do about it other than send a sniper?

  4. By Peter Kovar on 7 December 2008

    good luck mike! Glenn told me once, that US citizens living and working abroad are subject to the US taxation regardless of the current residancy, but I might just got him wrong. but, honestly, what can we imagine under the term ‘failure due to reasonable cause’?

  5. By Peter Kovar on 7 December 2008

    *residence

  6. By Mattocracy on 8 December 2008

    Divorces are expensive and it sounds like this bitch can take you to the cleaners for leaving her. They purposely made this scary catch 22 for a reason. You owe taxes, yet you aren’t a citizens, so technically you aren’t guaranteed the same rights. If you don’t comply for the next ten years, what can they do? Did they explain that at all?

  7. By Mike Gogulski on 8 December 2008

    @Kent: The possibility exists, however remote, that I might be found deportable under Slovak law. The target country for that deportation would be the US. Not a desirable outcome at this point.

    @Peter: No, you heard him exactly right. The US is one of a vanishingly small number of nations (two?) which require citizens living abroad to file tax returns every year, and pay income tax if certain income thresholds are exceeded. Last I looked, you could earn up to around US$80,000 outside the US while on non-resident status, and have that amount exempt from taxation. Filing tax returns is still mandatory regardless. “Failure due to reasonable cause” might mean something like the taxpayer died, went insane, was imprisoned incommunicado, and so forth.

    @Matt: The Embassy’s duties do not encompass providing tax advice, of course, so no, they didn’t explain it. What can they do? Dunno… arrest me at the port of entry on an outstanding warrant should I ever turn up on US soil? Black bag job? Let your imagination roam…

  8. By Name1 on 15 June 2009

    Did you receive any type of confirmation your Form 8854 was received and processed, ending your tax status?

  9. By Name1 on 15 June 2009

    Maybe write an article or link to here if you have time:

    http://www.escapefromamerica.com

  10. By AJ Valleron on 10 September 2009

    Mike, you don’t have to file the Form 8854 for ten years. By the sounds of it, you expatriated after June 2008 and therefore only owe the IRS one 8854 (the first and the last). The ten-year shadow period is not applicable to you (section 877). Because you expatriated later than June 2008, you are subject to Section 877A. Even if 877 applied to you, your net assets must be over US$2m to have to file the Form 8854 for ten years.

  11. By Mike Gogulski on 10 September 2009

    @AJ: Aha. Didn’t read it that way. Well, we’ll see in any case, because there’s approximately zero chance of my filing the bloody thing anyway. :)

  12. By AJ Valleron on 10 September 2009

    Actually, the new law of 877A is better if you don’t want to file the Form 8854. Your US tax obligation ended when you signed the Oath of Renunication. This was your last day as a “US Person” (US tax resident).

    Under the old 877 rules, if you DIDN’T file the 8854 your US taxation would continue to run forever. No matter for you of course because these rules don’t apply.

  13. By Mike Gogulski on 10 September 2009

    Note the possible exception, though. I checked “no” on a question of the form “do you swear you’ve complied with all your US tax obligations for the past five years”. There was a notation saying that unless that response was “yes”, I fall under 877.

  14. By AJ Valleron on 11 September 2009

    OK, if you ticked No, then you’re in 877A (the Exit Tax). That won’t mean anything unless you have large unrealised gains (over US$600,000). If you don’t have that, it won’t make any difference.

  15. By Steve Miller on 30 September 2009

    So that means a Form 8854 does not have to be filed?

    If is isn’t, then 877A is applicable, which does not mean anything unless one has net assets over $600,000.

    Is that correct?


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