What Dual Citizens Need to Know Before You Renounce US Citizenship
The US is one of the few countries that impose tax based on citizenship and not residency, so that means that citizens will pay income tax regardless of where they live. Many US citizens faced with US taxation and reporting requirement have considered or are planning to renounce US citizenship. The renunciation process has many steps, and there are things that you must know before even beginning the procedure. Check out our tips below if you are planning to renounce US citizenship.
Dual Citizen Planning to Renounce US Citizenship? You Have to be Tax Compliant First
As a dual citizen, the first thing that you must do is become tax compliant before you can renounce citizenship. For most people, this means being current on their tax filings. Dual citizens over the age of 18 must file five years of tax returns to be in compliance and pay any and all tax due. This requirement extends to foreign financial accounts, so if FBARS are required, then these also need to be filed. The FBAR (Foreign Bank Account Report) threshold is met if all of your bank accounts totaled or exceeded $10,000 at any point during the year.
Further, if you missed an informational return, such as Form 8938 (FATCA), Form 8865, Form 5471, or Form 8858, then you are not in compliance. So, you must ensure that your tax returns have been properly prepared. For individuals that have fewer than five years of returns due, then they must file all returns that are required and pay any tax due to be in compliance.
Next Step: Establish Citizenship Elsewhere Before Your Renounce
There is no requirement that you establish citizenship in another country since the US will allow a person to be stateless. However, it is challenging to relinquish citizenship without being a citizen of another country, so it is recommended that you become a dual citizen first before applying to renounce US citizenship.
Don’t Forget to Schedule a Meeting at the US Embassy
The subsequent step will be to schedule an initial meeting at a US embassy or consulate. This first meeting is to determine you are mentally fit and not exiting under pressure. This appointment should be scheduled at least six months in advance, due to the waiting period. After the initial meeting, a second meeting will be scheduled in which you officially renounce citizenship.
Please note that renunciation isn’t allowed for tax avoidance purposes, and if this is the only reason for your exit, and your renunciation could be voided. You must ensure that all of these steps are properly taken in order to renounce smoothly.
Need Help With Planning to Renounce US Citizenship?
We can get your taxes in order before you go. Get started with Greenback, so that the process is clear and straightforward.
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