What it's REALLY Like to Expatriate

There are a lot more former U.S. citizens than there once were.  Americans fed up with paying tax—and their government—are voting with their feet.  And they're doing it in much greater numbers than ever before.

Why might you wish to give up your U.S. citizenship? Primarily, because doing so is the only way that you can eliminate your lifetime obligation to pay U.S. taxes, no matter where you live. 

Expatriation is a major decision.  It means, for instance, that you no longer have the automatic right to enter or live in the United States.  You'll need to get a visa to do so, unless your non-U.S. passport qualifies you for visa-free entry.  In all cases, the Department of Homeland Security can deny you re-entry to the United States, and is under no obligation to tell you why.

However, the actual process of expatriation isn't as arduous as you might think.  You're likely to encounter bureaucratic incompetence, unexplained delays, and rampant stupidity.  But giving up your U.S. nationality is a legal right; one that even the inane employees of the Department of State understand. Here's one account my colleague Bob Bauman recently received from a now-former U.S. citizen on how the expatriation process really works:

As you wrote, the first step is to find alternative citizenship.  After attending a Sovereign Society meeting, I decided that my best bet was to gain citizenship in St. Kitts & Nevis by purchasing a property there for an amount over $350,000.  Then, I paid another $50,000 for two additional family members to apply for citizenship.  This whole process, including closing on the property, application, review of paperwork, citizenship, then waiting for issuance of the passport, took about nine months.

After moving all of my assets whose title I could change or move offshore, I purchased a home and moved to Panama.  Then it came time to surrender my citizenship.  From everything I could find on-line or in any books, I was expecting the surrender process to be rather grueling, including meeting one on one with a consular official sitting me under a bright light, interrogating me about reasons and taxes, then almost beating me with a rubber hose.  We are all aware of the onerous threats of what IRS can do if we have the nerve to try to escape the plantation.

Bob, I was absolutely dumbfounded at how EASY it really was.  No problems, no questions about anything, they were simply willing to cut me free.  I had thought I wanted an attorney with me, so I would have some idea which questions I legally had to answer and which I could refuse to answer.  It was just not necessary.  I believe IRS and the State Department tries to scare the hell out of us so we won't even try to surrender citizenship the process is far different than I envisioned.

There are a total of five forms needed.  All are available on-line on the State Department Web site.  The numbers for these forms are DS-4079 through DS-4083.  You complete these forms, and then take them along with your U.S. passport, birth certificate, Social Security card and new passport to the embassy.  If you are smart, you will also bring a typed letter explaining your reason for wanting to expatriate. 

Do not say ANYTHING about taxes.  My reasons were that I abhorred socialism, loved the Constitution, but was unbelievably sorry that we no longer followed it.  Then a clerk will re-type all the forms.  This took about two hours because of numerous typographical errors.  It is important to proofread every answer and every single line.  It took something like 10-12 different efforts to get all five forms finally completed correctly. 

A consular representative then came to the window, asked for my U.S. passport, asked me if I was really the person who wanted to expatriate, and whether I understood the consequences.  Then he signed a few papers, took my passport and said good-bye.  That was it!   Oh, he also told me I should contact the IRS to inform them of what I had done.  He said I would receive my certificate of loss of nationality in about four months.   He never asked me ANYTHING about taxes or finances.

After a follow-up call to the embassy four months later, I was told I could return and pick up my official certificate of loss of nationality.  They returned my U.S. passport with holes punched in it.  The next day I returned to the embassy to apply for a 10-year, unlimited visit VISA to come to the United States.  It was approved the same day.  I also applied for Social Security because I was now old enough to receive it.  You do NOT surrender your right to Social Security benefits by expatriating.

I thought it might be helpful to you to know what they ACTUALLY do to those who wish to surrender citizenship.  Regardless of how intimidating they want you to believe this process can be, at least in my case, NOTHING happened.

I am now a free, sovereign citizen of the world.  St. Kitts & Nevis charges me zero income tax, zero capital gains tax, and zero death tax.  I don't even have to file a tax return any longer for ANYONE.  Panama leaves me alone, so long as I pay my property tax and sales tax, and the U.S. no longer "owns" me. 

My St. Kitts & Nevis passport gets me almost anywhere in the world that I could have gone with my former U.S. passport.  With my 10-year visa, I can come back to visit the U.S. whenever I want.  Believe me, I don't want or need to come back very often, and there are lots of nice other places to see in this world.  And, if we are both on the same plane hijacked by terrorists, they'll kill you long before me. 

I have the very best of all worlds.  I live virtually tax-free in a beautiful country.  I actually have more freedom and liberty as a guest resident of Panama than I did as a citizen of the United States. 

I simply don't understand why there are not MILLIONS of Americans giving up their citizenship.  If only they knew how EASY it is, how practical it is and how much better for their financial health, there would be lines around the block at every U.S. embassy from those who realize there are better choices than remaining a U.S. citizen.

Copyright © 2009 by Mark Nestmann

Comments

[Jeff]

Great info and nice to hear. Would really like to hear more about filing the IRS Form 8854 and people's experience with that. It seems that many are only completing half of the process.

How smoothly do the IRS 8854 proceed?

If you do not file and are considered a covered expatriate, do those provisions expire after 5-10 years if you never file an 8854?

[Mark Nestmann]

Jeff,

No word on the Form 8854 on the communication Bob received.

Remember, under the new law, you don't need to file Form 8854 until you file your tax return for the year you expatriate. Depending on when you expatriate, that could be up to a year or more after you lose U.S. nationality.

Also, under the new law, you don't need to file Form 8854 to lose U.S. nationality and end future U.S. tax liability. But it's a good idea to file it.

If the IRS doesn't contest your calculations or your statement of tax compliance for the past five years within a year or two after you file Form 8854, you're probably home free. The IRS usually doesn't come after people for tax obligations many years in the past. It's harder to create a case and even harder to collect, especially if you no longer maintain any connections to the United States.

[Oilwelldoctor]

Nice if you don't minding forefitting $400K after-tax $ for citizenship. That money would go a long way toward paying US taxes until death. The USA has its problems granted, but living there, especially now with the recession/depression & low prices on real estate and food is about as good as it gets on a retirement income. BTW, I have been living abroad for the past 20 years and will retire in Tucson and/or south Florida.

[Mark Nestmann]

The real tax payoff for this strategy is for those who are willing to live in a lower-tax jurisdiction outside the USA. But many expatriates are less concerned with tax than with the incredible difficulty of complying with increasingly intrusive US tax and regulatory requirements when living abroad, along with the steady drift of the US government toward socialism and its alarming levels of debt.

[George]

3 years residency to get Canadian citizenship maybe a better option.