Unwilling dual citizens face 10-month wait to shed U.S. citizenship in Toronto
In the end, Dale travelled most of the way across his adopted country to cut his last ties to his old one.
Originally from Kansas, the Strathroy, Ont. man had become a Canadian citizen in 2004, which he thought of as marking the loss of his U.S. citizenship.
But he’d never asked the U.S. government to acknowledge his loss of nationality, which started to seem like a good idea last year, when Canada signed a deal with the U.S. under the Foreign Account Tax Compliance Act, obliging Canadian banks to give the IRS information on any customer they think is American, including dual citizens. (The CRA acts as an intermediary between the banks and the IRS.)
“Once FATCA hit the news, I said: ‘This is ugly stuff, and I don’t want any part of it,’” he explains.
Dale emigrated to Canada in 1973 after leaving the U.S. Navy, where he had spent time on river patrol boats in the Mekong Delta in Vietnam.
“I really screwed things up – I served five years, then fled to Canada,” he jokes.
(Dale is unwilling to have his full name published until the U.S. State Department approves his loss-of-nationality paperwork.)
Starting in November of last year, he contacted the embassy and most of the U.S. consulates in Canada, trying to make an appointment to ask for loss-of-nationality paperwork.
The trouble was, lots of other people had the same idea.
The Toronto consulate offered him an appointment on Oct. 15, 2015, nearly a year away. Other consulates ignored him, while the Ottawa embassy turned him down because he didn’t live in the region.
The U.S. consulate in Calgary could give him a date in March, so he booked that – and some plane tickets.
“That was basically only three months away, so we jumped all over it,” he says. In the end, once he managed to get an appointment, the process was ‘a piece of cake.’
“I’ve lived Canadian for 42 years – give me a break,” he says “I’m not going back to the U.S., I have no ties to the U.S., I don’t own property down there. Why would I not formalize this and get my certificate?”
READ MORE: Our FATCA coverage
Last week, Dundas, Ont. lawyer David Lesperance booked a citizenship renunciation appointment for a client at the U.S. consulate in Toronto. The first available date: February 2016.
More unwilling dual citizens want to lose U.S. status than consular officials can keep up with, so the waiting list steadily grows. In February, the wait in Toronto was eight months, says cross-border accountant Kevyn Nightingale, and last August it was only five months.
“Toronto was never that backlogged, but we are seeing an unprecedented onslaught,” Lesperance says.
FBI statistics show that 1,030 people finished the citizenship renunciation process in March, far higher than the normal monthly total of about 270. FBI spokesperson Stephen Fischer told Global News that “the Department of State is working on updating this file, and thus the increase.”
(Under U.S. law, people who renounce citizenship are barred from buying guns in the United States. They’re entered in an FBI database that includes fugitives, convicts, drug addicts, people dishonorably discharged from the military and people subject to domestic violence-related restraining orders.)
People who want to lose U.S. citizenship are added to U.S. consulates’ existing workload, Lesperance points out.
“They do have other things to do. They’re not going to open it up 24 hours a day to deal with expatriations. It’s also there to service existing U.S. citizens who want consular services.”
Unlike other industrialized countries, the U.S. requires its citizens to file tax returns whether they live in the country or not. While it has been on the books for many years, the rule has only recently started to be seriously enforced.
Canadian residents won’t normally owe the U.S. any taxes, though there are situations where that can happen. However, U.S. tax filings can be confusing, intrusive and expensive to prepare, dual citizens say. Among other things, they must report all accounts they have signing authority over to an arm of the U.S. Treasury Department called the Financial Crimes Enforcement Network, or face large penalties.
“Some renunciants have reported to consular staff that the cost of preparing and filing U.S. tax returns, even though they may have had no U.S. tax liability, was a factor in their decision, ” a U.S. State Department official who spoke on condition she not be identified wrote in an e-mail.
The top countries for people shedding U.S. citizenship are Canada, Britain and Switzerland, she said.
Somebody who renounces U.S. citizenship in 2016 won’t be able to file their last piece of U.S. tax paperwork until mid-2017.
In August of last year, the U.S. State Department announced it would increase the fee people pay to renounce their citizenship – from US$450 ($550) to $US2,350 ($2,873).
Global News asked the State Department why, with the increased fee, it couldn’t afford to staff up to clear the backlog.
“The Department continues to work with overseas posts to refine the renunciation process to meet customer needs, and considers this among the numerous workload and other factors involved in making staffing decisions at our diplomatic missions overseas,” the official said.
“The Department does not discuss the details of personnel and staffing patterns of our missions overseas.”
Lesperance says he hasn’t seen clients motivated to shed U.S. citizenship put off by the higher fee:
“The resentment is there, but the cost is not enough for them to not do it, because the relief they will get from having ceased to be a U.S. person is greater than the cost. I haven’t had a single client who has said ‘I was going to expatriate, but they increased the cost, and not I’m not going to.'”
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