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Terry Ritchie, U.S. Expatriation and Your Dual Citizen Clients

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In this video, Terry Ritchie speaks with InvestmentExecutive.com’s Rudy Mezzetta about what U.S. citizens living abroad need to know when considering renouncing their U.S. citizenship. Though the numbers of expatriations are reaching historical highs, the process is not an easy one. After filing with the Department of Homeland Security, an individual wishing to renounce citizenship must meet with the consulate. Upon approval, the individual will be issued a CLN: Certificate of Loss of Nationality, from The State Department. This is not a quick process.

In terms of taxes, if you meet one of these rules—a worldwide net worth of $2 million or more, average annual net income tax of more than $150,000 (adjusted for inflation), or have not complied with all U.S. tax responsibilities in each of the five preceding years—you can be defined as a “covered expatriate.” CEs are subject to onerous tax considerations, including a “mark-to-market tax” that takes into account what you would net if you sold all of your assets upon expatriation, and then taxes this amount as a capital gain. Further implications include a tax on qualified assets and tax-deferred investment vehicles.
Finally, Terry reveals the #1 reason that Americans chose not to expatriate: the possibility (based on pending U.S. legislation) of not being allowed to return to the U.S. View the video here.

The First Canadian in the White House?

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Our very own, Terry Ritchie, recently wrote an article for the website, Advisor.CA. He touches on the latest news surrounding Ted Cruz. Cruz, a U.S. senator, has decided to renounce his dual Canadian citizenship to prevent confusion regarding his political loyalties, experts suspect, because the Republican Party has shortlisted him as a candidate for the presidential election in 2016. Ted Cruz, a U.S. senator from Texas, may be attempting to avoid the same election complications that plagued President Barack Obama when his citizenship came under fire prior to becoming the 44th U.S. president due to living abroad during his childhood and having a father from Africa. Cruz was born in Calgary and his American mother and naturalized American father relocated to the U.S. when he was four years old.

Technically Cruz is both a Canadian and American citizen, and according to the U.S. Constitution is eligible to run for president, but when a candidate’s birth origin is ambiguous, a phenomenon called “birtherism” sometimes develops that involves political opponents publicly disparaging and questioning a politician’s patriotism.

The tax and financial implications are minimal but could have been serious had Cruz lived in and reported income taxes to Canada as a dual U.S. citizen. The U.S. Internal Revenue Service requires all American citizens, regardless of residence to report income taxes as U.S. income. Conversely, Canada collects income taxes from only those Canadians living within the country’s border. The American law has become more enforced since the Foreign Account Tax Compliance Act was implemented in 2010, compelling many ex-patriot Americans to renounce U.S. citizenship to avoid paying higher taxes.

In a single fiscal quarter, according to the U.S. Treasury Department, 1,130 Americans renounced American citizenship, whose names are recorded in the Federal Register. The public record can be viewed by anyone, and accounting professionals can search for their clientele.

In a statement by Cruz, he claimed to have no awareness of his dual citizenship and said, “I have never taken affirmative steps to claim Canadian citizenship, I assumed that was the end of the matter… Nothing against Canada, but I’m an American by birth and as a US senator, I believe I should be only an American,” Cruz said.

There has been no confirmation that Cruz will indeed run for presidential election, but as a Hispanic former presidential legal adviser and Tea Party backed policy maker, some experts consider him a strong contender and his inner circle of advisors have indicated a bid.