Relinquishing Your US Citizenship

To force a man to pay for the violation of his own liberty is indeed an addition of insult to injury.

Benjamin Tucker

Don’t give up your US citizenship or your Green Card without talking to an expert.

The IRS is sending notices to expatriates who have not complied with the filing requirements for expatriation from the United States, including the imposition of a $10,000 penalty where appropriate.

Let’s start from the beginning.

  1. Request a consultation to review you tax situation
  2. Let us provide you with a US expatriation road map
  3. Don’t give up your US citizenship or your Green Card without talking to an expert.

Expatriation on or after June 17, 2008

If you expatriated on or after June 17, 2008, the new IRC 877A expatriation rules apply to you if any of the following statements apply.

  1. Your average annual net income tax for the 5 years ending before the date of expatriation or
  2. Termination of residency is more than a specified amount that is adjusted for inflation ($151,000 for 2012, $155,000 for 2013, $157,000 for 2014, and $160,000 for 2015).
  3. Your net worth is $2 million or more on the date of your expatriation or termination of residency.

You fail to certify on Form 8854 that you have complied with all U.S. federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency.

If any of these rules apply, you are a “covered expatriate” – this means you are subject to an exit tax.

Did you know about Relief Procedures for Certain Former Citizens?

 

 Relinquishing U.S. citizenship and the tax impacts of relinquishing U.S. citizenship are serious matters that involve irrevocable decisions.

On 6th September 2019, The IRS announced procedures for certain persons who have relinquished, or intend to relinquish, their United States (U.S.) citizenship and who wish to come into compliance with their U.S. income tax and reporting obligations and avoid being taxed as a “covered expatriate” under section 877A of the U.S. Internal Revenue Code (IRC).

The purpose of these new Relief Procedures is to support former US citizens to come back into compliance with their US tax filing obligations and avoid any potential ‘exit tax’, provided they meet the following criteria:

 

  1. Their failure to file tax returns was non-wilful.
  2. They did not previously have a filing history as a US citizen or resident.
  3. They had an average annual net income tax liability after credits for the 5 years ending before the year of expatriation below a certain annually-adjusted threshold (US$168,000 for 2019).
  4. They had global net assets of less than US$2,000,000 at the time of expatriation and at the time of filing their return under these procedures.
  5. They did not have an overall tax liability of more than US$25,000 over the five tax years prior to expatriating and in the year of expatriation.
  6. They agree to complete and submit all required Federal tax returns for the six tax years at issue, including all required schedules and information returns such as Form 8938, Statement of Foreign Financial Assets and FinCEN Form 114, the FBAR.

The IRS is also allowing individuals to file tax returns under the Relief Procedures without needing to obtain a social security number – a lengthy and administratively burdensome process for citizens living outside of the US.

Forewarned is forearmed.