Expatriation Problems – Tax & IRS Problems – Attorneys, Former IRS

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Expatriation Tax

The expatriation tax provisions under Internal Revenue Code (IRC) sections 877 and 877A apply to US citizens who have renounced their citizenship and long-term residents (as defined in IRC 877(e)) who have ended their US resident status for federal tax purposes. Different rules apply according to the date upon which you expatriated.

Definition – What is a Expatriate

In its broadest sense, an expatriate is any person living in a different country from where he is a citizen. In common usage, the term is often used in the context of professionals sent abroad by their companies, as opposed to locally hired staff.

There is no set definition and usage does vary depending on context and individual preferences and prejudices.” per Wikipedia”
Have not filed an Income Tax Return(s)

Among the various new requirements contained in IRC 877 and 877A, individuals that renounced their US citizenship or terminated their long-term resident status for tax purposes after June 3, 2004 are required to certify to the IRS that they have satisfied all federal tax requirements for the 5 years prior to expatriation.

If all federal tax requirements have not been satisfied for the 5 years prior to expatriation, even if the individual does not meet the monetary thresholds in IRC 877 or 877A, the individual will be subject to the IRC 877 and 877A expatriation tax provisions.

Individuals that have expatriated should file all tax returns that are due, regardless of whether or not full payment can be made with the return.

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Depending on an individual’s  tax circumstances, a taxpayer filing late may qualify for a payment plan.

All payment plans will require continued compliance with all filing and payment responsibilities after the plan is approved.

Expatriation on or after June 16, 2008

If you expatriated after June 16, 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 termination of residency is more than a specified amount that is adjusted for inflation ($145,000 for 2009 and 2010, $147,000 for 2011, and $151,000 for 2012).
2. The taxpayers net worth is $2 million or more on the date of your expatriation or termination of residency,
3. 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.

Relinquishing citizenship

IRC 877A(g)(4) provides that a citizen will be treated as relinquishing his or her U.S. citizenship on the earliest of four possible dates:

1. the date the individual renounces his or her U.S. nationality before a diplomatic or consular officer of the U.S., provided the renunciation is subsequently approved by the issuance to the individual of a certificate of loss of nationality by the U.S. Department of State,

2. the date the individual furnishes to the U.S. Department of State a signed statement of voluntary relinquishment of U.S. nationality confirming the performance of an act of expatriation specified in paragraph (1), (2), (3), or (4) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(1)-(4)), provided the voluntary relinquishmentt is subsequently approved by the issuance to the individual of a certificate of loss of nationality by the U.S. Department of State,

3. the date the U.S. Department of State issues to the individual a certificate of loss of nationality or,

4. the date a U.S. court cancels a naturalized citizen’s certificate of naturalization.

Expatriation Problems – Tax & IRS Problems – Attorneys, Former IRS

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