Dual-Status Tax Returns and Treaty Tax Rates

I get questions. Here is an answer for a Sunday afternoon: I’ve scoured the Internet for an answer to this question, and I can’t find it anywhere. Since you’re the go-to guru on the subject, I hope you can help. Background info: I renounced my U.S. citizenship on [Month] 31, 2014 and I have received […]

Telling the IRS that Elvis has left the building

Webinar – April 24, 2015 – Noncovered Expatriates Just a reminder. My webinar for noncovered expatriates is coming up on April 24, 2015. Get more information and sign up here. This week’s question This week’s question is not for U.S. citizens. It is for noncitizens who are U.S. tax residents, and who terminate their resident […]

Quick balance sheet question for Form 8854

One of the eternal struggles is the effort to bring an expatriate’s net worth below the $2,000,000 mark. Success here means that the person escapes the United States without being a “covered expatriate” and thereby incurring a potentially massive tax cost for doing so. Questions come up all the time about how to do this. […]

The only non-cash basis step up rule (other than death)

This week’s question came from a CPA friend, asking about a client of hers. It is a disguised expatriation question. See if you can guess the expatriation question before I answer it:

A client [now a U.S. resident] sold his house in China. Since the capital gain is calculated based on the original purchase price, why do some articles say that properties should be appraised before landing to this country? I have been confronted with this question a couple of times. Do you know why?

Form W-8BENs for expatriates

This Week’s Question

This week’s episode is a mashup of several question that have come up.

Once I have successfully expatriated, I want to keep my bank account, IRA, 401(k), brokerage account, etc. open in the United States. What paperwork is required and how will I be taxed?

Short Answer

Form W-8BEN. That is what you give the financial institution. It is pretty easy unless you want to reduce your U.S. income tax from the default 30% to a lower number (like zero).

Gifts, bequests, inheritances and expatriation

This Week’s Question

This week’s question came from reader N., who answered the question in the “Welcome to the Expatriation Only Newsletter” email I sent him with this:

My biggest question regarding expatriation is regarding inheritance. How does taxation change upon renunciation?

Webinar for Noncovered Expatriates

Course Overview:

Part 1. Introduction/Overview


Part 2. The Certification Test

A. Overview – Certification Test

The only test that matters to you (net worth and net tax liability are not a problem by definition)

B. How you become a covered expatriate

The law, Form 8854 – what is required?

The Code and the question on Form 8854.

The hard questions – small errors, big errors, etc. – what are the risks?

C. How to prevent covered expatriate status

Which years matter?

What to look for in those years?

What to leave alone

What to fix

How to fix it

When to fix it

No Social Security Number?

Part 4. Dual Status Tax Returns

A. Basic requirement to file

Filing requirement for year of termination of resident/citizen status.

What about low income people otherwise exempt from filing?

Should you file a dual status tax return or a full-year resident status return?

B. What happens if you don’t file, or you’re late

C. Technical details

How to allocate income to before/after expatriation date

Paperwork for the citizen/resident portion of the year (Form 1040 as a statement)

How to flow numbers from your Form 1040 Statement to the Form 1040NR

Paperwork for the portion of the year after expatriation

Tax computation for the noncitizen/nonresident portion of the year

Treaties for the nonresident/noncitizen portion of the year

Other stuff – personal exemptions, standard deductions, dependents, etc.

Part 5. Retirement Plans After Expatriation

A. How are the distributions taxed

Default rules

Treaty rules

B. Using treaties to reduce U.S. tax

How it works

The paperwork

C. Withholding at source

How it works

Form W-8BEN

Form 1040NR

Part 6. Life After Expatriation

A. Social Security, Medicare

How it is taxed



Medical treatment paid for by Uncle Sam

B. U.S. real estate

Income taxation of rent

Estate taxation

Capital gains tax on sale

C. Estate planning for U.S. assets

Real estate

Stock market investments

D. Travel to the U.S.


Friday April 24, 2015

8:00AM to 10:00AM Pacific Time

Will your future self hate you?

This week’s question comes up fairly frequently, particularly from “accidental” American citizens. The typical example is a person who was born in the United States while his parents were attending school, but who left and returned to his home country at a very early age–never to return to the United States.

I have no Social Security Number and I have never filed a tax return. I want to renounce my citizenship. Should I get a Social Security Number and file five years of tax returns before I do that?

And when I say “fairly frequently” I mean twice today. :-)

Mentally incompetent people and renunciation; some bad solutions

Commenter badger on the blog suggested this topic:

Could you follow up with your always insightful and informative comments – this time on the related situation of those living (and many born) entirely abroad – who are prevented (lifelong) by US law from expatriating or being expatriated (by a parent or guardian) because they are deemed legally incompetent to understand citizenship and thus to voluntarily renounce or relinquish it? They therefore are bound forever as US taxable citizen persons abroad – with all the pain and burdens that entails.

This is very important – in order for families to arrange for ALL family members to renounce and have the same non-US status for simplicity sake, and to protect their legal, local, non-US disability grants, benefits and savings (ex. Canadian Registered Disability Savings Plans RDSPs) from punitive and unjust US extraterritorial taxes, FBAR, and 3520/A burdens imposed on the funds provided by non-US taxpayers, parents and governments in order to provide for the wellbeing and support of those who cannot provide for themselves – due to chronic or congenital physical, neurological, psychological or intellectual impairments which make them unable to care for and support themselves.