Our attorney Phil Hodgen was recently quoted in a TIME magazine article on expatriation. Read the full text here: Why More U.S. Expatriates Are Turning in Their Passports
Plan ahead
If you or your spouse are considering relinquishing US citizenship or permanent residency, there are important tax consequences to consider well before you do so.
The tax problem for expatriation is simple — there is a “pretend” sale of all of your assets when you leave the United States. All of that “pretend” capital gain ends up being a very real cash tax liability to you, and you may have to pay the U.S. Treasury a whacking big tax payment in order to successfully leave the United States.
We informally refer to this as an “exit tax.” On the day that you successfully “exit” the US by giving up your citizenship or residency, the U.S. taxes you as if you had sold all of your assets.
Set up a consultation
We have helped many clients to navigate this process successfully. For a flat fee of $1,400, one of our attorneys will discuss your situation with you in detail and give you a plan for moving forward. We work with clients all over the world, and usually do these consultations over the phone.
This session isn’t by the clock, and the attorney will take as much time as you need in order to understand the expatriation process. Send an email to debra.rudd@hodgen.com if you have any questions about how we work, or if you’d like to schedule your consultation. You can also call Debra at 626-689-0060 x3.
Additional Links
New York Times article on increase in expatriations
Frequently Asked Questions
I want to give up my citizenship or green card, but I don’t know where to start. Where can I learn more?
Check out Phil’s blog post on expatriation: Leaving the USA and leaving U.S. tax law behind you.
How much “exit tax” will I have to pay?
Generally, if your assets are under $2 million, you will not owe any tax. However, you will still have paperwork to complete.
If your assets are over $2 million, and you do nothing to reduce your tax liability, you will owe tax. However, there may be various ways to reduce your tax hit.
How much do you charge to handle all of the IRS paperwork?
We always work on a fixed-fee (not hourly) basis. After your initial consultation, our attorney will give you a fixed-fee quote to complete all of the necessary IRS forms. The fee will vary depending on the value and complexity of your assets. We will prepare the paperwork to correctly log you out of the US taxpayer system, as well as your final year tax returns.
Can I do the IRS paperwork myself?
If your situation isn’t complex and your assets are well under $2 million, our attorney may be able to walk you through the paperwork during your initial consultation. However, this will depend entirely on your comfort level and on the complexity of your situation.
Can my current CPA do the IRS paperwork?
Again, this will depend on your situation and your CPA’s level of expertise. Many CPAs are unfamiliar with the specialized form necessary to correctly log out of the US tax system. However, we sometimes to recommend that our clients use their existing CPAs; if desired, we will then review the forms that he or she prepares.
Will giving up my US citizenship or permanent residency automatically log me out of the US tax system?
Until you file the IRS paperwork to “log out” of the US tax system, you’ll still be a U.S. taxpayer. This is the case even if you successfully relinquish your visa status as a permanent resident.
Giving up your green card or your passport does not log you out of the U.S. tax system, and if the U.S. government catches you they’ll think you are taxable on all of your worldwide income. You have to file the right forms with the IRS to successfully do this.
Where can I get more information on IRS procedures?
Follow the link to Notice 2009-85. This notice was published in October, 2009 and is the administrative guidance for people who want to expatriate.