Exit Tax Book Chapter 2: How a U.S. Citizen Becomes an Expatriate

Last month, we covered a general overview of the exit tax, expatriation, and the distinction between covered and non-covered expatriates.

For the February issue, we will focus on the ways in which a US citizen can expatriate, and on what date that expatriation becomes effective.

Who is a US citizen?

The Internal Revenue Code, or tax law, definition of a US citizen points to the definition from immigration law. This is the tax law definition of a US citizen: 1

Every person born or naturalized in the United States and subject to its jurisdiction is a citizen. For other rules governing the acquisition of citizenship, see Chapters 1 and 2 of Title III of the Immigration and Nationality Act (8 USC 1401-1459).

Minimultinationals Chapter 01: Overview of the Series

American minimultinationals are small (for various definitions of “small”) business enterprises subjected to the U.S. tax system.

There are many ways that a minimultinational becomes exposed to the U.S. tax system. Doing business in the United States is an obvious way. If you have an office or employees in the United States, some portion of your business profits will be taxed.

I focus here on businesses that operate mostly or entirely outside the United States but are owned by U.S. citizens or residents. This factor alone–ownership by a U.S. person–means that the business profits will be exposed to U.S. income tax, even if the business never operates in the United States.... continue reading

American Minimultinationals: An Introduction

What do I mean by American minimultinational?

Multinational

A multinational business operates in multiple countries, exposed to multiple tax-hungry governments. Apple. General Motors. Exxon.

A minimultinational is a multinational business, but smaller.

• Do you have 100 people in a cubicle farm working on your international tax stuff? You’re a multinational.
• Is that thought ludicrous bordering on insane? You’re a minimultinational.

American

An American minimultinational is one that is owned by a U.S. citizen or resident.

Merely by having a U.S. citizen or green card holder as an owner, a business that operates 100% outside the United States is a multinational business.... continue reading

Exit Tax Book Chapter 1: A Quick Overview of the Exit Tax

Today’s topic: A quick overview of the exit tax

The term “exit tax” is not used or defined in the Code or regulations anywhere. It is a shorthand to describe the federal law that requires some citizens and green card holders who are leaving the US tax system to pay US tax, one last time, on their worldwide assets.

The defining feature of the exit tax is that all assets are treated as if they are sold on the day before citizenship or resident status is terminated. If there are any profits from the pretend sale, you pay tax on those profits.... continue reading

File an Income Tax Return Extension to December 15, 2018

If you are an American living abroad and sweating the October 15, 2018 tax filing deadline for your 2017 income tax returns, there is a possible piece of relief. You may be able to qualify for a further extension of time for filing your tax return — to December 15, 2018.

For American taxpayers living abroad, if you want to get a filing deadline of December 15, 2018 for your 2017 Form 1040, do this:

• On or before June 15, 2018, file Form 4868.
• On or before June 15, 2018, pay whatever tax you have to pay for 2017, along with that Form 4868 you are filing.