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February 27, 2018 - Phil Hodgen

Tax Liabilities and Your Form 8854 Balance Sheet

Net Worth Test and Covered Expatriate Status

We help many, many people with their expatriation, and the number 2 problem we fix is net worth. Bad tax things happen if a person is a covered expatriate.

A person is a covered expatriate if he or she has a net worth of $2,000,000 or more.1 An expatriate reports all assets and liabilities on Form 8854.

The planning question is simple: “How can I reduce my net worth so I can report a value below $2,000,000 on the Form 8854 balance sheet?”2 If you are able to reduce your net worth below $2,000,000, you may be able to avoid covered expatriate status.... continue reading

Expatriation
January 30, 2018 - Phil Hodgen

The Consequences of Filing Form 8854 Late

Form 8854, I like to say, is how you log out of the U.S. tax system when you give up U.S. citizenship or permanent resident status. Let’s look at the procedural aspects of this mandatory paperwork:

  • Why you must file Form 8854;
  • When you must file Form 8854; and
  • What happens if you don’t file Form 8854 on time?
Why Form 8854 Exists

Overview

Congress imposed the data collecting requirements for expatriates. The IRS took these instructions from Congress and, wielded its its general authority under 6011 to design forms and collect data. Form 8854 is the result. The IRS also took its authority under 6071 and set the filing deadlines that we work with.... continue reading

Expatriation
October 10, 2017 - Phil Hodgen

How to Complete Part I of Form 8854

Expatriates have the rare pleasure of becoming intimate (in a one-time sort of way, usually) with Form 8854. Let’s take a look at Part I of the Form 8854.

  • What information are you asked to provide?
  • By what right does the IRS claim the power to force you to provide this information?
  • How do you answer the questions correctly?
Line 1 – Mailing Address, Telephone Number

The IRS wants to be able to find you after you expatriate. They’re coming to get you, Murdoch.

For this they need your mailing address1 and telephone number.2

Line 2 – Address of Principal Residence

If you don’t live at your mailing address, then you must provide your actual residence address.... continue reading

Expatriation
February 14, 2017 - Phil Hodgen

Does Filing a Late Form 8854 Make You a Covered Expatriate?

Does filing a late Form 8854 make you a covered expatriate?1

No.

If you are late filing your Form 8854, the worst that can happen is that you will be fined $10,000. You will not be a covered expatriate.

Form 8854 and Its Filing Deadline

Congress sets the rules for what is taxed, and what the tax will be. Then it granted the IRS power to design tax forms2 and set filing deadlines.3

Expatriates – citizens who give up their U.S. citizenship, green card holders of long-standing – are required to provide information.4 Form 8854 is how the IRS exercised its power to design a tax return (and set the filing deadline) for the information required from expatriates.... continue reading

Expatriation
March 15, 2016 - Phil Hodgen

Why Social Security does not go on the Form 8854 balance sheet

Hello again from Phil. This is the bi-weekly Expatriation Only newsletter, in which we cover U.S. tax topics related to renunciation of U.S. citizenship or giving up your green card. You can stop getting this newsletter by clicking on the “Unsubscribe” link at the bottom of the email.

Why Social Security Isn’t an Asset

This week I am going to dive into the shallow pool of Tax Metaphysics and tell you why you do not put Social Security benefits on the Form 8854 balance sheet when computing your net worth.

I hope the answer aggravates you and (for those of you who can still vote in the United States elections) galvanizes your political views.... continue reading

Expatriation Tax and Trusts