You can become a covered expatriate if your average tax liability for the previous five years is above a certain amount ($162,000 for expatriations in 2017).
Calculating this average amount is a bit of a pain.
Don’t be “covered expatriate”.
Here is a question from an email:
I am employee of a PFIC. My employer issued some stock options to me as part of my compensation. Do I have a PFIC problem?
This post describes why you cannot avoid passive foreign investment company (PFIC) taxes by holding onto an option or selling the option directly. But you may want to hold onto the option to reduce annual reporting requirements.
A passive foreign investment company (PFIC) is a special subcategory of foreign corporations. US shareholders of a PFIC are subject to punitive tax rules, so US persons want to avoid owning shares of a PFIC.... continue reading
This week I am going to highlight the “constructive ownership” rules in U.S. tax law. This means that the IRS can pretend that you own something — we will talk about stock of foreign corporations — even though you don’t really own it.
We will talk about U.S. citizens married to noncitizens. First, a simple example, then a more complicated (and realistic) example. The realistic example — one I have seen many times — yields a “Who knows what the answer is!” conclusion.
Here is the practical advice:
... continue reading
If you are a U.S. citizen living abroad, married to a noncitizen, look out for the combination of foreign corporations owned by trusts.
Is it possible to renounce your U.S. citizenship, live outside the United States, collect 100% foreign income, and still be under the IRS’s thumb? (YouTube).
Here is what it takes:
Here’s what happens to you:
This is a question that we get a lot:
If I own shares in a foreign corporation, and I file Form 5471, then I do not have to file Form 8621, right?
The answer to this question is “incorrect”. There are situations under which you have to file both Form 5471 and Form 8621 to report the same corporation. Here are a few common situations we have seen arise in the course of our work.
Form 8621 is a form that US persons use to report investments in passive foreign investment companies (PFICs).... continue reading