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July 18, 2017 - Phil Hodgen

Pension Valuation for the Net Worth Test

The net worth test rates you as a covered expatriate if your net worth is $2,000,000 or more.1 Pensions and retirement plans are assets that you include in calculating your net worth.2

How do you figure out how much your pension is worth?

Government Guidance: Embarrassing

There is scant (and by “scant” I mean nothing at all) guidance on how to compute the value of your pension benefits. The Instructions to Form 8854, for instance, say absolutely nothing at all.3

Notice 2009-85 merely points you to Notice 97-14 for guidance on how to calculate your net worth.... continue reading

Expatriation
June 20, 2017 - Phil Hodgen

Taxation of MSAs and HSAs after Expatriation

This is another piece of the rewrite project for The Exit Tax Book.


Specified Tax-Deferred Accounts After Expatriation: Generally

Distributions from specified tax-deferred accounts after expatriation are unremarkable: an expatriate (covered or not) is treated like any nonresident alien, and taxed accordingly. The only difference will be for covered expatriates: since they are taxed when they expatriate, they are not taxed a second time when they receive distributions of money that was previously taxed.

This chapter discusses distributions from every type of specified tax-deferred account except IRAs:

  • Health Savings Accounts (HSAs);
  • Archer Medical Savings Accounts (MSAs);
  • Section 529 education savings plans; and
  • Coverdell education savings plan.
... continue reading
Expatriation
June 6, 2017 - Phil Hodgen

Canadian Treaty Relief from Double Taxation

Covered expatriates risk being taxed twice: once by the United States on assets they own when when they expatriate, and a second time by their home country when they sell assets or take pension distributions.

The double taxation problem has been largely solved for expatriates who live in Canada, but not (as far as I know) for other residents of countries.

What’s a Double Taxation Problem?

Let’s talk first about what a double-taxation problem is. It occurs because two countries want to tax you, and neither country cares that the other country taxed you.

Two Countries Claim You

If you are a taxpayer in two different countries, both countries will impose their domestic tax laws on you, and insist on the right to force you to pay tax on your income.... continue reading

Americans Living Abroad Expatriation
April 25, 2017 - Phil Hodgen

U.S. Resident Status After Expatriation?

Becoming a Tax Resident Again

Sometimes people who expatriate — give up their U.S. citizenship or green cards — want to visit the United States. This might be for business reasons, family reasons, or just to have some fun.

Here’s how to keep that hard-won status of “not a U.S. taxpayer”, even if you return to the United States after expatriating.

Reader C inspired the topic in an email to me:

It was my understanding that once I have given up my citizenship I would be treated like any other foreigner ie I could stay in the US for up to 60 days assuming I had the appropriate visitors visa.

... continue reading
Expatriation
April 11, 2017 - Phil Hodgen

Tax Filing Deadlines for Expatriates

Just knowing the paperwork you need to file with the IRS is not enough – you need to know when to file, too. Let’s talk about tax filing deadlines for Expatriates.

Here are the possible tax filings that you may need to do. Not all of these will necessarily apply to you.

  • Prior year amended tax returns. If you need to fix problems in order to pass the certification test, you will be filing remedial paperwork for one or more of the five calendar years before the year in which you expatriate.
  • Gift tax return. If you need to reduce your wealth in order to pass the net worth test, you may be making taxable gifts.
... continue reading
Expatriation