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  1. Hi Phil,
    Very interesting reading, concise and understandable, thank you very much! I am left with just one last question in reference to your exchanges with Michael: What do I have to fear if I am a Covered Expat at time of relinquishment, but do not have any assets / income substantial enough to be liable for U.S. Taxation? Background: I qualified and just submitted all paperwork necessary for the Streamlined Offshore Program (FBAR’s + last 4 yrs tax Returns), and was only liable for $2.000 back taxes from 2011, which i paid simultaneously upon submission. I have received the “Assurance of Citizenship” from the German government, and would like to take the dreaded trip to the U.S. Consulte for renunciation ASAP. In order to fulfill the 5yr reporting requirement, I have been advised to wait for renunciation until filing for 2015, but why? Really appreciate your advice here! Many Thanks, John

  2. After expatriation, for covered and non-covered.
    What are the rules for converting funds from a 401k to a Roth 401k?
    Before expatriation the amount transferred is added to your earned income.
    What happens after expatriation? Do you report the amount transferred as earned income on the 1040NR?
    The general question is how to manage pension plans after expatriation to minimize tax.

  3. Hi David,

    This is a whole Expatriation list email. I will put it on the list for a future Tuesday.

  4. I expatriated on January 15th of 2014 and am just a little bit over the 2m limit so will have to pay the exit tax though my gains aren’t enough to actually pay it. I had no income at all during those first 14 days of 2014. I have no other USA income for the year, only UK interest and salary. Please explain which exact forms I have to complete? And for the FBARS are they only for the accounts I held ON January 14th and not for the rest of the calendar year? Or do they want all accounts held in 2014? Thanks!

  5. To clarify.
    If I am non-covered and I have $1m unrealized long term capital gain and I sell before expatriating I would pay 20% in capital gains tax. Do you mean that if I sell after expatriating then, after filing W-8BEN, I would pay no tax? This sounds a great deal if I can remain non-covered. I would save $200k in this example.
    So the $680K exemption only applies to covered expatriation.

  6. @SD,

    As a noncovered expatriate you are taxed like any other nonresident noncitizen of the USA. Typically that means stock market capital gains are tax free.

  7. If I am non-covered but I have $750k in unrealized capital gains in my personal account what tax do I pay on expatriation? What taxes are due on realizing the gain after expatriation?

  8. File 2008 – 2013 before you renounce. That’s what you need to avoid the certification test.

    The big problem is how long it takes to get a SSN. Maybe months. If you jump on this right now you might be done in a year. This problem is a cluster, frankly. Go to a US Social Security office and you will speed it up but . . . expect aggravation.

  9. Phil,

    wow that was quick. Thank you so much for clearing that up.

    Would filing the tax returns for the previous 5 years be sufficient for passing the paperwork test, given that I don’t actually pay tax (I’m paying taxes in Germany)?

    I’m asking because waiting for the IRS to answer, then renunciating, then waiting again until the letter of renunciation arrives would probably not fit into the one year window which Germany allows me. Otherwise I’ll probably have to undergo the immigration procedure again.

  10. @Michael,

    Good luck with your renunciation date.

    If you do not have a SSN, you will definitely be a covered expatriate. You can’t file a tax return without one.

    Your two choices are:

  11. Wait a while to expatriate. Get a SSN, file prior year tax returns, then expatriate. Then file your final year tax return. You won’t be a covered expatriate assuming everything works out right with your net worth and tax liability.
  12. Expatriate now. Get an ITIN. File your tax stuff with the IRS according to whatever plan you have. You’re a covered expatriate because you did not have five years of tax returns filed and fully paid up before you expatriated, so you deal with the tax implications of that status.
  13. Hi Phil,

    thanks a lot for putting all this together. My renunciation date is next week and I’m under the assumption that I am considered a covered expatriate. I’m not too rich, but have never filed tax return in the US to date.

    Having said that, after reading through your blog I still have one question open: Wouldn’t a SSN be a prerequisite to file tax return? I was never issued nor have I ever asked for one. If an SSN would be prerequisite, would I still miss the paperwork test?

    Best regards from Heidelberg,

  14. o.k. I understand – I was hoping you would say that years do not count towards the 8 where the expat was not even for one day in the US…. he voluntarily gave up his permanent resident status.

  15. @bubblebustin,

    Hmm. This means a blog post should be done. 🙂

    Before you hit the “8 of the prior 15 years” mark as a green card holder, if you make the treaty election to be a nonresident, then that particular year is not counted toward your magic 8 years. Example: you get a green card in 2004. That is your first year toward the eight you need in order to be headed toward exit tax land. Your tally is 1.

    In 2005 you make the treaty election to be a nonresident of the United States for income tax purposes. This means your tally is still 1. In 2006, 2007, 2008, 2009, 2010, 2011, 2012, and 2013 you make the treaty election each year. None of those years count toward the magic “8 of the last 15 years”. Your tally is still 1.

    I will leave it to a future blog post to give examples of toggling the switch on and off over the years — electing nonresident status in some years, being a resident of the U.S. in others.

    Once you have hit the “8 of the last 15” criterion, then the very next election you make to be a nonresident — that is an expatriation event which will trigger Section 877A. You must file Form 8854 and possibly pay the exit tax.

  16. “Just having a green card will not be enough to subject you to the exit tax. You must have held the green card visa for a sufficiently long time. The length of time is curiously defined as “in at least 8 of the last 15 years”. This is harder to figure out than you would think. Which years count and which do not?”

    Sorry Phil but did I miss something ? Which years do now count and which years don`t ?

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Tax laws change over time, and the information in this post above may be less accurate today than it was at the time of the last revision. This post is not tax advice for your specific situation. Please contact an international tax professional to get personalized advice for your situation.