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Expatriation

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U.S. citizens and permanent residents pay income tax on their worldwide income.  If sufficiently wealthy, their worldwide assets are taxed when they die.  This is true no matter where they live. Every year, more and more people are relinquishing their U.S. citizenship or giving up their green card (permanent resident) visa status.

This means that they are leaving the U.S. tax net. As they leave, the United States seeks its last chance to impose tax. This is called the “exit tax.” Section 877A of the Internal Revenue Code.

If you are rich enough (as defined by the U.S. government) or your tax paperwork is not in order, the Internal Revenue Service pretends that you sold everything you own on the day before you relinquished your citizenship.  After applying an exemption amount ($651,000 in 2012) you pay tax on the “pretend” sale. The Internal Revenue Service pretends that you received all of your IRA balances on the day before you relinquished your citizenship.  That’s all taxable income to you.

There are a number of other special tax rules that may create an enormous tax liability to the United States, just because you gave up your U.S. citizenship or green card visa. Even if you are not rich (again, “not rich” is defined by the U.S. government, not by you), you will still face a mountain of tax paperwork that needs to be filed correctly and on time.

We know these tax rules, perhaps better than anyone else, because we counsel so many people throughout this process.  Let us help you – from your initial questions when you first consider this action, through the tax planning before you relinquish citizenship, and filing the tax returns afterwards.

Recent Articles on Expatriation

May 8, 2018

How Expatriation Works: Just The Basics

How expatriation works is something we talk about with clients all the time, and it’s worth devoting a little blog space to a general description of the basic mechanics every once in a while. Imagine…continue reading

April 24, 2018

Do Non-Green Card Years Count Toward the 8-Year Long-Term Resident Test?

This week’s question addresses a common situation: Do years that someone spends in the US on a non-green card visa count towards the long-term resident test? For purposes of answering this question, I will use…continue reading

April 10, 2018

How the New Tax Laws Affect Low Income Expatriates

Today’s Topic: How the New Tax Laws Affect Low Income Expatriates One of the much-touted aspects of the new tax laws that came into effect at the start of 2018 is the abolishment of the…continue reading

March 27, 2018

Did you Expatriate if your Green Card Expired?

Today’s topic: Letting your green card expire as an act of expatriation? This question is one that has come up a number of times in cases I’ve worked on: If I allow my green card…continue reading

March 13, 2018

The New Tax Law and Expatriation: New Reasons to Renounce

Our trusted servants in Washington DC blessed us with a new tax law, effective December 22, 2017. The new law–the Tax Cuts and Jobs Act of 20171  –did not change the expatriation tax rules, but it…continue reading

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