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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

March 14, 2017

Covered Expatriates and Nongrantor Trusts. It’s Probably Pointless.

Renounce, Receive Foreign Income and Get Tax Troubles1 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). Yep. Or…continue reading

February 14, 2017

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…continue reading

January 31, 2017

State Income Taxation for Expatriates

The exit tax is a Federal tax law, but it can trigger State income tax. There is no “standard” method for computing taxable income for State purposes, so this is a high-level overview, not an…continue reading

January 17, 2017

Treaty Election to Avoid Long-Term Resident Status

Green card holders, if they give up their visa status as a permanent resident of the United States, can be hammered by the exit tax. But not all green card holders are at risk—only if…continue reading

January 3, 2017

How to Mail Your Form I-407 (And Why)

Conclusion A joke should always be told punchline first. Right? Here’s the conclusion of this little essay: If you plan to file Form I-407 to abandon your green card, do it in person. If that…continue reading

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