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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 13, 2019

Exit Tax Book Chapter 5: Are You a Covered Expatriate?

There are two types of expatriates: covered expatriates, and non-covered expatriates. Covered expatriates must pretend that they sold all their worldwide assets on the day before expatriation and pay tax on the pretend gains. There…continue reading

April 5, 2019

Exit Tax Book Chapter 4: Paperwork for Expatriates

Last month, I discussed how long-term residents can become expatriates. Now I will overview the tax paperwork expatriates will need to file. All individuals who cease to be taxed as US persons file tax returns…continue reading

March 5, 2019

Exit Tax Book Chapter 3: How a Green Card Holder Becomes an Expatriate

Last month, I talked about citizens and how they can renounce their US citizenship. This month, I am focusing on another group of people who can become expatriates, known as long-term residents. “Long-term resident” is…continue reading

February 5, 2019

Exit Tax Book Chapter 2: How a U.S. Citizen Becomes an Expatriate

Last month, we covered a general overview of the exit tax, expatriation, and the distinction between covered and non-covered expatriates. We will now focus on the ways in which a US citizen can expatriate, and…continue reading

January 8, 2019

Exit Tax Book Chapter 1: A Quick Overview of the Exit Tax

Today’s topic: A quick overview of the exit tax The term “exit tax” is not used or defined in the Code or regulations anywhere. It is a shorthand to describe the federal law that requires…continue reading

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