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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

December 5, 2017

Roth IRA Taxation for Covered Expatriates

Let’s talk about how a covered expatriate’s Roth IRA is taxed at the time of expatriation. Summary Make-Believe Distribution A Roth IRA is treated as if there is a make-believe distribution to a covered expatriate…continue reading

November 7, 2017

How to Make Zero Capital Gain Tax When Moving Assets Between Spouses

The net worth test is something that may cause an expatriate to become a covered expatriate. Instead of just having a paperwork problem (Form 8854, specifically), a covered expatriate has a paperwork problem plus a…continue reading

October 24, 2017

Green Card Received in 2011? Give It Up in 2017 or Face Exit Tax

Deadline for 2011 Immigrants If you received your green card visa in 2011 and you are thinking about terminating your permanent resident status, do it in 2017 if you want to avoid the exit tax…continue reading

October 10, 2017

How to Complete Part I of Form 8854

Expatriates have the rare pleasure of becoming intimate (in a one-time sort of way, usually) with Form 8854. Let’s take a look at Part I of the Form 8854. What information are you asked to…continue reading

September 26, 2017

When Covered Expatriates Come Back

The current iteration of the exit tax rules were enacted in June, 2008. At this point, nearly 10 years later, I am working with people who expatriated and now want to become residents and citizens…continue reading

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