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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

April 25, 2017

U.S. Resident Status After Expatriation?

Becoming a Tax Resident Again Sometimes people who expatriate — give up their U.S. citizenship or green cards — want to visit the United States. This might be for business reasons, family reasons, or just…continue reading

April 11, 2017

Tax Filing Deadlines for Expatriates

Just knowing the paperwork you need to file with the IRS is not enough – you need to know when to file, too. Let’s talk about tax filing deadlines for Expatriates. Here are the possible tax…continue reading

April 5, 2017

A former green card holder’s post mortem on expatriation and U.S. tax law

We recently helped a green card holder clean up his tax situation so he could avoid covered expatriate status. This is his own post-mortem of the process. It is a familiar story: green card holder…continue reading

March 28, 2017

The Tax Liability Test for Covered Expatriates

You can become a covered expatriate if your average tax liability for the previous five years is above a certain amount ($162,000 for expatriations in 2017). Calculating this average amount is a bit of a…continue reading

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

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