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  1. Phil, thank you very much for the clarifications. I enjoyed reading your topics and posts because it’s practically well-explained in a street-smart way which makes it fun to read. 🙂

  2. @Ruby,

    If your answer to question 3 is no, then leave question 4 blank.

    For question 5 you need to satisfy both conditions in order to answer yes. You have lived outside the USA for a long time so that half of the question is satisfied, but you were not under age 18.5 when you expatriated. You will answer “no”.

  3. In Part IV number 3 of form 8854, if I answer NO on it, do I have to answer number 4 or can I just leave it with blank answer?

    In Part IV number 5 of form 8854, it is a very tricky question for me because I’m way over 18 but I live in the US of not more than 10 years. What is the correct answer for me to mark on this number 5, yes or no?

    Please help

  4. @teenage,

    I think filling in the balance sheet is unavoidable, even if one of the two exceptions (such as the “age 18” exception) applies to make you not a covered expatriate. The reason I think it is required is because of Internal Revenue Code Section 6039G(b)(5), where Congress tells expatriates (of all flavors) to give income, asset, and liability details.

    Thus, while it is impossible for you to be a covered expatriate, the “we collect gratuitous information on you . . . because we can” Standard Operating Procedure (so beloved by the U.S. government) will stand.

    If you do not provide this information, then you have not fully complied with all of your obligations under Title 26 of the United States Code — the Internal Revenue Code. Section 6039G is in Title 26. As a result, you would fail the certification test (question 6 in Part IV, Section A of Form 8854).

    The exceptions to being a covered expatriate because of wealth do not exempt you from the certification test. You can be a dual citizen, fail the certification test, and thus become a covered expatriate. You can properly renounce citizenship at age 18 and fit yourself within the requirements of that exception. But if you fail the certification test, you will be a covered expatriate.

    Yes, it’s stupid. Yes, it achieves nothing of value for the U.S. government. Yes, it will cost you a lot of extra money to do the stupid stuff that the U.S. government requires from you. Just remember, though. You have one more Gate of Stupidity to pass through, then you’re done. The rest of us who remain U.S. taxpayers must marinate in this system forever. Lucky you. 🙂

  5. Highly volatile assets might not be the only consideration. What about volatile exchange rates? If Scottish people vote to leave the UK tomorrow, a person with UK assets who is expatriating in London on Thursday might wish she had waited until next week.

    You mention that “6039G is the infamous rule that triggers the quarterly publication of names of people who renounce U.S. citizenship”.

    Aha! So the numbers that are oft-mentioned, such as 1,001 in 2014 Q1, are really only the ***covered expatriates**? Then surely, there must be an even greater number who expatriate by renouncing, but are not covered (such as the dual-citizen foreign-residing teenager entrepreneur), or who are relinquishing.

    Is there any report or estimate of the number of people filing Form 8854 each year? Might the true number of people giving up US citizenship be hugely greater than is reported in the quarterly publication, perhaps more than 100,000 per year?

    Anecdotally, tax accountants and lawyers must be able to say what proportions of their clients are filing Form 8854 as covered rather than not covered expatriates.

  6. Must a non-covered expatriate teenager compute “net worth on the date of your expatriation for tax purposes”?

    Form 8854 Part IV has six lines. The instructions say “This section must be completed by all individuals who expatriated in 2013.” Line 2 is “net worth on the date of your expatriation for tax purposes”.

    But if I check “Yes” on lines 5 and 6 then I am not covered, by reason that I was under age 18 1/2 when I expatriated and I have I complied with all tax obligations for the past 5 years. Given these facts (or that I have checked “Yes” on lines 3, 4 and 6), the information requested in lines 1 and 2 is not needed by the IRS in order to apply the law to my case. So can I leave them blank and yet be in adequate compliance with instruction “This section must be completed by all individuals who expatriated in 2013″?

    Line 1 is easy to complete by copying from my past five tax returns, but line 2 will be expensive to complete. It will be very time-consuming to find all the necessary records and my tax accountant will charge $1000s to compute my net worth. Also, since my net worth is in excess of $2,000,000, I worry that I will be waving a red flag to a bull. The Form 8854 instructions for line 2 say “You can use the balance sheet in Part V (Schedule A) to arrive at your net worth.” But I will not be completing Part V since this is only required for covered expatriates.

    It looks to me as if Form 8854 Part IV lines 1 and 2 are asking me for information that the law does not require me to provide.

    This begs a more general question: do instructions and questions in IRS Forms have the force of law, or are they only the IRS’s attempt to implement law, and so can be safely ignored if they are not supported by law?

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Tax laws change over time, and the information in this post above may be less accurate today than it was at the time of the last revision. This post is not tax advice for your specific situation. Please contact an international tax professional to get personalized advice for your situation.