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Relinquishing U.S. Citizenship? Here are Your Filing Obligations

March 09, 2023

Are you relinquishing your U.S. citizenship or long-term residency? You are required to file form 8854. Are you also subject to the expatriation tax? We explore below.

Turning in your passport? You are required to file form 8854. The penalties for noncompliance are steep read on.

What is Form 8854?

Form 8854, Initial and Annual Expatriation Statement is the form every U.S. citizen or long-term resident needs to file after giving up their U.S. citizenship or permanent residency on or after June 17, 2008. The form is used by expatriates to certify compliance with tax obligations in the five years before expatriation and to comply with their initial and annual information reporting obligations.

Individuals who expatriated for immigration purposes after June 3, 2004, and before June 17, 2008, but who have not previously filed a Form 8854, will continue to be treated as U.S. citizens or U.S. lawful permanent residents for U.S. income tax purposes until they file a Form 8854.

Who Must File Form 8854?

  • Relinquished U.S. Citizenship
  • Terminated U.S. long-term residency (considered a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year you are no longer treated as a lawful permanent resident)
  • Expatriated before 2022 and you:
    • Deferred the payment of tax,
    • Have an item of eligible deferred compensation, or
    • Are a beneficiary of a non-grantor trust

What is the expatriation tax and am I subject to it?

Expatriation tax, sometimes called exit tax, is levied on U.S. citizens and long-term residents, who have renounced citizenship or for federal tax purposes ended their U.S. resident status. Check out our blog, U.S. Gov Proposes Reduced Fee for Renouncing American Citizenship for the details.

What are the penalties for not filing Form 8854?

If you fail to file Form 8854 for any tax year, do not include all the information required by the form, or report incorrect information, a penalty of $10,000 may be assessed unless it is substantiated that such failure to file accurately is due to reasonable cause and not willful neglect.

Is there a fee for renouncing citizenship?

Check out our recent blog. The federal government has recently proposed to decrease the current renunciation fee from $2,350 to $450. We will keep you posted if that proposal goes through.

Questions? Feel free to contact a member of our International Tax Services Practice.

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