Form 8854 Exit Tax Calculations and Reporting and IRS Relief Procedures for Certain Former Citizens

Determining Covered Expatriate Status Under Section 877A, Navigating the Mark-to-Market Tax, and Expatriation Planning

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, October 4, 2022

Recorded event now available

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Course Materials

This course will provide tax advisers and compliance professionals with a practical guide to the basic calculations and reporting requirements for U.S. taxpayers and exiting green card holders. The panel will discuss the rules of Section 877A, determining whether a taxpayer is a covered expatriate, and strategies for mitigating the impact of expatriation rules.

Description

The number of U.S. citizens expatriating from the United States has increased by an annual rate of 20 percent over the past several years. As part of the U.S. government's effort to eliminate tax avoidance through expatriation, Congress passed Section 877A, which imposes various taxes on U.S. taxpayers who renounce their citizenship or a long-held green card.

Section 877A creates an exit tax regime for individual U.S. taxpayers who renounce their citizenship or surrender a green card held for a specified amount of time and whose income or net worth exceeds certain thresholds. The exit tax rules also apply to expatriates who fail to certify U.S. income tax compliance for the five years preceding the year of expatriation.

Expatriating taxpayers must file IRS Form 8854, Initial and Annual Expatriation Statement. This detailed and complex form requires taxpayers to declare a balance sheet reflecting U.S. property owned at the time of exit. The exit tax reporting form is a multi-year filing obligation for covered expatriates. Late or incorrect filing of Form 8854 carries a steep $10,000 penalty. Tax advisers need to know the form requirements to avoid expensive tax consequences.

In 2021, a taxpayer could be considered a covered expatriate and subject to income tax liability on the net unrealized gain on their assets if their net worth was $2 million or more on the date of expatriation or when their average annual net income tax liability for the five years before the date of expatriation exceeds $172,000.

Listen as our experienced panel provides a comprehensive and practical guide to navigating the exit tax regime.

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Outline

  1. Expatriation overview
  2. Who is affected by expatriation laws? Who cares?
  3. Expatriation event and expatriation date
    1. Expatriation events for U.S. citizens
    2. Expatriation events for long-term residents
  4. Are you a covered expatriate?
  5. Income taxation of covered expatriates
    1. Specified tax-deferred accounts
    2. Deferred compensation
    3. Distributions from nongrantor trusts
    4. Mark-to-market gain/loss recognition
  6. Transfer taxation for friends and relatives of covered expatriates
  7. Planning for expatriation
  8. IRS program for delinquent Form 8854 filings

Benefits

The panel will review these and other key issues:

  • Which taxpayers are subject to Section 877A and must file Form 8854
  • How to calculate the mark-to-market tax and what assets it applies to
  • Transfer tax for family members of covered expatriates
  • The types of deferred compensation subject to the exit tax
  • Which former citizens qualify for relief from prior taxes under IRS' procedures
  • Strategies for mitigating the impact of the expatriation rules under Section 877A

Faculty

Francis, Benedict
Benedict Francis

Director, Global Mobility Services
KPMG

Mr. Francis has over 20 years of experience consulting on the tax and payroll issues associated with inbound and...  |  Read More

Seery, John
John T. Seery

Senior Manager, Washington National Tax, Global Mobility Services
KPMG

Mr. Seery is a Sr. Manager with KPMG’s Washington National Tax – Global Mobility Services (GMS) group. His...  |  Read More

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