Form 8854 Exit Tax Calculations and Reporting: Minimizing the IRC 877A Expatriation Tax

Description

The number of U.S. citizens expatriating from the United States has increased by an annual rate of 20% over the past several years. As part of Treasury’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 certain U.S. taxpayers who renounce their citizenship, have intentionally relinquished their U.S. citizenship when they become naturalized citizens of another country, or surrender a green card that has been held for more than seven years and whose income or net worth exceed 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.

Taxpayers subject to the exit tax must file IRS Form 8854 Initial and Annual Expatriation Statement. This is a detailed and complex form that 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. 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.

Listen as our experienced panel provides a comprehensive and practical guide to navigating the exit tax regime and completing Form 8854 for U.S. citizens planning expatriation.