Aufgabe der Green Card – Aufgabe der US-Staatsangehörigkeit
- Expatriation – Reference Materials
- US Citizenship, Taxation, and Expatriation: What You Need to Know
- Covered Expatriate: Definition, Criteria, and Tax Implications
- Form 8854 Explained: The Expatriation Statement for US Expatriates
- Relief Procedures for Accidental Americans: Path to Tax Compliance and Citizenship Renunciation
- Surrendering the Green Card: When, Why, and How to Give Up Your US Green Card
Expatriation Tax – US Wegzugsbesteuerung
We guided and piloted many of our clients through the maze of the expatriation and the expatriation tax (amerikanische Wegzugsbesteuerung). We will walk you through the process and explain, step by step, using the references below.
For assistance, please get in touch with our experienced team of Wirtschaftsprüfer und Steuerberater in den USA®. We are only a phone call away, +49 89 2351 3218 or +1 914 816 1115 after 15h (9 am ET).
For more information about Expatriation rules – Wegzugsbesteuerung USA, please click on the links below or contact us.
IRS on Expatriation Tax
Form 8854 – Initial and Annual Expatriation Statement
Instructions for Form 8854
IRS Publication 519 – residence rules, dual status tax return
Notice 2009-85 – the only thing the IRS has published on expatriation so far
Internal Revenue Code Sections 877, 877A – the old and current exit tax rules, respectively
Internal Revenue Manual Section 188.8.131.52.5 – how the IRS will process your return
Proposed Regulations Under Section 2801 – Gifts and Bequests from Covered Expatriates
Other Taxes – A Trap for the Unwary
US Citizenship, Taxation, and Expatriation: What You Need to Know
Understanding the Tax Implications for US Citizens at Home and Abroad
Becoming a US citizen can occur through birth within the United States or its territories, or by having a US citizen parent. All US citizens must pay income tax on their global earnings, regardless of their residence.
Taxation for US Citizens Living Abroad
US citizens living in other countries may face taxation in their country of residence, which can lead to double taxation. To alleviate this issue, US citizens can credit foreign taxes paid against their US tax obligations, subject to certain limitations. Additionally, they can exclude a specific amount of income earned from working outside the United States. Like other US taxpayers, US citizens abroad are eligible for exclusions and deductions from their gross income, potentially reducing their taxable income to a level where no tax is due.
Expatriation Rules and the Exit Tax
Special rules apply to individuals who relinquish their US citizenship or cease being lawful permanent residents (expatriates). “Covered expatriates” must pay a mark-to-market exit tax on their global assets, based on their value the day before expatriation. An individual is considered a covered expatriate if they meet at least one of three criteria:
- The tax liability test: having an average annual net income tax liability exceeding a specified inflation-adjusted amount for the five years before expatriation.
- The net worth test: possessing a net worth of $2 million or more on the expatriation date.
- The certification test: failing to certify, under penalty of perjury, compliance with all US federal tax obligations for the five years preceding expatriation.
Special Rules for Dual Citizens
Expatriates who are dual citizens of the United States and another country at birth are subject to a unique rule. If they continue to hold citizenship and tax residency in the other country, they can be exempt from the tax liability and net worth tests, provided they have not been a US resident for more than ten years within the 15-year period leading up to expatriation. However, these individuals still need to pass the certification test.
Expatriation Statement and Statute of Limitations
Expatriates who renounce their US citizenship or abandon permanent resident status must file Form 8854 with their US tax return to certify compliance and provide information related to the exit tax. The IRS typically has three years from the date a return is filed to assess taxes. The statute of limitations can be extended if the taxpayer fails to provide required information related to international transactions or assets, but Form 8854 is not currently included in this provision.
FATCA and Foreign Financial Institutions
Under the Foreign Account Tax Compliance Act (FATCA), foreign financial institutions must collect specific information about US account holders, including their taxpayer identification number (TIN). Institutions that fail to comply with these requirements may face US withholding taxes on certain US-source payments. As a result, foreign financial institutions require US citizens to provide a TIN when opening an account.
Covered Expatriate: Definition, Criteria, and Tax Implications
Understanding the Concept of a Covered Expatriate
A covered expatriate is an individual who relinquishes their US citizenship or lawful permanent resident status (expatriates) and meets specific criteria set by the Internal Revenue Code (IRC). These individuals face unique tax implications, such as the exit tax, which is calculated based on their worldwide assets’ value before expatriation. Special tax considerations may also apply to Covered Expatriates when gifting or bequeathing assets to US citizens.
Criteria for Becoming a Covered Expatriate
An individual is considered a covered expatriate if they meet at least one of the following three tests:
- Tax Liability Test: The individual has an average annual net income tax liability exceeding a specified inflation-adjusted amount for the five years before expatriation.
- Net Worth Test: The individual possesses a net worth of $2 million or more on the expatriation date.
- Certification Test: The individual fails to certify, under penalty of perjury, compliance with all US federal tax obligations for the five years preceding expatriation.
Special Rules for Dual Citizens at Birth
Dual citizens who acquire US citizenship and citizenship in another country at birth may be exempt from the tax liability and net worth tests if they continue to hold citizenship and tax residency in another country. However, they must not have been a US resident for more than ten years within the 15 years leading up to expatriation. These individuals are still subject to the certification test.
Exit Tax for Covered Expatriates
Covered expatriates must pay a mark-to-market exit tax on their worldwide assets based on their value the day before expatriation. This tax is imposed on a deemed disposition of the assets, meaning the tax is applied as if the assets were sold and then repurchased by the expatriate.
Filing Requirements and Tax Compliance
Expatriates who renounce their US citizenship or abandon lawful permanent resident status must file Form 8854, the Initial and Annual Expatriation Statement, with their US tax return. This form certifies compliance with US federal tax obligations and provides information related to the exit tax. Failure to file Form 8854 or comply with other tax obligations may result in significant penalties or an extended statute of limitations for tax assessment.
Gift and Estate Tax for Covered Expatriates
Unlike gifts and inheritances from non-Covered Expatriates, gifts and inheritances from Covered Expatriates to US citizens are subject to US gift or estate tax, regardless of whether the donor or decedent resides abroad at the time of the gift or death.
Reporting Requirements for US Citizens Receiving Gifts or Inheritances from Covered Expatriates
US citizens who receive gifts or inheritances from Covered Expatriates may need to report these assets on Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. This reporting requirement applies if the value of the gifts or inheritances exceeds certain thresholds.
US Tax Basis for Gifts and Inheritances from Covered Expatriates
Special rules apply to the tax basis for gifts and inherited assets from Covered Expatriates for US citizens. Generally, the tax basis for gifts and inherited assets from Covered Expatriates is the fair market value of the assets at the time of the gift or death.
In conclusion, understanding what it means to be a covered expatriate is crucial for individuals considering expatriation. This status has significant tax implications, and proper planning, compliance, and filing are essential to avoid potential penalties and complications.
Form 8854 Explained: The Expatriation Statement for US Expatriates
What is Form 8854?
Form 8854, also known as the Initial and Annual Expatriation Statement, is a document that individuals who relinquish their US citizenship or lawful permanent resident status (expatriates) must file with their US tax return. This form serves as a certification of compliance with US federal tax obligations and provides information related to the exit tax for covered expatriates.
Purpose of Form 8854
The primary purpose of Form 8854 is to help the Internal Revenue Service (IRS) determine whether an individual is a covered expatriate and subject to the exit tax. Additionally, the form certifies that the expatriate has fulfilled their US tax obligations for the five years preceding expatriation, as required by the certification test.
Who Needs to File Form 8854?
Individuals who relinquish their US citizenship or abandon their lawful permanent resident status are required to file Form 8854. This includes those who renounce their citizenship at a US embassy or consulate or those who abandon their green card by filing Form I-407 with the Department of Homeland Security.
Filing Requirements and Deadlines
Form 8854 must be filed with the expatriate’s US tax return for the year of expatriation. The filing deadline for Form 8854 generally coincides with the regular tax return filing deadline, which is typically April 15th of the following year. However, expatriates residing abroad may qualify for an automatic two-month extension, making their filing deadline June 15th.
Information Required on Form 8854
Form 8854 requires expatriates to provide various information, including:
- Personal information: Name, address, Social Security number, and date of birth.
- Expatriation details: Date and method of expatriation, such as renouncing citizenship or abandoning lawful permanent resident status.
- Tax compliance: Certification of compliance with all US federal tax obligations for the five taxable years preceding expatriation.
- Net worth and tax liability tests: Information related to the expatriate’s net worth and average annual net income tax liability for the five years before expatriation.
- Exit tax calculation: For covered expatriates, details about worldwide assets, including their fair market value and cost basis, are required for calculating the exit tax.
Consequences of Not Filing Form 8854
Failure to file Form 8854 or comply with other tax obligations may result in significant penalties or an extended statute of limitations for tax assessment. Expatriates must ensure accurate and timely filing of Form 8854 to avoid these potential consequences.
In summary, Form 8854 is a crucial document for individuals relinquishing their US citizenship or lawful permanent resident status. Proper understanding, compliance, and filing are essential to avoid complications and potential penalties related to expatriation.
Relief Procedures for Accidental Americans: Path to Tax Compliance and Citizenship Renunciation
Overview of Relief Procedures for Accidental Americans
The IRS introduced relief procedures on September 6, 2019, to help specific “Accidental Americans” in Germany and elsewhere become compliant with their US tax and filing obligations. These procedures apply to individuals who have relinquished or plan to renounce their US citizenship and have not filed US tax returns as citizens or residents.
Eligibility Criteria for the Relief Procedures
The Relief Procedures for Certain Former Citizens are designed for individuals who meet the following criteria:
- Have not filed US tax returns as citizens or residents.
- Owe a limited amount of back taxes to the United States.
- Possess net assets below $2 million.
- Have relinquished their US citizenship anytime after March 18, 2010.
Benefits of the Relief Procedures
The Relief Procedures allow eligible individuals to become compliant with their US tax and filing obligations without facing penalties for back taxes. This provides a simplified path for Accidental Americans to resolve their tax situation and, if desired, renounce their US citizenship.
No Set Termination Date for the Relief Procedures
The IRS has not established a specific termination date for these Relief Procedures. However, they will announce a closing date before ending the program, providing individuals with sufficient time to take advantage of this opportunity to become compliant with their US tax obligations.
Taking Advantage of the Relief Procedures
Accidental Americans who meet the eligibility criteria and wish to renounce their US citizenship should consider using the Relief Procedures for Certain Former Citizens. These procedures offer a valuable opportunity to resolve tax compliance issues and avoid potential penalties associated with non-compliance.
In conclusion, the IRS’s Relief Procedures provide a viable solution for eligible Accidental Americans to comply with their US tax and filing obligations and renounce their US citizenship. Understanding the eligibility criteria and the process can help affected individuals navigate this opportunity and achieve tax compliance.
Surrendering the Green Card: When, Why, and How to Give Up Your US Green Card
Learn everything you need to know about surrendering the Green Card, including reasons, procedures, and tax implications. The Green Card is a coveted document granting foreign nationals the status of a US Lawful Permanent Resident (LPR). However, there are situations where the holder of a Green Card may wish to surrender it.
When should you surrender your Green Card?
- Long-term emigration
- Acquiring another citizenship
- Tax considerations
Why should you surrender your Green Card?
- Reducing tax liabilities
- Simplified travel regulations
- Avoiding dual requirements
How to surrender your Green Card?
- Step-by-step guide to surrendering the Green Card
- Form I-407: Abandonment of Lawful Permanent Resident (LPR) Status
- Required documents
Tax implications of surrendering the Green Card
- Exit tax
- Tax liabilities before surrendering the Green Card
- Tax liabilities after surrendering the Green Card
Important considerations before surrendering the Green Card
- Future travel to the US
- Family members with Green Cards
- Social Security benefits
Summary and Conclusion
The decision to surrender the Green Card should be carefully weighed, as it can have long-term consequences. Consider tax implications and future travel requirements before making a decision. This comprehensive guide helps you understand the various aspects of surrendering the Green Card and make an informed decision.