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  • Writer's pictureDaniel Gray CPA

U.S. Citizenship Renunciation

You need to show past five years of filed US tax returns to expatriate. If you cannot locate your SSN, see elsewhere on our website on topic. You need a SSN to file your US tax returns. Your final US tax return is different from the earlier years and requires additional information.

Your final tax return will be from January 1st through the day you expatriate. If your renunciation date is any day other than December 31st, you’ll be filing Form 1040 (1040NR if applicable) for your final return with IRS Form 8854, the Expatriation Information Statement, which is the exit tax form filed along with your final return.However, the fair market valuation for all your assets is as of the day before. That’s because on the day you renounce, you are no longer a taxable person to the IRS.

8854 filers who expatriated after June 16, 2008, attach Form 8854 to their income tax return (Form 1040) for the year that includes their expatriation date, and file their return by the due date of their tax return (including extensions). Thus, your 8854 needs to be attached to any 1040 you file or e-file.

8854 filers also must send a copy of their Form 8854 to this address: Department of the Treasury, Internal Revenue Service, Philadelphia, PA 19255-0049

Form 8854 reports:

  • number of days you were physically present in the United States in year of expatriation The U.S. Customs and Border Protection website allows individuals to request the report of your days in the U.S. if you have your passport number, full name, and birth date.

  • all countries (other than the United States) of which you are a citizen & the date you became a citizen of each country listed

  • how you became a U.S. citizen (birth, naturalization)

  • your U.S. income tax liability (after foreign tax credits) for the 5 tax years ending before the date of expatriation.

  • your net worth on the day BEFORE you expatriate

  • the date you became a non-US citizen

  • did you become at birth a U.S. citizen and a citizen of another country, and do you continue to be a citizen of, and taxed as a resident of, that other country? If you answered “Yes” to the preceding question, have you been a resident of the United States for not more than 10 of the last 15 tax years?

  • whether you were under age 18 1/2 on the date you expatriated

  • that you have complied with your USA tax obligations for the 5 tax years ending before date of expatriation, including but not limited to, your obligations to file income tax, employment tax, gift tax, and information returns, if applicable, and your obligation to pay all relevant tax liabilities, interest, and penalties.

On the balance sheet/income statement one lists in U.S. dollars the fair market value (column (a)) and the U.S. adjusted basis (column (b)) of one’s assets and liabilities as of one’s date of expatriation. You can use good faith estimates of fair market value and basis. Formal appraisals are not required. For “U.S. adjusted basis”, provide the cost (for example, the price of a stock acquired). If you are unsure of the meaning of a line item (such as line 19 Other assets (see instructions)), refer to the definition at

Line 5a

List the appropriate amount in each column for all non-marketable stock and securities issued by foreign corporations that would be controlled foreign corporations (CFC) if you were still a U.S. citizen or resident. Note that these amounts are already included on line 5. Do not include amounts on this line in the total on line 20.

Control is >50% and includes constructive (aka indirect or attributed) ownership. You likely have constructive ownership attributed to you from any relatives' shares. IF YOUR OWNERSHIP IS >50%, YOU NEED TO COMPLETE LINE 5b OF FORM 8854 BALANCE SHEET.

Provide BOTH the fair market value (column a) figures for: items such as cash, real property outside the US and one’s mortgage as well as the U.S. adjusted basis (column b and as of your expatriation date). You can use good faith estimates of fair market value and basis. Formal appraisals are not required.

Adjusted Basis is the net cost of an asset after adjusting for various tax-related items. In other words, adjusted basis is calculated by beginning with an asset's original cost basis, and then making adjustments. Adjusted basis is calculated as follows:

  • Cost Basis

  • + Purchase costs (title & escrow fees, broker commissions, shipping, sales tax, etc.)

  • + Improvements (rehabilitation expenses & substantial repairs)

  • + Legal fees (to defend or to perfect title to the property, zoning costs, etc.)

  • + Selling costs (title & escrow fees, broker commissions, shipping, transfer fees, etc.)

  • - Accumulated depreciation, depletion, or amortization

  • - Casualty or theft Loss

  • - Other decreases to basis

  • = Adjusted Basis

Until you file Form 8854 and notify the Department of State or the Department of Homeland Security of your expatriating act, your expatriation for immigration purposes does not relieve you of your obligation to file U.S. tax returns and report your worldwide income as a citizen or resident of the United States. Form 8854 and its instructions also address how individuals should certify that they have met their federal tax obligations for the five preceding taxable years and what constitutes notification to the Department of State or the Department of Homeland Security. You have to file a U.S. income tax return while working and living abroad unless you (abandon your green card holder status by filing Form I-407, with the U.S. Citizen & Immigration Service, or you) renounce your U.S. citizenship under certain circumstances described in the expatriation tax provisions.

This is why you must file your initial Form 8854 as soon as possible after the date you relinquish U.S. citizenship (or terminate your long-term residence). You remain subject to tax as a U.S. citizen (or resident) until you both file your initial Form 8854 and notify the appropriate authorities of your expatriating act. Form 8854 must also be filed to comply with the annual information reporting requirements of IRC 6039G, if the person is subject to the alternative expatriation tax under IRC 877 or IRC 877A (see below). A $10,000 penalty may be imposed for failure to file Form 8854 when required. Form 8854 is attached to Form 1040 or Form 1040NR if you are required to file either of those forms. For purposes of filling out Part I of Form 8854, the date of your expatriation is the later of the date you notified the relevant agency of your expatriating act or the date Form 8854 was first filed.

You are considered to have expatriated on the date you relinquished your citizenship (in the case of a former citizen). You are considered to have relinquished your U.S. citizenship on the earliest of the four dates described here:

A citizen will be treated as relinquishing his or her U.S. citizenship on the earliest of four possible dates: (1) the date the individual renounces his or her U.S. nationality before a diplomatic or consular officer of the United States*, provided the renunciation is subsequently approved** by the issuance to the individual of a certificate of loss of nationality by the U.S. Department of State; (2) the date the individual furnishes to the U.S. Department of State a signed statement of voluntary relinquishment of U.S. nationality confirming the performance of an act of expatriation specified in paragraph (1), (2), (3), or (4) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(1)-(4)), provided the voluntary relinquishment is subsequently approved by the issuance to the individual of a certificate of loss of nationality by the U.S. Department of State; (3) the date the U.S. Department of State issues to the individual a certificate of loss of nationality; or (4) the date a U.S. court cancels a naturalized citizen’s certificate of naturalization.

* In order to renounce your US passport you will need a second passport and you are required to bring this with you to your renunciation appointment.

The documents listed below are the ones required by the State Department to process your renunciation. You only need to fill out DS-4079 before your appointment. DS-4080, 4081, 4082 and 4083 are forms that you should review beforehand but complete at the appointment, since they just have a few check boxes, dates and signatures.

DS-4079: Questionnaire – Information for Determining Possible Loss of U.S. Citizenship, US State

DS-4080: Oath of Renunciation of the Nationality of the United States, US State Dept.

DS-4081: Statement of Understanding Concerning the Consequences and Ramifications of Relinquishment or Renunciation of U.S. Citizenship, US State Dept.

DS-4082: Witnesses’ Attestation Renunciation/Relinquishment of Citizenship, US State Dept.

DS-4083: Certificate of Loss of Nationality of the United States, US State Dept.

** At the end of renunciation appointment you will be provided with DS-4083, called the CLN for Certificate of Loss of Nationality. Keep this in a safe place and do not lose it, as it is the one piece of physical proof that you've completed the process for renouncing US citizenship. It's signed and affixed with an official seal at the appointment. Technically the CLN will need to be approved by the State Department but this can take several months and in the meantime you will need evidence of the day you formally signed renunciation.

The IRS publishes on a quarterly basis the names of persons who renounce citizenship in the Federal Register pursuant to section 6039G(d). Under 6039G(d), the Secretary of State provides the IRS with a copy of each certificate as to the loss of American nationality, which the IRS uses to publish in the Federal Register the names of those who have expatriated.

Expatriation tax - You determine whether IRC 877A expatriation rules apply to you and thus make you a“covered expatriate”.

The expatriation tax provisions under Internal Revenue Code (IRC) sections 877 and 877A apply to US citizens who have renounced their citizenship (and long-term residents (as defined in IRC 877(e)) who have ended their US resident status) for federal tax purposes. Among the various requirements contained in IRC 877 and 877A, individuals who renounced their US citizenship are required to certify to the IRS that they have satisfied all federal tax requirements for the 5 years prior to expatriation.

As you will expatriate after June 16, 2008, the IRC 877A expatriation rules apply to you if any of the following statements apply (all in $USD):

  • Your average annual net income tax (NOT INCOME!) for the 5 years ending before the date of expatriation or termination of residency is more than a specified amount that is adjusted for inflation, 2013 as an example is $155,000.

  • Your net worth is $2 million or more on the date of your expatriation or termination of residency.

  • You fail to certify on Form 8854 that you have complied with all U.S. federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency.

  • You expatriated before 2013 and you: a) deferred the payment of tax, b) have an item of eligible deferred compensation, or c) have an interest in a non-grantor trust.

If any of these rules apply, you are a “covered expatriate.” With regards to “covered expatriate”make sure not confuse “annual net income tax” with net income.

IRC 877A imposes a mark-to-market regime, which generally means that all property of a covered expatriate is deemed sold for its fair market value on the day before the expatriation date. Any gain arising from the deemed sale is taken into account for the tax year of the deemed sale notwithstanding any other provisions of the Code. Any loss from the deemed sale is taken into account for the tax year of the deemed sale to the extent otherwise provided in the Code.

The amount that would otherwise be includible in gross income by reason of the deemed sale rule is reduced (but not to below zero) by $600,000, which amount is to be adjusted for inflation for calendar years after 2008 (the “exclusion amount”).

The amount of any gain or loss subsequently realized (i.e., pursuant to the disposition of the property) will be adjusted for gain and loss taken into account under the IRC 877A mark-to-market regime, without regard to the exclusion amount. A taxpayer may elect to defer payment of tax attributable to property deemed sold.

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