Although many Americans are extremely patriotic, more and more Americans are playing ”The Expatriation Games”

December 14, 2021 - Participants Include:

 

Olivier Wagner CPA - @1040Abroad

John Richardson - @Expatriationlaw

 

The Expatriation Games - A Discussion with Oliver Wagner

This podcast features a practical and focussed discussion about some of the key issues in relinquishing US citizenship. Olivier has posted this podcast on his youtube channel.

 

These issues include:

 

There are two kinds of US citizenship:

1. US Citizenship for immigration/nationality purposes:

- relinquished on the date of the relinquishing act

 

2. US Citizenship for tax purposes:

- after June 3, 2004 relinquished on the date that notice is given to the US government

- prior to June 3, 2004 relinquished on the date of the expatriating act

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Covered expatriate status - tax compliance is necessary:

- one (but the not the only one) of the necessary conditions to avoid "covered expatriate" status is a certification of five years of tax compliance (in the five years prior to the year of the appointment at the Consulate)

- obviously this means that a defensible level of tax compliance is required 

 

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Significance of Form 8854:

After listening to this podcast I think this issue deserves further clarification as follows:

- Since June 16, 2008 it is NOT necessary to file Form 8854 in order to sever tax residency from the USA. One ceases to be a US tax resident from the date of renunciation. This means that from that point on one is  treated as a nonresident alien. But, note that renunciation does not cure/end past tax obligations.

- But the tax certification of five years compliance is required to be done on Form 8854. This is is why filing Form 8854 is necessary for avoiding covered expatriate status

- "covered expatriates" are subject to the 877A Exit rules and the 2801 tax impediments to making gifts or bequests to US persons

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Reducing net worth to avoid covered expatriate status through gifting ... and more!

- For most people a net worth in excess of 2 million USD on the date of expatriation will make one a covered expatriate

- to make gifts is to reduce net worth (but there are requirements to make a valid gift).