Expatriate Tax Issues (Form 8854 and other issues)

Expatriation and being termed an “expatriate” have very specific meaning in the Internal Revenue Code.  Expatriation tax provisions apply to U.S. citizens who have relinquished their citizenship and long-term residents who have ended their residency (expatriated). You are an long-term resident if you were a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year your status as an long-term resident ends. Expatriation includes the acts of relinquishing U.S. citizenship and terminating long-term residency. Many people think of expatriation as living abroad for a period of time that would allow for the Foreign Earned Income Exclusion. Recent changes in the law state that 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. Because US Citizens are subject to income tax on their worldwide income a person expatriating for non-tax avoidance purposes must act carefully or they may remain liable for US income tax on income earned after expatriation without realizing it. If you would like to discuss expatriation or any other matters relating to the US tax consequences of foreign income contact Paul by clicking here.

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