Category Archives: Form 8854

Americans Abroad Aren’t Denouncing Because They Want To. They Are Renouncing Because They Feel They Have To

1 Reply

Introduction/background:

Denunciation of U.S. Citizenship – From the perspective from a U.S. Senator

Renunciation of U.S. Citizenship – From the perspective of a U.S. journalist

It’s hard to have a discussion about why Americans abroad are renouncing U.S. citizenship. There are many different perspectives about renunciation. There is very little “shared reality”. Tax academics (who have the resources to know better), “pensioned intellectuals”, politicians and most journalists see this from a “U.S. resident perspective”. They don’t understand the reality of the lives of Americans abroad. But, Americans abroad are NOT a monolith. The ONLY thing they have in common is that they live outside the United States. Their circumstances vary widely. There is little “shared reality” among Americans abroad of what the issues are. AT the risk of oversimplification, I have attempted to divide “Americans abroad” into four categories (as defined below). The categorization will explain why different groups of “Americans abroad” experience the U.S. extra-territorial tax regime differently.

Hint: Americans abroad aren’t renouncing U.S. citizenship because they want to. They are renouncing U.S. citizenship because they feel they have to.

Politicians, tax academics, “pensioned intellectuals” and many journalists deal in the world of opinions. The opinions they hold are often “myths”. They are not “facts”. They are entitled to their opinions (as misguided and ignorant as they may be). They are NOT entitled to their “facts”.

This post is to describe the facts about how the extra-territorial application of the Internal Revenue Code and the Bank Secrecy Act pressure many Americans abroad to renounce U.S. citizenship. Interestingly a large percentage of those renouncing owe ZERO taxes to the U.S. government. They renounce anyway!

First, a bit of background to the problem – what is the problem and who is affected?

They do NOT meet the test of being “nonresident aliens” under the Internal Revenue Code

As SEAT cofounder, Dr. Laura Snyder explains, in the first of her 16 “working papers” describing the problems of Americans abroad:

The people most affected by the U.S. extraterritorial tax system are not a monolithic group. Some left the United States recently, some left years or decades ago. Some left as adults (some young, some middle-aged, and some retirees), while others left as children (with their families), and some have never lived in the United States (they are U.S. citizens by virtue of the U.S. citizenship of at least one parent). Some intend to live in the United States (again) in the near or distant future, while others do not intend to ever live in the United States (again). Some identify as Americans while others do not. Many are also citizens of the country where they live (dual citizens) while others hold triple or even quadruple citizenships. In referring to this group, there is no one term that sufficiently reflects its full diversity. What unites them is that they do not meet the test of “nonresident alien” under the Internal Revenue Code. Depending upon the context, this series of papers will use terms such as “persons,” “individuals,” “affected individuals,” and “overseas Americans.” The latter term has a drawback, however: it emphasizes connections to the United States while minimizing the important connections that such persons have to the countries and communities where they live.

That said, what divides Americans abroad may be greater than what unites Americans abroad!

Continue reading →

Biden 2024 Green Book: Message To Accidental Americans – Either comply or renounce!

3 Replies

Part I – Summary of post:

The proposals for Americans abroad include:

1. A provision to (and presumption of) heighten enforcement of the 877A exit tax through changes in the Internal Revenue Code

2. A possible “carve out” from the 877A exit tax for certain Americans abroad with limited ties to the United States (under rules prescribed by the Treasury Secretary)

3. NO RELIEF whatsoever from U.S. citizenship taxation and the way that the rules apply to Americans abroad. This assumes a continuation of U.S. citizenship taxation with no evidence of change.

In other words: Either comply or renounce!

Continue reading →

Summary Of The Reporting Obligations Triggered By Relinquishing US Citizenship Or Abandoning The Green Card

1 Reply

The American Expat Financial News Journal reliably reports information about the “Name and Shame List”. The report generally includes information about the number of people on the list and people who are reported more than once. The report often attempts to determine whether those on the list are citizenship relinquishers or green card abandoners.

The purpose of this brief post is to explain the statutory basis for the reporting obligations, identify the relevant statutes and clarify some common misconceptions.

A summary of the analysis is that:

1. All individuals renouncing (whether “covered expatriates” or not) US citizenship during the relevant period are to be included on the “Name and Shame List”.

2. Green Card holders that are “long term” residents” are required to be included on the list

It is common knowledge that the lists contain many inaccuracies on the list.

Which statutes are relevant to determining the reporting obligations?

IRC 6039G – https://www.law.cornell.edu/uscode/text/26/6039G

IRC 877 – https://www.law.cornell.edu/uscode/text/26/877

IRC 877A – https://www.law.cornell.edu/uscode/text/26/877A

Continue reading →

Part 2 – The Warren “Ultra-Millionaire Tax Act of 2021” and The Wealth Of Other Nations

Leave a reply

The fact that …

Leads to the obvious question of …

Hmm…

The fact is that Senator Warren is proposing to impose her wealth tax on property located outside the United States, purchased by individuals who live outside the United States, who have no connection to the United States other than (perhaps) the circumstance of having been born in the United States. Yup, it’s true.

On March 18, 2021, FATCA will turn on 11. The Senator’s proposed wealth tax explicitly states that FATCA is to be used to enforce this tax! Finally an (il)legitimate use for FATCA.

In the 18th Century Adam Smith wrote “The Wealth Of Nations”. In the 21st Century Senator Warren is proposing to impose a wealth tax on “The Wealth Of OTHER Nations”.

Discussion And Analysis

This is the second of what I expect to be a multi-part series on Senator Warren’s proposed wealth tax of 2021. As the above tweet makes clear, the practical utility of the tax depends on US citizenship-based taxation (to whom it applies) and FATCA (how are non-US assets located). In my first post, I referenced Senator Warren’s statement that:

Continue reading →

Individuals, Treasury, The State Department And IRC 6039G: Who has to report what when an individual renounces US citizenship?

Leave a reply

Renunciation of U.S. Citizenship triggers a “Reporting Frenzy”!

It’s simply unbelievable. The renunciation of U.S. citizenship triggers more reporting obligations on the part of individuals and government agencies than anything else. More than birth. More than death. More than marriage. More than bankruptcy. More than conviction of a crime (probably). It’s unbelievable.

The purpose of this post is to “slice and dice” what those reporting obligations are.

Let’s Go On A Magical Reporting Tour

https://www.law.cornell.edu/uscode/text/26/6039G

The rules governing information reporting when one relinquishes U.S. citizenship are found in Internal Revenue Code 6039G. They impose reporting obligations on “some” individual relinquishers (“covered expatriates”), the State Department whenever a Certificate of Loss Of Nationality has been issued and on U.S. Treasury. (I will comment separately on the situation of Green Card holders at the end of this post.) Most of this is summarized in the following two tweets. But, because this is so confused, I am going to take the time to parse the statute.

It’s all in Internal Revenue Code – 6039G Note that Section 6039G is found in Subtitle F which is the – “Procedure and Administration” – part of the Internal Revenue Code. In other words, it deals only with information reporting. It does NOT impose taxation. Interestingly, Section 6039G imposes reporting requirements on individuals, the State Department, U.S. Treasury (and in the case of Green Card holders) the Immigration authorities.

That pretty much sums it up. For those who want to understand the analysis …

Continue reading →

The 2019 IRS "expatriation" compliance campaign: Getting ahead of the fear mongering

3 Replies

On July 19, 2019 the IRS announced six new compliance initiatives.
Of particular interest to U.S. citizens and permanent residents (Green Card holders) is what is described as:

Expatriation
U.S. citizens and long-term residents (lawful permanent residents in eight out of the last 15 taxable years) who expatriated on or after June 17, 2008, may not have met their filing requirements or tax obligations. The Internal Revenue Service will address noncompliance through a variety of treatment streams, including outreach, soft letters, and examination.

What is expatriation?
Continue reading →

How can the IRS enforce US tax debts in foreign countries? Does renunciation of citizenship matter?

Leave a reply

For years people have asked the question: Can the United States enforce U.S. tax debts in foreign countries? If this is possible, how would this work. I sometimes answer questions on Quora. My answer to this question (comments invited) is here:
Read John Richardson's answer to Can the IRS confiscate non US-based assets for taxes owed after someone renounces their citizenship? on Quora

Considering the EB-5 Visa? The IRC S. 877A Expatriation Tax Demonstrates that "Not All US @TaxResidency Is The Same!"

Leave a reply


“Understanding U.S. Tax Residency …
The United States uses a form of “deemed tax residency“.
The Internal Revenue of the United States deems that all “individuals” (wherever they live in the world – including citizens and residents of other countries) except “nonresident aliens” are subject to taxation in the United States on their world wide income. One qualifies as a “nonresident alien” unless one is a:
1. A U.S. citizen
2. A U.S. resident as defined by Internal Revenue Code Sec. 7701(b)
Continue reading →

Part 9: Responding to the Sec. 965 “transition tax”: From the "Pax Americana" to the "Tax Americana"

Leave a reply


This is the ninth in my series of posts about the Sec. 965 Transition Tax and whether/how it applies to the small business corporations owned by taxpaying residents of other countries (who may also have U.S. citizenship). These small business corporations are in no way “foreign”. They are certainly “local” to the resident of another country who just happens to have the misfortune of being a U.S. citizen.
Continue reading →

Does the end of #OVDP signal a move FROM the "voluntary disclosure" model TO the "enforcement model"?

Leave a reply

The IRS recently announced that it was ending OVDP – the “Offshore Voluntary Disclosure Program.”
The reaction of the “tax compliance community has been largely that the “retiring” of the OVDP program should be interpreted to be a “last, best chance to come into compliance!” A comment at the Isaac Brock Society asks:

“Those who still wish to come forward have time to do so.”
I haven’t finished reading John’s farewell to OVDP but that IRS statement caught my eye. It does NOT say “who must come forward” or “who have yet to come forward”. Who the heck would ever “wish” to come forward, especially after reading about Just Me’s trial by OVDP fire and the betrayal of trust suffered by our dear Dr. Marcus Marcio Pinheiro (aka markpinetree)?

I suppose there could be two possible reasons:
1. The OVDP program could be replaced with something worse; and/or
2. There could be some (few and far between) situations where OVDP might actually be better than streamlined.


What do the “tax professionals” think? A collection of comments from the twittersphere follows:


Interestingly, the IRS announcement was accompanied by the statement that:

The planned end of the current OVDP also reflects advances in third-party reporting and increased awareness of U.S. taxpayers of their offshore tax and reporting obligations.

A comment from the Isaac Brock Society asks:

Doesn’t this just mean that they will move from the “voluntary disclosure” model to the “enforcement model” where they will begin to use the information gathered in FATCA, etc, to send notices to people with large fines?
To me, this sounds more like a gunshot that begins the battle between the IRS and expats versus an expat victory.

And in the real world …
Last week I was shown a sample of an IRS form letter received by an elderly American woman who has (apparently) not lived in the United States for fifty years. During those fifty years she had dutifully and responsibly filed her U.S. tax returns. Of course, she was living in a “foreign” country outside the United States.
Those interested might have a look at the following form letter she received. Notice that the letter appears to have been prompted because the IRS received information that she had an account at a “foreign bank”.
IRS – ltr form 6019
Looks like quite the fishing expedition to me. What a “penalty laden” list of possible accusations. Would you like to receive a letter like this about your “local” bank accounts?