Tag Archives: expatriation date

Taxability Freedom Day: On what day does a "U.S. person" cease to be a "U.S. taxpayer"?

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Update: October 9, 2015
This post focuses largely on the role of form 8854 in relinquishing U.S. citizenship for tax purposes. See also my more recent post which discusses the role of the Certificate of Loss of Nationality in relinquishing U.S. citizenship.


 
Introduction …
There is a difference between:

  1. What is your tax liability IF you are a “U.S. person” for tax purposes”;and
  2. Whether you are a U.S. person for tax purposes at all.

I find that many of the blog posts and articles confuse these two issues.
Remember that “U.S. person” for tax purposes INCLUDES (but is not limited to) U.S. citizens and Green Card Holders.
What this post is NOT …
This post is NOT to discuss your specific U.S. tax liability – the AMOUNT of U.S. taxes owing in general. It is NOT to discuss how U.S. taxes are calculated in general. It is NOT to discuss the “taxes that may be triggered” by expatriation. Only those who are “U.S. persons” are subject to U.S. taxation. Therefore, in order to end the “jurisdiction of the United States to impose taxes on you (your “taxability”):
You must terminate your status as a “U.S. person” for tax purposes. This means that you must either “relinquish your U.S. citizenship” under ALL applicable legislation or terminate your Green Card.
What this post IS …
This post is to explain the date that you cease to be a “U.S. person” for tax purposes. At what point, can you say with confidence:
“I’m free. The U.S. no longer has the right to treat me as a “U.S. person” for tax purposes. Nothing that I do from this point on will generate “U.S. tax liability”.
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Attn: Former U.S. Citizens: Are you STILL or have you EVER BEEN a U.S. "Tax Citizen"?

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Synopsis:
This is a long post. In fact, it is too long for the average reader. Therefore, I wish to summarize the purpose and possible (but not certain conclusion) of the post in a few simple sentences.
Here goes:
If you were born in the United States (and became a U.S. citizen at birth) who moved to Canada and naturalized as a Canadian Citizen prior to June 3, 2004:
1. Without informing the U.S. State Department or applying for a Certificate of Loss of Nationality; and
2. You are hearing from the media and some members of the tax compliance community that you are either still a U.S. citizen and/or are somehow liable for U.S. taxes; then
You should NOT believe that you are still a U.S. citizen and/or are that you are subject to U.S. taxation without getting proper counselling.
In other words you should NOT:
– apply for a Certificate of Loss of Nationality
– file U.S. tax returns
– renounce U.S. citizenship
without a thorough investigation of your situation. You may or may not be a U.S. citizen who is subject to U.S. taxation.
Extreme caution is warranted. Every case is fact specific.
Please note that this post is NOT legal advice of any kind whatsoever. You meed to discuss your specific circumstances with a competent adviser of your choice.
To understand why, read on …
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