Tag Archives: Form 8854

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

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

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

Updated on June 29, 2024

The confusion over this topic continues on. With respect to U.S. citizenship relinquishment IRC 6039G imposes the following three specific requirements:

1. The State Department is required to report to U.S. Treasury the names of ALL people who have been issued a Certificate of Loss of Nationality.

2. U.S. Treasury is required to publish in the Federal Register the names of all people who the State Department has reported were issued CLNs in that quarter.

3. Individual relinquishers: 1. 6039G requires that all “Covered Expatriates” file a Form 8854.2. The “Secretary” requires individuals to file Form 8854 in order to order to certify that because they have met their tax compliance obligations they are NOT “covered expatriates”.

Explanation – tracking the relevant provisions in the Internal Revenue Code:

1. IRC 7701(a)(50) – provides statutory test for when an individual ceases to be a U.S. citizen:

“(50) Termination of United States citizenship
(A) In general

An individual shall not cease to be treated as a United States citizen before the date on which the individual’s citizenship is treated as relinquished under section 877A(g)(4).”

https://www.law.cornell.edu/uscode/text/26/7701

2. IRC 877A(g)(4) – provides the date of relinquishment of U.S. citizenship under the IRC:

“(4) Relinquishment of citizenship A citizen shall be treated as relinquishing his United States citizenship on the earliest of—
(A) the date the individual renounces his United States nationality before a diplomatic or consular officer of the United States pursuant to paragraph (5) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)),
(B) the date the individual furnishes to the United States Department of State a signed statement of voluntary relinquishment of United States 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)),
(C) the date the United States Department of State issues to the individual a certificate of loss of nationality, or
(D) the date a court of the United States cancels a naturalized citizen’s certificate of naturalization.
Subparagraph (A) or (B) shall not apply to any individual unless the renunciation or voluntary relinquishment is subsequently approved by the issuance to the individual of a certificate of loss of nationality by the United States Department of State.”

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

3. State Department: IRC 6039G – imposes obligation on State Department to notify the Secretary of all CLNs issued under INA 358:

“(2) the Secretary of State shall provide to the Secretary a copy of each certificate as to the loss of American nationality under section 358 of the Immigration and Nationality Act which is approved by the Secretary of State,”

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

4. Treasury Secretary: IRC 6039G -Imposes obligation on Secretary to report names of ALL relinquishers in Federal Register:

Notwithstanding any other provision of law, not later than 30 days after the close of each calendar quarter, the Secretary shall publish in the Federal Register the name of each individual losing United States citizenship (within the meaning of section 877(a) or 877A) with respect to whom the Secretary receives information under the preceding sentence during such quarter.

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

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

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

The Green Card and the "Oh My God" Moment: You know you want to leave the USA? Not so fast!


Well he won the lottery. Specifically he won the “Green Card” lottery. He and his wife came all the way from an Asian country to “Live The Dream” – specifically the dream of living in the United States of America.
He spoke English. His wife did not speak English. He believed in strict compliance in the law. His wife relied on him to ensure her compliance with the law.
As a Green Card holder he was vaguely aware that he could be deported if he were convicted of certain kinds of offenses. But, mainly he believed in compliance with the law for its own sake.
As a Green Card holder and as a U.S. resident he was subject to laws that were never explained to him. He didn’t realize that he was taxable on his WORLD income (including a small pension that he received from his country of citizenship).
In 2009 the “Offshore Jihad” began. He didn’t think of himself as having “offshore accounts”. After all, he was a just citizen of another country. Surely it could NOT be criminal to have a bank account in his country of origin. Did he have to report his small foreign pension to the IRS? That pension was in no way related to the United States of America? And then he learned about the alphabet soup of “reporting requirements” – Mr. FBAR, Uncle FATCA, etc. He began to learn what the “reporting requirements” were. But, the penalties (as least described) were certain. He could not believe the extent of the penalties.
It was at this moment that his “Oh My God” moment began. He was confused and mentally disorganized. At that moment, all of his life assumptions were reversed.
Assumption 1: He had always believed that he was a good, moral “law abiding” person. How could it be that he was NOT in compliance with the law. He had no reason to believe that the reporting requirements would even exist.
Welcome to the United States of America where any involvement with anything “foreign” makes you a presumptive criminal.
Assumption 2: He had always believed that the United States was a “just nation”. How could the United States threaten to impose such penalties on a person in his situation?
Welcome to the United States of America where justice is NOT the norm.
What’s a poor “Green Card” holder to do?
He was ill prepared to deal with the situation in which he found himself.
He strived to learn what he could. The IRS would not answer his questions – suggesting that he go to a “tax professional”
The “tax professionals” gave him different, conflicting and contradictory answers.
His greatest frustration was that he could NOT completely understand what was expected of him – although he did understand the threat of penalties, penalties and more penalties.
He eventually decided that he had to move back to his home country. He did this NOT to escape U.S. taxation, but because:

  1. He could not completely understand what was required of him to be U.S. tax complaint; and
  2. He was worried that he would die and leave his wife in a situation where she would not know how to be U.S. tax compliant.

In order to prepare for leaving he:

  • entered the streamlined program (domestic  version) and “back filed” for 3 years
  • stayed in America for two more years so that he could certify the “five years of tax compliance” when he handed in the I-407
  • even filed the “Sailing Permit” (The 1040C) that is required of ALL aliens (resident or nonresident) when they leave the United States

He in now trying to file his final return and 8854. Fortunately he will not be subject to the S. 877A Exit Tax. He is currently focusing on staying alive long enough to complete his U.S. tax filings. He feels that it is important that he NOT die and leave the U.S. tax compliance problem to his wife.
His emotional state:
Like many he is living in a state of fear. I pointed out to him that he was a small insignificant person and that nobody in the U.S. Government cared about him. He thanked me for telling him that “nobody in the U.S. Government cared about him”. He said that it was the first time in his life that he felt good that nobody cared about him.
Epilogue:
One more day. One more life ruined. One more person chased out of America because of the Internal Revenue Code.
His greatest wish is that he lives long enough to file Form 8854 to log him and his wife out of America.
Nobody, but nobody should move to America without reading the fine print!
#YouCantMakeThisUp!
John Richardson
 
 
 
 
 

False Form 8854 used as part of "willful" #FBAR prosecution

The primary story is of a U.S. professor who pleaded guilty to an FBAR violation and was subjected to a 100 million FBAR penalty.  Notably the “tax loss” was 10 million dollars and the FBAR penalty was 100 million dollars. It appears that Mr. FBAR is becoming an important tool in the arsenal used by the United States Treasury.
The more interesting (for the purposes of expatriation) was the role that a “false Form 8854 “Expatriation Statement”) may have played in the guilty plea.
The story has been reported at the following two sources:


and on Jack Townsend’s blog


What is most  interesting is the description from the Department of Justice site which includes:

Horsky directed the activities in his Horsky Holdings and other accounts maintained at the Zurich-based bank, despite the fact that it was readily apparent, in communications with employees of the bank, that Horsky was a resident of the United States.  Bank representatives routinely sent emails to Horsky recognizing that he was residing in the United States.  Beginning in at least 2011, Horsky caused another individual to have signature authority over his Zurich-based bank accounts, and this individual assumed the responsibility of providing instructions as to the management of the accounts at Horsky’s direction.  This arrangement was intended to conceal Horsky’s interest in and control over these accounts from the IRS. 
In 2013, the individual who had nominal control over Horsky’s accounts at the Zurich-based bank conspired with Horsky to relinquish the individual’s U.S. citizenship, in part to ensure that Horsky’s control of the offshore accounts would not be reported to the IRS.  In 2014, this individual filed with the IRS a false Form 8854 (Initial Annual Expatriation Statement) that failed to disclose his net worth on the date of expatriation, failed to disclose his ownership of foreign assets, and falsely certified under penalties of perjury that he was in compliance with his tax obligations for the five preceding tax years.
Horsky also willfully filed false 2008 through 2014 individual income tax returns which failed to disclose his income from, and beneficial interest in and control over, his Zurich-based bank accounts.  Horsky agreed that for purposes of sentencing, his criminal conduct resulted in a tax loss of at least $10 million.  In addition, Horsky failed to file Reports of Foreign Bank and Financial Accounts (FBARs) up and through 2011, and also filed false FBARs for 2012 and 2013.

The point is that the false Form 8854 (used primarily to provide information about whether one is a “covered expatriate” and to calculate the Exit Tax) was used as evidence of part of a conspiracy to evade taxes. This is an interesting use of the Form 8854,  which is primarily an “information return”.
Obviously this a “general interest” post with extremely unusual circumstances. But, it is an example of how associations with others, in the  “Wide and Wonderful World of U.S. Tax Forms” can become a problem.
This is also a reminder the “information returns” DO matter!