Expatriate Legal Services for Americans Abroad

Giving up citizenship (or a long held green card) ends future U.S. tax residency, but the IRS wants a clean exit. You file a final return for the year you expatriate, attach Form 8854, and certify that your last five years of federal tax obligations were met. Depending on your situation, you may also owe exit tax on unrealized gains. If any of those pieces are missing, the IRS can keep treating you as a covered expatriate, with consequences that follow you and your U.S. heirs.

There are three tests, and you only need to meet one. First, your average annual net income tax for the five years before expatriation is above a threshold the IRS adjusts for inflation each year (recently a little over $200,000). Second, your net worth is $2 million or more on the expatriation date. Third, you can't certify on Form 8854 that you complied with federal tax law for the prior five years. The third test catches a lot of people who simply never filed while living overseas.

If you're a covered expatriate, the IRS treats most of your worldwide assets as sold at fair market value on the day before you expatriate. Gains above an exclusion amount, which is indexed for inflation, are taxed on your final return. Retirement accounts, deferred compensation and certain trusts follow their own rules. Running the numbers well before your renunciation date gives you room to plan, for example by addressing compliance gaps so you don't fall into covered status for the wrong reason.

Usually yes, if you want to avoid covered status through the compliance test. Many Americans abroad owe little or no U.S. tax thanks to the foreign earned income exclusion or foreign tax credits, but the returns still had to be filed. We identify which years are missing, gather income and account records, and prepare returns and FBARs so you can sign the five year certification on Form 8854 honestly.

If your failure to file was not willful, the Streamlined Foreign Offshore Procedures let qualifying taxpayers living outside the U.S. file the last three years of returns and six years of FBARs, along with a signed statement explaining what happened. For those who qualify, the IRS does not assess failure to file or FBAR penalties under that program. There's also a separate IRS relief procedure for some former citizens with modest net worth and small tax balances. Eligibility for either depends on your facts.

If the combined balance of your foreign financial accounts went over $10,000 at any point in the year, you generally need to file an FBAR (FinCEN Form 114). Separately, Form 8938 under FATCA may be required when foreign assets pass higher thresholds. These are reporting forms, not taxes, but the penalties for skipping them can be steep. We review every account you hold, including joint accounts and ones you can sign on for an employer.

Yes. As an IRS Enrolled Agent, our founder holds unlimited practice rights before the IRS, and where you live doesn't change that. With a Form 2848 on file, we can speak to the IRS for you, respond to notices, handle audits and appeals, and negotiate payment plans or penalty relief on old balances. We do the work remotely, so time zones are rarely an issue.

That's fine; it happens more than people think. You may still be able to fix things through the relief procedures for former citizens, or by filing the missing Form 8854 and final returns late. If tax is owed, we can work on an installment agreement, penalty abatement or other IRS resolution options. The earlier you deal with it, the more choices you usually have.