U.S. Expatriation Consulting & Filing

  • After the implementation of Foreign Account Tax Compliance Act (FATCA), the number of people queuing for the expatriation of US citizenship at the US embassies around the world has increased significantly. The number of people who gave up US passports and green cards in 2013 rose to 3,000. To get to the bottom of the matter, it is due to the strict new tax law. The new tax law makes overseas income tax reporting more complicated and cumbersome. At this point, a number of Americans considering giving up US passports perhaps are for protecting personal properties. But, giving up US citizenship will cause legal problems. It is neither legal to give up US citizenship for tax avoidance, nor does it mean by giving up US citizenship one can be removed from the list of tax arrears.
  • If you want to give up your US citizenship, you need to meet specific conditions. With or without the motivation to avoid tax, you must calculate the expatriation tax. But whether it is permanent residents with green cards or US citizens, once you choose to give up the legal US identity, as long as you have considerable wealth, you are facing the requirements of declaring the expatriation tax.
  • If you have a green card but has yet to reach eight years of holding, you are exempt from the expatriation tax.

If you give up your green card or US citizenship but has not applied for the departure permit of the Internal Revenue Service (IRS), you still have the responsibility to file tax. On the day of the expatriation:

  • If the market net value of your global assets exceeds USD2 million, or the annual income tax you have paid over the past five years is over the standard threshold (the 2014 threshold is USD157,000; adjustable annually as appropriate), you will need to liquidate your global total assets to pay the expatriation tax in order to be exempt from the tax obligations according to tax laws.
  • If your assets are lower than the above-mentioned standards, you still need to fill out the 8854 tax form, indicating that in the past five years you have honestly reported income tax and overseas accounts in accordance with US tax laws to be qualified to apply for the expatriation.
  • Legal risks:
    1. Once you have entered the expatriation process, you cannot change your mind.
    2. You need to pay for all the unpaid taxes for the past five years.
    3. Most of the assets are deemed to be sold at "market price". After deducting the exemption allowance of the expatriation from the profits of asset sales, the rest of the amount will be calculated into the individual income of the period.
    4. It is possible to cause IRS to inspect and generate huge fines.

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