For US expats ready to renounce their citizenship, understanding the final legal and tax steps is essential. Form 8854, the Initial and Annual Expatriation Statement, marks the conclusive stage in breaking ties with the U.S. tax system. At 1040 Abroad, we specialize in navigating the complexities of Form 8854, offering the insights needed to finalize your departure from U.S. tax obligations confidently. This article is your definitive guide to completing Form 8854, the ultimate step in your expatriation journey.

WHAT IS FORM 8854?

Form 8854 is a tax form used by long-term residents relinquishing their Green Card and U.S. citizens renouncing their citizenship. Until you file it, you will remain a U.S. person for tax purposes. The form declares expatriation and compliance with IRS requirements, marking your official departure from U.S. tax obligations.

Note: A long-term resident, for the purposes of Form 8854, is an individual who has held a green card in at least 8 of the last 15-tax-year period before the year of expatriation.

WHAT IS THE PURPOSE OF FORM 8854?

Form 8854 has several key purposes:

1. To notify the IRS of your expatriation or termination of long-term residency.
2. To certify that you have complied with all U.S. federal tax obligations for the five years preceding the year of your expatriation.
3. To determine if an individual is a “covered expatriate” under U.S. tax law, which has implications for their tax liabilities.
4. To calculate the exit tax, if applicable,  under sections 877 and 877A of the Internal Revenue Code.

Importantly, for U.S. citizens who have renounced their citizenship, filing Form 8854 is necessary to formally cease being considered a U.S. person for income tax purposes. This step is essential to ensure compliance with U.S. tax laws and avoid continuing U.S. tax obligations.

WHO IS CONSIDERED A COVERED EXPATRIATE?

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