One might not expect it, but the United States has experienced an increasing trend in number of expatriates in the last decade. Each year, thousands of individual taxpayers relinquished either their U.S. citizenship or permanent resident status, peaking in 2016 with 5,405 total expatriates. Expatriates are required to comply with specific tax provisions. The Treasury Inspector General for Tax Administration (“TIGTA”) ultimately performed an audit to assess the reliability and effectiveness of the Internal Revenue Service’s efforts to ensure taxpayer (or former taxpayer) compliance.
Sections 877 and 877A, Generally
Sections 877 and 877A of the Internal Revenue Code govern the tax provisions related to expatriates. Under these provisions, certain taxpayers who relinquish their U.S. citizenship or long-term residents who terminate their U.S. residency may be subject to certain tax consequences. Specifically, such taxpayers must certify on Form 8854, Initial and Annual Expatriation Statement, their compliance with all U.S. federal tax laws for the five years prior to the date of expatriation and determine whether they are “covered expatriates.”