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

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Cares Act Effect On Expatriates

Introduction

This post is based on my Quora answer to the question: “Do you agree with the policy of not issuing checks to US citizens who jointly file taxes with someone who has an ITIN?

The Quora answer was rewritten with the generous technical assistance of CPA Olivier Wagner of 1040 Abroad.

Part I – Objective Analysis

This post focuses on the class of individuals entitled to relief. It does not discuss how the relief is administered.

The statute authorizing the relief is found in Section 6428 or Subtitle F (the Procedure And Administration section of the Internal Revenue Code). The following sections specify WHO is entitled to the relief:
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Foreign Trusts - John Richardson

TaxConnections is posting this thoughtfully written comment on an article titled “Treasury Exempts Applicable “Tax-Favored Foreign Trusts” From The Form 3520… And Therefore Form 3520A Requirement” written by John Richardson. Here is a recommendation for Treasury to consider as posted by a David Johnstone.

John,
Excellent post. Based on my reading of the Revenue Procedure, as well as feedback from practitioners in the UK or Australia, I have grave reservations about the claim that this Revenue Procedure will help “many” Americans abroad. Perhaps this is an example of an attempt to simplify things from a legal perspective that in practice – once one does the math – may lead to greater complexity and help a very small number of people at best.
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Helen Burggraf

The U.S. Internal Revenue Service unveiled a set of “new procedures” on Friday that it said would enable “certain” expatriates – a sub-group of “accidental Americans” who have renounced their citizenship, or are considering doing so – to avoid key taxes normally associated with renouncing.

Tax experts said the announcement was highly significant, and would likely be welcomed by many who fit the relatively narrow category of those likely to benefit from it. One suggested the scheme might help the IRS to focus its attention on the “bigger fish” it believes to be lurking in the overseas pond. 

In a statement, the Accidental Americans Association said it welcomed the initiative, but added that it did “not go far enough”. 

The “Relief Procedures for Certain Former Citizens” only applies to individuals who have relinquished their citizenship since March 18, 2010, or have not yet done so, who have less than US$2m in net worth, and who have never filed U.S. tax returns as U.S. citizens or residents, the IRS explained in a statement. 

They also must “owe [only] a limited amount of back taxes to the United States.”

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Boris Johnson

Boris Johnson, the front-runner to succeed Theresa May as Britain’s prime minister this week, is well known to Londoners for myriad reasons, including having unofficially lent his name to a bicycle-sharing scheme (“Boris bikes”) that was launched in 2010, and with which he, a keen cyclist himself, was associated.

Less well known to many of his fellow Londoners is that he had a bitter and rather public battle with the U.S. IRS six years ago, when it sought to tax him on the sale of his London property, owing to the fact of his American citizenship, acquired at birth.

Below is an updated version of a story on his U.S. tax travails that we first ran last September. We thought it timely to revisit this issue now, because London property experts report that Americans currently account for a disproportionately large share of those currently shopping for – and buying – London properties, helped by a dollar that’s at near-record highs against the pound, and expected to strengthen further. At the same time, London property prices have been under pressure, with the average value of a London home reported recently to be  down by 4.4% in the year to the end of May.

When British politician Boris Johnson renounced his citizenship in 2016, many observers speculated that he had finally been moved to do it after the seemingly ill-advised sale of his home in north London in 2009 saw him hit with a significant (said to be in the tens of thousands of pounds) capital gains tax payable to the U.S. government on his half of the profit from the sale.

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Attention Please

We bring your attention to the commentary on the post this week  written by John Richardson of Citizenship Solutions in Toronto, Canada called “The United States Imposes A Separate And Much More Punitive Tax On U.S. Citizens Who Are Residents Of Other Countries”.

We appreciate the commentary to Johns post and ask our readers to add their own stories to educate the public of the impact of these laws have on dual citizens. The real financial impact is causing hardship and stress for many Americans who live and reside in other countries and have done so for years.

You can read the story and commentary at this link.

 

John Richardson On Expatriate Taxes

We continue to receive commentary on the article written by TaxConnections Member John Richardson of Citizenship Solutions. His blog post on USA Of The 21st Century Is Like Britain In The 19th Century has hit a nerve with many expatriates around the world. The blog post and the 120+ comments that follow explain what is happening to those who happened to be born here but do not live in the United States. There is more to learn that will leave you at the edge of your seats so stay tuned to this post.

Read this post that has 120+ comments and growing by the day and please forward to expatriates you know to add commentary.

https://www.taxconnections.com/taxblog/the-usa-of-the-21st-century-is-like-britain-in-the-19th-century/#.XH3XiKJKiJB

Please add your commentary below to continue to educate others on the consequences of United States FATCA tax laws on your life.

Written By TaxConnections CEO, Kat Jennings

 

Olivier Wagner, Foreign earned Income For Expats

Do you want to take advantage of the Foreign Earned Income Exclusion, the Foreign Housing Exclusion or the Foreign Housing Deduction? As a U.S. citizen or Green Card Holder living abroad, you still need to file annual U.S. federal tax returns. There are many different options, which American abroad has in order to cut the tax bill. However, the 3 above-mentioned ones are based on Foreign Earned Income.

So what is a Foreign Earned Income?

It’s crucial to understand what FEI is for US expats. We prepared this easy infographic to provide more clarity on this topic. The definition by the IRS states that it’s income you receive for services you perform in a foreign country:

Check out the infographic below to understand the classification of types of income and what is considered to be NOT earned income. We also included what the IRS doesn’t count as a Foreign Earned Income.

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If you’ve paid attention to the news lately, you’ve no doubt heard the term “negative gearing”. It has become somewhat of a political football – with the Liberal and National parties supporting current arrangements, while Labour intends to change it. But what exactly is negative gearing and how do the rules apply to Australian expatriates?

Negative Gearing 101 Read More

American expats are still required to file a US federal tax return to the IRS. As expats also have to comply with the tax rules in the country where they live, it’s counterintuitive but nonetheless important that they file US taxes too.
Taxing US citizens abroad, or Citizenship (rather than Residence) Based Taxation, dates back to the Civil War, but until recently the IRS was powerless to enforce expat taxes, so few expats filed.

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The Foreign Earned Income Exclusion lets US expats exclude the first around $100,000 (the exact figure rises a little each year) of their earned income from US taxes.

It’s a great choice for many expats who earn less than this threshold, and sometimes a good option for expats who earn above the threshold too.

To claim the Foreign Earned Income Exclusion, expats have to file form 2555 with their annual US tax return. Form 2555 requires expats to prove that they live abroad.

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President Trump’s former campaign manager Paul Manafort, along with his associate Richard Gates, were indicted last week, with a long list of criminal charges filed against them.

The charges include engaging in conspiracies against the United States and to launder money, making false statements, acting as an unregistered foreign agent, and failing to report foreign bank and financial accounts.

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