Final tax return following relinquishment

Taxpoor · Post by **Taxpoor** » Wed Nov 21, 2012 9:03 am

I have a tax question regarding the filing of my final income tax form (1040) following my relinquishment of US Citizenship.

Following my Consulate appointment, which should be before December 31st of this year, am i to understand that the next IRS filing will be on a 1040NR for taxation year 2012...or do i use a straight 1040?

Also, I assume I attach my 8854 to the 1040 in question and then send a copy(of the 8854) to the US dept of the Treasury along with my 2012 FBAR?

Another hypothetical question....

If something pushes my relinguish ceremony past December 31st...say to the end of March....would the senerio be as follows;

In 2013 fIle a normal 1040 for 2012 until Dec 31st. (since i was technically still a US citizen)

In 2014, file the final 1040 (NR?) for 2013 months of jan, feb and March.

?

am i on the right subway here???

primo · Post by **primo** » Wed Nov 21, 2012 9:12 am

File 1040 for the period up to the date of relinquishment and 1040NR for the remainder of the tax year. Include an 8854. Write dual status tax year on the top of your 1040NR, make sure you sign all 3. Doesn't matter if it is this year or next, it's done the same.

Copy of your 8854 goes to the IRS in Philadelphia. Address is in the instructions. Doesn't go with the FBAR, they go to Detroit.

Phil Hodgen has a good blog on expatriation and he explains the last return procedures well.

Taxpoor · Post by **Taxpoor** » Wed Nov 21, 2012 9:44 am

Thanks Primo,

Still searching for Phils blog on this.

Additional questions...

How about the senerio where I relinquish on December 1st. Would I then have to file a normal 1040 for 2012 up to and including Dec 01...then file an additional 1040NR for the Dec 2nd to the 31st inclusive?

The problem here is that my techincal relinguishment would be the exact day I signed the papers in front of a Consulate official....i doubt if they ever coincide with Dec 31st.

I might be making more out of this....but Just trying to make sure I follow all the steps re: irs tax forms.

thanks

primo · Post by **primo** » Wed Nov 21, 2012 11:30 am

The 1040 is up to the day before you renounce. The value of your assets that you have up to the day before you renounce go on the 8854. The 1040 NR is for the day you renounce til the end of the year.

Personally, I renounced in December last year. I just pro-rated everything for the 1040, had zeroes for the 1040NR since I have no US income.

Here's Phil's blog where he explains the procedure. If you hunt around his site, you will find lots of stuff on expatriation on his various blogs and in answers to questions.

http://hodgen.com/why-people-expatriate/

nelsona · Post by **nelsona** » Wed Nov 21, 2012 11:50 am

" I just pro-rated everything for the 1040."

There is no "prorating" on 1040, based on days, etc, other than the foreign earned income exclusion on form 2555.

Standard deduction is either available (for full year 1040), or it is not (for dual status, like primo's case).

Taxpoor · Post by **Taxpoor** » Wed Nov 21, 2012 1:21 pm

Primo,

You mentioned in an earlier post that it "it doesnt matter if its this year or next, its done at the same time'.

From this can I assume that i could theoretically file the 1040 and 1040NR at the same time, even if my reliquishment was done in 2013? Or am i getting confused with this whole issue ?

The way i understand it, i would file a regular 1040 for 2012 (jan 01 to dec 31 2012 tax year) and the 1040nr for jan 01 2013 to whatever date I relinquished. The 8854 woud be based on the date of relinquishment.

I am also assuming i cannot file both together come June 15th, but would rather have to wait until june 15th of 2014 to file the 1040NR ??

Also, if one relinquishes in, say March of 2013....is it difficult to calclate a portion of tax for those 3 months for the 1040....? (I think an Accountant could figure this one out without much difficulty?).

primo · Post by **primo** » Wed Nov 21, 2012 1:46 pm

I said, "Doesn't matter if it is this year or next, it's done the same." NOT that it's done at the same time.

The 1040 and 1040NR are filed TOGETHER with the 8854. If you renounce next March 1, you have to file a 1040 for Jan.1, 2013 to Feb. 28, 2013 and a 1040NR for March1, 2013 to Dec 31, 2013 You attach a 8854 for Feb 28, 2013 with the 1040 and 1040NR. You send it all to where you usually send your tax return by June of 2014, You also send a copy of 8854 to Philadelphia at the address on the instructions for the 8854.

Write dual status return on the top and sign all 3 returns.

Nelsona is right in that you can't claim the standard deduction. You have to itemize deductions. I pro-rated my income and taxes paid in Canada.

nelsona · Post by **nelsona** » Wed Nov 21, 2012 3:29 pm

"I pro-rated my income and taxes paid in Canada."

Again, there was no prorating of income: You reported ALL the Cdn income you made before renunciation, and none afterwards.

What you would prorate are the taxes calculated (accrued) on your Cdn tax return for that year (not tax paid), for use against the Cdn income reported on your 1040, on form(s) 1116.

primo · Post by **primo** » Wed Nov 21, 2012 4:41 pm

nelsona,
I see what you're saying. in my case, my income is evenly distributed over the year, so it would be the same as pro-rating but that wouldn't be the case for everyone. Much more accurate to say all income before relinquishment is reported on the 1040. Thanks.

Taxpoor · Post by **Taxpoor** » Thu Nov 22, 2012 7:57 am

Ok...i think i have it now;

example 1;

relinquish citizenship March 01 of 2013, therefore file normal 1040 from Jan01 2013 to Feb 28th 2013, file 1040NR (and 8854) from March 01 to Dec 31 2013.

File 1040, 1040nr and 8854 together by June 15th of 2014.

example 2;

relinquish citizenship (this year 2012) December 15th 2012. FIle normal 1040 from Jan01 2012 to Dec 15 2012, file 1040NR (8854) from Dec 15th to Dec 31 2012. File 1040, 1040nr and 8854 by june 15 of 2013.

correct?

primo · Post by **primo** » Thu Nov 22, 2012 8:59 am

That's right. and don't forget to send an extra copy of 8854 to Philadelphia at the same time. Good luck.

Taxpoor · Post by **Taxpoor** » Thu Nov 22, 2012 1:11 pm

Thanks Primo....to take it one step further....

If I relinquish, say Jan 15th of 2012...i would then have to file a normal 1040 from Jan 01 to the 15th (2012) and a 1040NR from Jan 16th to Dec 31st of 2013...filing both of these of course with the 8854 by june 15th of 2014.

My question is this....if technically i have no further obligations tax wise to the IRS following the hypothetical relinquishment on Jan 15th...why do we have to file a tax return for the remainder of that year?

In the same vein....can i still use the FEIE exclusion from Jan 16th to Dec 31st...and if not will i end up owing the IRS tax on my Canadian income?

Taxpoor · Post by **Taxpoor** » Thu Nov 22, 2012 1:13 pm

sorry...sentence one should read "i would have to file a normal 1040 from Jan 01 to the 15th (2012) and a 1040NR from Jan 16th to Dec 31st of 2012..(not 2013)

primo · Post by **primo** » Thu Nov 22, 2012 1:34 pm

I really don't know why a 1040NR would be required if one has no US income. The 1040NR only deals with US income you may make, not Canadian. If you don't have US income, you'll have a bunch of zeroes on the 1040NR and that's it. Phil Hodgen answered this question somewhere on his blog. He said something along the lines that sometimes you have to submit things with all zeros. He basically said, just do it, make the IRS happy. I'll try to find where he discussed it.

You have it right though, for the dates for the 1040, 1040NR, 8854.

primo · Post by **primo** » Thu Nov 22, 2012 1:38 pm

About the FEIE, you don't use it on the 1040NR because it is only for reporting US source income, not Canadian.