Completing IRS form 8854
Moderator: Mark T Serbinski CA CPA
Completing IRS form 8854
Trying to complete IRS form 8854 to complete expatriation of US citizenship procedure. Met with US consul in Dec. 2010., to initiate expatrition process.Expatriation was approved by US Department of State in Dec 2011 8) Wonder if I should complete Version 2010 of 8854 or version 2011 of 8854? 8)
Aproval of request for expatriation
[quote="Mach7"]i am curious as to how they 'approve' someones expatriation and why it took a year for the 'approval'.[/quote]
The application for expatriation process is a rather long story. The first formal step is to book an appointment to meet with a US Consular official to initiate the process of an application for a request for expatriation. This I did in december 2010. I met with a US Consular official, filled out forms, answered lots of questions, which you need to be well prepared for and took an oath. The consular official provides some paper work, which is interim in nature. I was told it would take up to a year for the application for expatriation to be approved by the US Department of State. The application approval took almost a year to the day. There is then a payment of a fee of $450.00 USD and then you are snt all of the formal, paperwork related to the granting of the request for expatraition. All of that is the easy part, the tax compliance issues are the real difficult portion.
The application for expatriation process is a rather long story. The first formal step is to book an appointment to meet with a US Consular official to initiate the process of an application for a request for expatriation. This I did in december 2010. I met with a US Consular official, filled out forms, answered lots of questions, which you need to be well prepared for and took an oath. The consular official provides some paper work, which is interim in nature. I was told it would take up to a year for the application for expatriation to be approved by the US Department of State. The application approval took almost a year to the day. There is then a payment of a fee of $450.00 USD and then you are snt all of the formal, paperwork related to the granting of the request for expatraition. All of that is the easy part, the tax compliance issues are the real difficult portion.
Audit prior to expatriation
[quote="Mach7"]When you say the tax compliance part was the most difficult...i am assuming you are in the same boat many of us were in and had to file back returns?
If so, did they single you out for an audit prior to expatriation?[/quote]
We are in the middle of filing our 2011 and last US return and FBAR for 2011. All prior year returns back to 2004 and assocaited FBARS have all been filed, previously without any feedback or audit to date.
Last step is to complete and file the IRS form 8854 and then we are done, we hope.
If so, did they single you out for an audit prior to expatriation?[/quote]
We are in the middle of filing our 2011 and last US return and FBAR for 2011. All prior year returns back to 2004 and assocaited FBARS have all been filed, previously without any feedback or audit to date.
Last step is to complete and file the IRS form 8854 and then we are done, we hope.
The filing of 8854 is based on the date that you officially took the Oath of Renunciation in front of the officer at the Consulate. In most cases, there are two separate meetings at the Consulate, an initial meeting where they go through the forms with you, and then a 2nd meeting a couple months later where they gave you time to think about what you are doing to make sure you really want to go through with it. Usually, the Oath is taken at the 2nd meeting, although some consulates will do everything in one meeting, depending where you are located.
In any case, the renunciation process is pretty strange in that you are a still a US Citizen until the State Department issues the official Loss of Nationality Certificate, but then as soon as that Certificate is issued, the date of your renunciation goes all the way back to when you took the Oath, which as you found out, can be up to a year prior.
For Form 8854, it has to be filed with your final set of tax returns by the normal due date, which is June 15. So in your case, it is important to know what date you took the official Oath. If you took the official Oath in 2010, then you were officially renounced in 2010, and your 8854 was due with your 2010 taxes by June 15, 2011. And if that is the case, then you were renounced in 2010, and you don't have to file any 2011 taxes.
If you took the official Oath sometime in 2011, then the 8854 is due with your 2011 taxes by June 15, 2012. You can file for a regular extension on the due date for your taxes, and that extension will carry over to the 8854 as well.
This didn't use to be an issue, because the Loss of Nationality Certificate was usually granted within 2 or 3 months of taking the Oath, so there was still plenty of time for people to get their 8854 filed on time. But in the last couple years there has been a huge spike in the number of people renouncing their citizenship, and the Loss of Nationality Certificate now takes up to a year to receive after taking the Oath. So now people have to actually file their final taxes and their 8854 before their Loss of Nationality Certificate has even been approved. Someone at the IRS should really review this whole process, but that's the process as it stands now.
In any case, the renunciation process is pretty strange in that you are a still a US Citizen until the State Department issues the official Loss of Nationality Certificate, but then as soon as that Certificate is issued, the date of your renunciation goes all the way back to when you took the Oath, which as you found out, can be up to a year prior.
For Form 8854, it has to be filed with your final set of tax returns by the normal due date, which is June 15. So in your case, it is important to know what date you took the official Oath. If you took the official Oath in 2010, then you were officially renounced in 2010, and your 8854 was due with your 2010 taxes by June 15, 2011. And if that is the case, then you were renounced in 2010, and you don't have to file any 2011 taxes.
If you took the official Oath sometime in 2011, then the 8854 is due with your 2011 taxes by June 15, 2012. You can file for a regular extension on the due date for your taxes, and that extension will carry over to the 8854 as well.
This didn't use to be an issue, because the Loss of Nationality Certificate was usually granted within 2 or 3 months of taking the Oath, so there was still plenty of time for people to get their 8854 filed on time. But in the last couple years there has been a huge spike in the number of people renouncing their citizenship, and the Loss of Nationality Certificate now takes up to a year to receive after taking the Oath. So now people have to actually file their final taxes and their 8854 before their Loss of Nationality Certificate has even been approved. Someone at the IRS should really review this whole process, but that's the process as it stands now.
I should point out though that even after you've officially renounced your citizenship, your tax obligations to the IRS do not end until Form 8854 has been filed on time (and you certify that you've complied with all filing obligations for the previous 5 years).
So even if you took the Oath back in 2010 - if you didn't file 8854 on time with your 2010 taxes, then you would likely still be on the hook for filing 2011 taxes as well. And if you didn't file Form 8854 by June 15 this year (assuming you didn't already file for a 2011 extension), then you may very well have to file taxes again in 2012 because 8854 wasn't filed by the deadline. So hopefully you already filed for an extension for your 2011 taxes.
You might be able to get the IRS to accept Form 8854 as being filed on time if you explain the circumstances and let them know that you were just waiting for the Loss of Nationality Certificate. They might accept that as a valid reason, because it really is pretty ridiculous having to file your final taxes when you still aren't even sure if the Certificate will be approved or not. As I said, this really only became an issue in the last 2 or 3 years with the massive increase in people giving up their citizenship.
So even if you took the Oath back in 2010 - if you didn't file 8854 on time with your 2010 taxes, then you would likely still be on the hook for filing 2011 taxes as well. And if you didn't file Form 8854 by June 15 this year (assuming you didn't already file for a 2011 extension), then you may very well have to file taxes again in 2012 because 8854 wasn't filed by the deadline. So hopefully you already filed for an extension for your 2011 taxes.
You might be able to get the IRS to accept Form 8854 as being filed on time if you explain the circumstances and let them know that you were just waiting for the Loss of Nationality Certificate. They might accept that as a valid reason, because it really is pretty ridiculous having to file your final taxes when you still aren't even sure if the Certificate will be approved or not. As I said, this really only became an issue in the last 2 or 3 years with the massive increase in people giving up their citizenship.
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Apolinarius
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Filing of tthe 8854
[quote="Dalthien"]The filing of 8854 is based on the date that you officially took the Oath of Renunciation in front of the officer at the Consulate. In most cases, there are two separate meetings at the Consulate, an initial meeting where they go through the forms with you, and then a 2nd meeting a couple months later where they gave you time to think about what you are doing to make sure you really want to go through with it. Usually, the Oath is taken at the 2nd meeting, although some consulates will do everything in one meeting, depending where you are located.
In any case, the renunciation process is pretty strange in that you are a still a US Citizen until the State Department issues the official Loss of Nationality Certificate, but then as soon as that Certificate is issued, the date of your renunciation goes all the way back to when you took the Oath, which as you found out, can be up to a year prior.
For Form 8854, it has to be filed with your final set of tax returns by the normal due date, which is June 15. So in your case, it is important to know what date you took the official Oath. If you took the official Oath in 2010, then you were officially renounced in 2010, and your 8854 was due with your 2010 taxes by June 15, 2011. And if that is the case, then you were renounced in 2010, and you don't have to file any 2011 taxes.
If you took the official Oath sometime in 2011, then the 8854 is due with your 2011 taxes by June 15, 2012. You can file for a regular extension on the due date for your taxes, and that extension will carry over to the 8854 as well.
This didn't use to be an issue, because the Loss of Nationality Certificate was usually granted within 2 or 3 months of taking the Oath, so there was still plenty of time for people to get their 8854 filed on time. But in the last couple years there has been a huge spike in the number of people renouncing their citizenship, and the Loss of Nationality Certificate now takes up to a year to receive after taking the Oath. So now people have to actually file their final taxes and their 8854 before their Loss of Nationality Certificate has even been approved. Someone at the IRS should really review this whole process, but that's the process as it stands now.[/quote]
Dalthein,
Thanks very much for that. The rules and regs for the date of filing are somewhat confusing to say the least. When I met with the US Consular official in Dec. 2010 he reminded me more than once that the application for renunciation of US citizenship WOULD NOT BE OFFICIAL until it was approved by the US Department of State, so based on that ,we decided to wait to file my 8854 until the renunciation was complete, which only happend AFTER I paid the $450.00 USD fee, which was in December 2011.
We have now completed my 2011 US retunr, not yet filed, but will do so in a day or so. Also have completed my 2011 FBAR, which will also be sent in a few days.
The real nub of the question is which 8854 form, should we use, as the contents, requirements on the 2010 8854, are different than the contant, requirements listed on the 2011 8854, for people, who renounced in 2010.
It would appear that the content and requirements on the 8854 for 2010 are easier and more simple that the requirements on the 2011 form for for people like me, who expatitated in 2010.
In any case, the renunciation process is pretty strange in that you are a still a US Citizen until the State Department issues the official Loss of Nationality Certificate, but then as soon as that Certificate is issued, the date of your renunciation goes all the way back to when you took the Oath, which as you found out, can be up to a year prior.
For Form 8854, it has to be filed with your final set of tax returns by the normal due date, which is June 15. So in your case, it is important to know what date you took the official Oath. If you took the official Oath in 2010, then you were officially renounced in 2010, and your 8854 was due with your 2010 taxes by June 15, 2011. And if that is the case, then you were renounced in 2010, and you don't have to file any 2011 taxes.
If you took the official Oath sometime in 2011, then the 8854 is due with your 2011 taxes by June 15, 2012. You can file for a regular extension on the due date for your taxes, and that extension will carry over to the 8854 as well.
This didn't use to be an issue, because the Loss of Nationality Certificate was usually granted within 2 or 3 months of taking the Oath, so there was still plenty of time for people to get their 8854 filed on time. But in the last couple years there has been a huge spike in the number of people renouncing their citizenship, and the Loss of Nationality Certificate now takes up to a year to receive after taking the Oath. So now people have to actually file their final taxes and their 8854 before their Loss of Nationality Certificate has even been approved. Someone at the IRS should really review this whole process, but that's the process as it stands now.[/quote]
Dalthein,
Thanks very much for that. The rules and regs for the date of filing are somewhat confusing to say the least. When I met with the US Consular official in Dec. 2010 he reminded me more than once that the application for renunciation of US citizenship WOULD NOT BE OFFICIAL until it was approved by the US Department of State, so based on that ,we decided to wait to file my 8854 until the renunciation was complete, which only happend AFTER I paid the $450.00 USD fee, which was in December 2011.
We have now completed my 2011 US retunr, not yet filed, but will do so in a day or so. Also have completed my 2011 FBAR, which will also be sent in a few days.
The real nub of the question is which 8854 form, should we use, as the contents, requirements on the 2010 8854, are different than the contant, requirements listed on the 2011 8854, for people, who renounced in 2010.
It would appear that the content and requirements on the 8854 for 2010 are easier and more simple that the requirements on the 2011 form for for people like me, who expatitated in 2010.
The consular officer that you spoke with was technically correct, but he left out part of the story. Once you take your Oath, you are still not officially expatriated until the State Department issues the Loss of Nationality Certificate. But once they do issue the Certificate, then the official date of renunciation goes back in time to when you actually took the Oath.
So if you took the Oath in 2010, then your renunciation date is 2010, and you should use the 2010 version of 8854. Just make sure to include a detailed explanation of why it is late, because your filing will now be more than a year overdue - and that could create its own set of problems if they don't accept your explanation.
But I agree with you, the whole process is kind of messed up the way they're doing it now, and leaves it for too easy for people to get confused about what they're supposed to do.
So if you took the Oath in 2010, then your renunciation date is 2010, and you should use the 2010 version of 8854. Just make sure to include a detailed explanation of why it is late, because your filing will now be more than a year overdue - and that could create its own set of problems if they don't accept your explanation.
But I agree with you, the whole process is kind of messed up the way they're doing it now, and leaves it for too easy for people to get confused about what they're supposed to do.
Your update comment on 8854 filing
[quote="Dalthien"]The consular officer that you spoke with was technically correct, but he left out part of the story. Once you take your Oath, you are still not officially expatriated until the State Department issues the Loss of Nationality Certificate. But once they do issue the Certificate, then the official date of renunciation goes back in time to when you actually took the Oath.
So if you took the Oath in 2010, then your renunciation date is 2010, and you should use the 2010 version of 8854. Just make sure to include a detailed explanation of why it is late, because your filing will now be more than a year overdue - and that could create its own set of problems if they don't accept your explanation.
But I agree with you, the whole process is kind of messed up the way they're doing it now, and leaves it for too easy for people to get confused about what they're supposed to do.[/quote]
Dalthein,
Thanks so much for the lucid clarification you provided on the timing around filing of 8854. We are in the middle of completing the 2010 version of the 8854 and I have already compiled a letter to accompany my 2011 return and the 8854, which goes to one IRS office in Austin. Another letter, with another copy of 8854 on its own will be sent to another IRS office in Philadelphia. A third letter with the completed 2011 FBAR (TD F 90-22.1) will be sent to another IRS office in Detroit.
All of these letters, with clear time line explanation as to why the 8854, is being filed at this time rather than last year. will be accompanid by the appropriate copies of correspndence from the US Department of State and the US Consulate in Calgary.
Thanks again for your notes. Much appreciated We are getting closer to the end, we hope.
So if you took the Oath in 2010, then your renunciation date is 2010, and you should use the 2010 version of 8854. Just make sure to include a detailed explanation of why it is late, because your filing will now be more than a year overdue - and that could create its own set of problems if they don't accept your explanation.
But I agree with you, the whole process is kind of messed up the way they're doing it now, and leaves it for too easy for people to get confused about what they're supposed to do.[/quote]
Dalthein,
Thanks so much for the lucid clarification you provided on the timing around filing of 8854. We are in the middle of completing the 2010 version of the 8854 and I have already compiled a letter to accompany my 2011 return and the 8854, which goes to one IRS office in Austin. Another letter, with another copy of 8854 on its own will be sent to another IRS office in Philadelphia. A third letter with the completed 2011 FBAR (TD F 90-22.1) will be sent to another IRS office in Detroit.
All of these letters, with clear time line explanation as to why the 8854, is being filed at this time rather than last year. will be accompanid by the appropriate copies of correspndence from the US Department of State and the US Consulate in Calgary.
Thanks again for your notes. Much appreciated We are getting closer to the end, we hope.
"So even if you took the Oath back in 2010 - if you didn't file 8854 on time with your 2010 taxes, then you would likely still be on the hook for filing 2011 taxes as well. And if you didn't file Form 8854 by June 15 this year (assuming you didn't already file for a 2011 extension), then you may very well have to file taxes again in 2012 because 8854 wasn't filed by the deadline. So hopefully you already filed for an extension for your 2011 taxes."
The rule that you had to file 8854 to stop being subject to US tax was in section 7701(n). This rule was repealed in 2008. If you expatriated in 2010, you should file the 8854 for 2010. Further, as long as you did not spend too many days in the US in 2011 you would not need to file a US tax return at all for 2011, or you would file 1040NR for US source income (if you had any).
The rule that you had to file 8854 to stop being subject to US tax was in section 7701(n). This rule was repealed in 2008. If you expatriated in 2010, you should file the 8854 for 2010. Further, as long as you did not spend too many days in the US in 2011 you would not need to file a US tax return at all for 2011, or you would file 1040NR for US source income (if you had any).
[quote="testone"]The rule that you had to file 8854 to stop being subject to US tax was in section 7701(n). This rule was repealed in 2008.[/quote]
Yeah, but it was simply replaced with Section 877A and the amended section 7701. The very first part listed under the current instructions for 8854 for Who Must File is that you must file in order to establish that you have expatriated for tax purposes. It's a grey area at the moment, but with the wrong IRS agent handling the case you could still be held liable under US tax law until you have established that you are no longer a citizen.
Not to mention that there is a $10,000 fine that now accompanies failure to file 8854, and there are issues with non-grantor trusts and deferred exit tax payments which can keep you on the hook having to file IRS forms for another 30 years after you expatriate.
The simple act of expatriating does not end your tax obligations. You still have to follow up with the proper IRS procedures to remove yourself from the tax side of the equation.
Yeah, but it was simply replaced with Section 877A and the amended section 7701. The very first part listed under the current instructions for 8854 for Who Must File is that you must file in order to establish that you have expatriated for tax purposes. It's a grey area at the moment, but with the wrong IRS agent handling the case you could still be held liable under US tax law until you have established that you are no longer a citizen.
Not to mention that there is a $10,000 fine that now accompanies failure to file 8854, and there are issues with non-grantor trusts and deferred exit tax payments which can keep you on the hook having to file IRS forms for another 30 years after you expatriate.
The simple act of expatriating does not end your tax obligations. You still have to follow up with the proper IRS procedures to remove yourself from the tax side of the equation.