Do I File an IRS Form 8854 After I Expatriate? (Examples)

What is the Annual Expatriation Statement, Who Files it?

Who Must File an Annual Expatriation Statement 

When a U.S. Taxpayer is ready to expatriate from the United States formally and qualifies as either a U.S. citizen or a Long Term Lawful Permanent Resident, they are required to file an IRS Form 8854 at the time they expatriate as part of their final tax return package. For example, if a Taxpayer renounces their U.S. Citizenship or terminates their Lawful Permanent Resident status in 2024, then in 2025 they will file their final tax return along with form 8854 which is referred to as an Initial and Annual Expatriation Statement. Most Taxpayers will only have to file an initial expatriation statement, but some Taxpayers unfortunately will have to file an annual expatriation statement (even after they expatriate) depending on what type of assets they have at the time they expatriate. Let’s look at some of the basics of who must file the annual expatriation statement.

*For all examples, please note that the Taxpayers are U.S. persons for tax purposes who have not made any treaty elections to be treated as a Non-Resident Alien (NRA). Also, these examples are for illustrative purposes only and Taxpayers should consult with a Board-Certified Tax Law Specialist if they have specific questions about their reporting requirements and not rely on this article for legal advice.

Annual Expatriation Statement for Persons Who Expatriated

The annual expatriation statement is for expatriates who may have to file Form 8854 in the years after they have expatriated (in addition to the initial expatriation statement). But, not everyone who expatriates has to file the annual expatriation statement, which is limited to a few different categories.

Deferred the payment of tax on any property on a Form 8854 filed in a previous year

In reality, most people do not defer the payment of exit taxes when they expatriate because the cost of maintaining the bond or similar deferment tool is very costly to the Taxpayer. In addition, if this is the only reason a Taxpayer would have to file an annual expatriation statement, most Taxpayers would seek to avoid that responsibility by making the exit tax payment when they expatriate.

• • • Example: John was a U.S. citizen who expatriated a few years ago but at that time he obtained a bond to defer the payment of his exit taxes. As a result, John is required to file the annual IRS Form 8854.

Reported an eligible deferred compensation item on a Form 8854 filed in a previous year

It is very common for Taxpayers to have eligible deferred compensation such as 401K when they expatriate; thus, it is not uncommon for Taxpayers to have to file an annual expatriation statement if they did not withdraw their entire 401K at the time they expatriated. It is important to note, that even if the Taxpayer did not receive a distribution in the current year, if they reported the eligible deferred compensation on Form 8854 in prior years — they still must file the annual expatriation statement.

• • • Example: Scott is a Long Term Lawful Permanent Resident who recently terminated his Green Card status a few years ago. At the time he expatriated, he did complete a Form 8854 but he did not withdraw his 401K fully and so it is still open in the United States and this year he began receiving distributions. Scott may be required to file the annual expatriation statement.

    • Example: Michelle is a U.S. Citizen who still has a 401K but did not receive any distributions in the current year. Michelle may still have to file the annual expatriation statement because the 401K is still open.

Reported an interest in a non-grantor trust on Form 8854 filed in a previous year.

The final category for Taxpayers who have to file an annual expatriation statement is if they received any distributions from a non-grantor trust. Like the eligible deferred compensation category, even if the Taxpayer did not receive any distributions from the non-grantor trust, if it was reported in prior years then the annual expatriation statement may still be required.

• • • Example: Brenda is a U.S. Citizen who had an interest in a non-grantor trust and received the distribution in the current year. She previously reported this interest on the 8854 and so she would have to file the annual expatriation statement and include information about the distribution.

    • Example: Randy is a Long Term Lawful Permanent Resident who had an interest in a non-grantor trust that was reported previously on her expatriation statement and did not receive any distributions in the current year. Randy may still required to file the Form 8854 in the current year even though she did not receive a distribution.

Late Filing Penalties May Be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist Taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs. Prior Year Non-Compliance

Once a Taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, Taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for Taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

*This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.