Are Taxes Due at Expatriation: Common Questions & Answers: Expatriation is the process of relinquishing or renouncing your U.S. status. For some people such as U.S. citizens, it can be a very complex (and exhaustive) process, and may involve a detailed tax analysis to submit to the IRS. For some Legal Permanent Residents (aka Green Card Holders) who are considered LTR (Long-Term Residents), it may also be complicated/ We wanted to try to dispel some of the inaccuracies, and provide a basic summary to assist you in the process.
Taxes & Expatriation: Common Questions & Answers
Here are some common questions we receive on expatriation and taxes:
Are You Even Subject to Possible Exit Tax?
In order to determine if you are a covered expatriate (see item 2. below), you must meet the threshold requirements of whether you may even qualify as a Covered Expatriate. Generally, a to potentially qualify as a covered expatriate you must first be either:
- A U.S. Citizen; and
- A Legal Permanent Resident (LPR), who has been an LPR for 8 of the last 15-years. This is referred to as an LTR (Long-Term Resident)
*There are exceptions for certain dual-citizens, minors, and those who (properly) claimed non-resident status during the compliance period.
Who is a Covered Expatriate?
There are 3-categories of covered expatriates:
- Net Worth Test ($2M) – remember it is “NET” not “Gross Value”
- Net Income Tax Test – Foreign Tax Credits will offset NITT
- Unable to show 5-years of IRS tax compliance
If you meet any of these three requirements, you may subject to Exit Tax.
What is a Mark-to-Market Sale?
If you qualify as a covered expatriate, you then have to conduct a “Sale” of your items on paper. For example, if you own stock you purchased for $300K, which is now worth $900K, that is a $600K gain. You are allowed a certain amount of automatic gain reduction of $725,000 (Adjusted annually for inflation).
Are all My Assets Included in the Paper Sale?
No. Not all Assets are Included in the sale. Some assets are deemed distributed at the time of expatriation. Other assets are not deemed distributed until they are actually distributed, with a 30% withholding tax applied.
International Tax Counsel: Golding & Golding (Board-Certified)
We specialize exclusively in international tax and voluntary disclosure.
We have successfully represented clients in more than 1,000 streamlined and voluntary offshore disclosure submissions nationwide and in over 70-different countries. We have represented thousands of individuals and businesses with international tax problems.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
- Learn more about the Board-Certified Tax Lawyer Specialist credential
- Learn more about the Enrolled Agent credential
- Learn more about Golding & Golding’s Case Accomplishments
- Learn more about Golding & Golding Testimonials from prior clients
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants and Financial Professionals worldwide.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.
Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.