- 1 Which Country Should I Expatriate To and Why
- 2 First, Immigration and Taxes
- 3 Are You a US Citizen or a Permanent Resident?
- 4 Do You Still Want to Visit the US (different options)
- 5 Get Your Taxes in Order and Assess Exit Tax
- 6 Research Your New Destination
- 7 File Your I-407 or DS Forms
- 8 Final Tax Return/8854/Exit Tax
- 9 Interested in Expatriation: Golding & Golding (Board-Certified Specialist)
Which Country Should I Expatriate To and Why
Whether it is for financial, political, or personal reasons, some US citizens and Lawful Permanent Residents decide that they want to leave the United States for good and relocate to another country to live. For a permanent resident of the United States, aside from the fact that there are some potential expatriation/exit tax implications, it is typically not that bad of a situation. But for US Citizens who want to leave the United States for good and give up their US citizenship, it can be a bit of a complicated immigration and tax exercise. That is because every U.S. Citizen who wants to give up their US Citizenship has the potential of becoming a Covered Expatriate (only Long-Term Lawful Permanent Residents may be considered ‘Covered) — in addition to the fact that a US Citizen must obtain citizenship in another country first. Let’s take a look at six important steps that taxpayers should consider when they want to leave the United States for good.
First, Immigration and Taxes
The first thing to keep in mind is that when it comes to leaving the United States, the immigration component and tax components of leaving are hopelessly entwined. In other words, while giving up citizenship and/or permanent residency may not technically be a very complicated undertaking, dealing with the tax implications and ramifications of leaving the United States can be daunting. It is important to find a firm that can facilitate the entire process for you.
Are You a US Citizen or a Permanent Resident?
If you are a permanent resident, then technically all you have to do from an immigration standpoint is give up your green card by filing a Form I-407. While there are other methods for giving up your green card, Form I-407 is typically the easiest. Conversely, for US Citizens that have to give up their citizenship, it is a much more formalized process that takes place at a U.S. embassy or consulate outside of the United States. And, before the US government will approve giving up your citizenship, you must first show that you have citizenship in another country so that you are not deemed ‘stateless’. Stated another way, the US government will typically not approve the renouncing of US citizenship unless the taxpayer has citizenship in another country.
Do You Still Want to Visit the US (different options)
Once a person gives up their US status, they may still want to travel to the United States — but traveling to the U.S. can become much more difficult. Taxpayers should assess the travel opportunities before determining which country they want to reside in. For example, is there a visa waiver program, does the country qualify for a treaty visa, and/or can the taxpayer qualify for B1/B2 tourist visa?
The different immigration visas have different requirements, but it is also important to make sure the taxpayer does not remain in the United States sufficiently to meet the Substantial Presence Test — because then the Taxpayer would become subject to U.S. tax on their worldwide income for any year that they meet the Substantial Presence Test – unless they qualify for the closer connection exception or other exemption.
Get Your Taxes in Order and Assess Exit Tax
It is important to determine whether or not you may have a potential exit tax implication when you give up your US status. Therefore, before beginning either the process of renouncing your US citizenship or relinquishing your green card, Taxpayers should have a general idea of whether or not they will become subject to the exit tax and if so how much.
Research Your New Destination
The world is your oyster, right? There are hundreds of different countries to choose from, but before selecting a new country to call home, it is important to understand each particular country’s rules, benefits, and detriments. For example, how strong is the passport, do they offer a golden visa program, and is it a high-tax country?
File Your I-407 or DS Forms
Once you get your ducks in a row, the next step will be to either file the USCIS Form I-407 or Department of State forms 4079 to 4083. In the former, Taxpayers can simply mail the document to USCIS. In the latter, Taxpayers have a much more complicated task ahead of them, which will include having to make an appointment at the embassy or consulate, submit for an initial interview and then a follow-up interview as well as prepare several different Department of State forms for submission.
Final Tax Return/8854/Exit Tax
Even after a person formally expatriates from the United States and has already left the country and moved on, they are still required to file a final tax return. For example, if a person expatriates in 2023, then they will have to file a dual-status final tax return in 2024, as well as Form 8854 and possibly a sailing permit, amongst other forms.
Interested in Expatriation: Golding & Golding (Board-Certified Specialist)
Our firm specializes exclusively in international tax, offshore compliance, and expatriation including.
Contact our firm today for assistance with getting compliant.