Form 8854 Exit Tax Calculations and Reporting and IRS Relief Procedures for Certain Former Citizens

The number of U.S. citizens expatriating from the United States has increased by an annual rate of 20 percent over the past several years. As part of the U.S. government's effort to eliminate tax avoidance through expatriation, Congress passed Section 877A, which imposes various taxes on U.S. taxpayers who renounce their citizenship or a long-held green card.

Section 877A creates an exit tax regime for individual U.S. taxpayers who renounce their citizenship or surrender a green card held for a specified amount of time and whose income or net worth exceeds certain thresholds. The exit tax rules also apply to expatriates who fail to certify U.S. income tax compliance for the five years preceding the year of expatriation.

Expatriating taxpayers must file IRS Form 8854, Initial and Annual Expatriation Statement. This detailed and complex form requires taxpayers to declare a balance sheet reflecting U.S. property owned at the time of exit. The exit tax reporting form is a multi-year filing obligation for covered expatriates. Late or incorrect filing of Form 8854 carries a steep $10,000 penalty. Tax advisers need to know the form requirements to avoid expensive tax consequences.

In 2024, a taxpayer could be considered a covered expatriate and subject to income tax liability on the net unrealized gain on their assets if their net worth was $2 million or more on the date of expatriation or when their average annual net income tax liability for the five years before the date of expatriation exceeds $201,000.

Listen as our experienced panel provides a comprehensive and practical guide to navigating the exit tax regime.

1. Expatriation overview
2. Who is affected by expatriation laws? Who cares?
3. Expatriation event and expatriation date
   1. Expatriation events for U.S. citizens
   2. Expatriation events for long-term residents
4. Are you a covered expatriate?
5. Income taxation of covered expatriates
   1. Specified tax-deferred accounts
   2. Deferred compensation
   3. Distributions from non-grantor trusts
   4. Mark-to-market gain/loss recognition
6. Transfer taxation for friends and relatives of covered expatriates
7. Planning for expatriation
8. IRS program for delinquent Form 8854 filings

The panel will review these and other key issues:

• Which taxpayers are subject to Section 877A and must file Form 8854
• How to calculate the mark-to-market tax and what assets it applies to
• Transfer tax for family members of covered expatriates
• The types of deferred compensation subject to the exit tax
• Strategies for mitigating the impact of the expatriation rules under Section 877A

Learning Objectives

After completing this course, you will be able to:

• Determine which taxpayers are subject to IRC 877A and Form 8854 filing requirements
• Ascertain how to calculate the mark-to-market tax
• Recognize the types of deferred compensation subject to the exit tax
• Identify which former citizens qualify for IRS relief for prior taxes
• Verify that Forms W-8CE and 8854 are filled out correctly and timely filed
• Develop strategies for mitigating the impact of the expatriation rules under IRC 877A

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms, plans and projections, supervising other accountants. Specific knowledge and understanding of foreign asset reporting requirements; familiarity with beneficial ownership rules, mark-to-market principles, deferred compensation rules, and gift transfer tax rules.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).