# 8854 covered expat



## lesindk (11 mo ago)

About 8854: the instructions seem to say that dual citizens won't be treated as covered expats if they have lived in the US for less than 10 of the last 15 years. ("exception for dual citizens and certain minors") Have I understood this correctly? Haven't lived there for almost 50 years.


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## 255 (Sep 8, 2018)

@lesindk -- Your post isn't entirely clear, but I am assuming you plan on expatriating from the U.S. The portion of the exception paragraph you quoted was only one part of qualifying. The other part states that you must have become a dual citizenship at birth and you have routinely paid income tax, as a resident of the other citizenship country. To take advantage of the covered expatriate exception, you still need to file IRS form 8854. Cheers, 255


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## lesindk (11 mo ago)

Yes, I must have missed the part about fulfilling both things. Thought it was too good to be true. Not really planning but researching at this point. 
Thanks for clearing that up for me.


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## Moulard (Feb 3, 2017)

Expanding on what 255 states... 

The first hurdle of dual citizen at birth is actually quite difficult if you happen to have been born in the US. While the US automatically grants citizenship at birth, many countries automatically grant citizenship on making a consular report of the birth abroad, which happens at some point after birth.

I seem to recall reading a ruling that called out that difference, but I cannot find it now.

May not be relevant in your case, but food for thought.


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## Nononymous (Jul 12, 2011)

Don't forget, one always has the option of renouncing and ignoring all US tax compliance, including Form 8854. This may or may not be suitable for the OP.


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## lesindk (11 mo ago)

Any idea what the consequences of non compliance could be?


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## Bevdeforges (Nov 16, 2007)

lesindk said:


> Any idea what the consequences of non compliance could be?


It depends on your "exposure" - if you don't have significant financial assets in the US, the consequences are pretty light to non-existent (especially given the current sorry state of the IRS). But you have to assess your risk based on how often you go to the States, where your financial assets are located, and how much you're worth all told. Then, there is the value you place on eliminating the source of any future "worries."


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## JustLurking (Mar 25, 2015)

Nononymous said:


> Don't forget, one always has the option of renouncing ...


With the proviso, however, that exercising this option may prove impossible.

Many US embassies around the world completely halted all renunciation services since the start of the pandemic, leaving large numbers of US citizens effectively trapped into unwanted US citizenship. The current situation in Denmark:


> *Important Update:* The U.S. Embassy is closed for loss of nationality services. We do not have a definitive date for the resumption of loss of nationality appointments. Check this page often for the most up-to-date information. We are not scheduling loss of nationality appointments at this time.


Is a human right still a human right if a government prevents you from exercising it?


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## Bevdeforges (Nov 16, 2007)

JustLurking said:


> Is a human right still a human right if a government prevents you from exercising it?


I'm not sure that renunciation is considered a "human right." Especially by the US government.


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## lesindk (11 mo ago)

Bevdeforges said:


> It depends on your "exposure" - if you don't have significant financial assets in the US, the consequences are pretty light to non-existent (especially given the current sorry state of the IRS). But you have to assess your risk based on how often you go to the States, where your financial assets are located, and how much you're worth all told. Then, there is the value you place on eliminating the source of any future "worries."


I think I may need a professional to help me find out if I am covered or not. There is a US trust involved to which I don't have direct access. As far as my own assets are concerned there is no problem. Any recommendations from this forum?


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## JustLurking (Mar 25, 2015)

Bevdeforges said:


> I'm not sure that renunciation is considered a "human right." Especially by the US government.


Universal Declaration of Human Rights:


> *Article 15*
> 1. Everyone has the right to a nationality.
> 2. No one shall be arbitrarily deprived of his nationality _nor denied the right to change his nationality_.
> ...
> ...


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## 255 (Sep 8, 2018)

@lesindk -- "As far as my own assets are concerned there is no problem. Any recommendations from this forum?" If I was under the dollar limits to be considered a covered ex-patriot and I wanted to renounce, I'd just file the IRS form 8854 to make a clean break and for piece of mind. I do understand @Nononymous' position, but the 8854 is just an information return and if you're under the limits, you're not a covered expat and you're done with the U.S.'s IRS. Cheers, 255

P.S. You can always "adjust" your estate to fall under the limits. Nelson Rockefeller famously said: "The secret to success is to own nothing, but control everything." The essence of my personal estate plan.


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## Nononymous (Jul 12, 2011)

lesindk said:


> Any idea what the consequences of non compliance could be?


None. There are no negative consequences to renouncing without tax compliance, provided of course that you have no US assets. I'll do what I always do and cite this report in which the IRS admits that 40 percent of those who renounce do not properly file Form 8854, and there is no attempt to follow up.

The point of non-compliance isn't so much to avoid filing the relatively simple Form 8854, but rather to avoid filing 5 years' tax returns and FBARs and all that. If you've already been filing then it probably makes sense to do the 8854, as long as you adjust the numbers so that you don't owe any exit tax.

Covered expatriate status is essentially meaningless. I think the only concern you have is the US trust, and whether your ability to access those funds in the future would be compromised by renunciation, with or without tax compliance.

PS It will definitely take time to renounce. There was a waiting list before the pandemic, and it's gotten worse. But sooner or later there will be appointments. I renounced earlier this year after a 14-month wait, in Canada.


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## 255 (Sep 8, 2018)

@Nononymous -- "I think the only concern you have is the US trust, and whether your ability to access those funds in the future would be compromised by renunciation, with or without tax compliance." Why? The U.S. is actually one of the worlds pre-eminent tax havens, for non-U.S. persons. The world of off-shore trusts is big business and there are a few U.S. States that have passed favorable laws and actively market themselves as viable jurisdictions for foreigners. The same for Corporations for other States. I see no issues, in reqard to the trust. Cheers, 255


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## Nononymous (Jul 12, 2011)

I only mention it as a concern because I know absolutely nothing about how these things work in general, and nothing about the OP's circumstance in particular.


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## Lancashire_Lass (Jul 27, 2021)

Hi. It does seem problematic as to what is covered and should be reported and what is not. The descriptors are (likely deliberately) vague. E.g., pensions. It just says ‘foreign pensions’. I wondered if anyone has any knowledge on if UK State pension is to be included or not? I believe that US Social Security is not, as it is described as insurance or not belonging to you and only paid as long as the government continues to pay. But the UK version is a grey area. It certainly hasn’t been on my FBAR! So while it may not be on anyone’s radar (and no idea what the communication is between UK and US IRS) I would like to be sure I was not going wrong 😳. 
Any thoughts or advice here?


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## 255 (Sep 8, 2018)

@Lancashire_Lass -- Not a Government site, but this may help: UK Pension & US Tax Treatment: FBAR, 3520, 8621 & 8938. . It appears that the UK pension should be reported on the FBAR, but with a value of zero, if you're not taking distributions. Cheers, 255


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## Lancashire_Lass (Jul 27, 2021)

255 said:


> @Lancashire_Lass -- Not a Government site, but this may help: UK Pension & US Tax Treatment: FBAR, 3520, 8621 & 8938. . It appears that the UK pension should be reported on the FBAR, but with a value of zero, if you're not taking distributions. Cheers, 255


Thank you. Helpful 😊


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## rtho100 (Oct 21, 2009)

I’m renouncing my Green Card (not a citizen) at the end of this week. I have filed tax returns including FBARs throughout the 9 years I’ve been here. My specialist Expat Tax lawyer told me that beyond the 1040 & 1040NR returns, I must also file the 8854. None of my worldwide assets add up to above $2m so I won’t have to pay an additional exit tax. The expat tax lawyer stated that the 8854 must be filed as part of expatriation and by filing it will no longer be on the hook with the IRS. The IRS’s tentacles have a long reach so for the sake of a couple of hundred bucks I want to insure that I have extricated myself properly. Why take the risk?


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## Nononymous (Jul 12, 2011)

rtho100 said:


> I’m renouncing my Green Card (not a citizen) at the end of this week. I have filed tax returns including FBARs throughout the 9 years I’ve been here. My specialist Expat Tax lawyer told me that beyond the 1040 & 1040NR returns, I must also file the 8854. None of my worldwide assets add up to above $2m so I won’t have to pay an additional exit tax. The expat tax lawyer stated that the 8854 must be filed as part of expatriation and by filing it will no longer be on the hook with the IRS. The IRS’s tentacles have a long reach so for the sake of a couple of hundred bucks I want to insure that I have extricated myself properly. Why take the risk?


In your case it makes sense to file an 8854, since you've been compliant anyway and there's no chance of an exit tax.

The bigger question is, why did you continue filing after departure? The green card is useless after a year, you can't return. Complete waste of time doing the taxes after leaving, unless of course you had US assets to worry about.


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## rtho100 (Oct 21, 2009)

You file a normal 1040 for 2021 and then a 1040NR for all US sourced income from 1st Jan to the date of expatriation. That will be filed next year along with the 8854.


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## AV56 (Oct 14, 2021)

Moulard said:


> Expanding on what 255 states...
> 
> The first hurdle of dual citizen at birth is actually quite difficult if you happen to have been born in the US. While the US automatically grants citizenship at birth, many countries automatically grant citizenship on making a consular report of the birth abroad, which happens at some point after birth.
> 
> ...


I renounced in Sep, 2021 and initially thought that I would avoid the covered expat punishing tax due to the net worth threshold - until I did a better financial accounting that included the value of my pension. Then I panicked as it pushed me above the threshold. But then research into Canadian citizenship saved me from potential financial ruin. Born in the states to a US father & Canadian mother 60+ years ago, I was only considered US at that time. When Canadian citizenship laws changed in the 70's allowing one to adopt their mother's citizenship as well I jumped on that - but that was not retroactive to birth. Thus my panic. But I've recently become familiar with current citizenship laws, last updated in 2009, which grants me retroactive citizenship to my birth. Whew!!

So - if you haven't renounced yet, very carefully go through the 8854 requirements so you can avoid becoming a covered expat. I would hate for my heirs, all Canadians, to be stuck with any US tax liabilities because I wanted to avoid covered expat states by deciding not to file my 8854.


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## AV56 (Oct 14, 2021)

Nononymous said:


> None. There are no negative consequences to renouncing without tax compliance, provided of course that you have no US assets. I'll do what I always do and cite this report in which the IRS admits that 40 percent of those who renounce do not properly file Form 8854, and there is no attempt to follow up.
> 
> The point of non-compliance isn't so much to avoid filing the relatively simple Form 8854, but rather to avoid filing 5 years' tax returns and FBARs and all that. If you've already been filing then it probably makes sense to do the 8854, as long as you adjust the numbers so that you don't owe any exit tax.
> 
> ...


The backlog of appointments seems to be clearing fairly rapidly now, especially if you are willing to go to any US consulate in Canada (or maybe any US consulate anywhere in the world). Still likely a long wait for some cities.


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## Nononymous (Jul 12, 2011)

You are presumably aware that you can avoid any and all exit tax problems by simply not filing US tax returns or Form 8854? (I recently renounced and have no intention of filing anything.)

If you have US assets or income sources or family south of the border then it's a bit more complicated, but if your money is all in Canada you can simply ignore the tax side of things. Your estate is not at risk from the IRS. Staple a copy of the CLN to your will if you're worried about an executor foolishly attempting US tax compliance, otherwise there's nothing to worry about.


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## AV56 (Oct 14, 2021)

Nononymous said:


> You are presumably aware that you can avoid any and all exit tax problems by simply not filing US tax returns or Form 8854? (I recently renounced and have no intention of filing anything.)
> 
> If you have US assets or income sources or family south of the border then it's a bit more complicated, but if your money is all in Canada you can simply ignore the tax side of things. Your estate is not at risk from the IRS. Staple a copy of the CLN to your will if you're worried about an executor foolishly attempting US tax compliance, otherwise there's nothing to worry about.


do have
These forum discussions have been very helpful for me. I do have some long time US investments, and have been filing


Nononymous said:


> You are presumably aware that you can avoid any and all exit tax problems by simply not filing US tax returns or Form 8854? (I recently renounced and have no intention of filing anything.)
> 
> If you have US assets or income sources or family south of the border then it's a bit more complicated, but if your money is all in Canada you can simply ignore the tax side of things. Your estate is not at risk from the IRS. Staple a copy of the CLN to your will if you're worried about an executor foolishly attempting US tax compliance, otherwise there's nothing to worry about.


Unfortunately I fall into the complicated category with US assets and have been filing US taxes.


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## Nononymous (Jul 12, 2011)

AV56 said:


> Unfortunately I fall into the complicated category with US assets and have been filing US taxes.


You can at least beat the exit tax by claiming the dual-from-birth exemption and/or fiddling the numbers so that your net worth is below the threshold. As far as we can tell, the IRS doesn't really look at or attempt to validate whatever one puts on Form 8854.


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## Tiwaz (11 mo ago)

Maybe you could say more about how to simply not file after renouncing, Nononymous? 

I am in a position to renounce and thought I had done so in 2013 when I became a citizen of Nicaragua. I had to file a letter in the public registry that I renounced my US citizenship. I had every intention of renouncing when I did that. This is what the head of immigration in Nicaraugua told me. He told me I needed to be very sure because when this is filed in the public registry there is no going back - that it immediately ends my US citizenship and would be delivered to the US. I told him that's absolutely fine as my family is here. I got citizenship and now have found out that supposedly that did not cancel my citizenship even though it was my intention that it was ended.

I would like to move to another country that does have treaties with the US. I would like to be done with them. I have not filed in more than 12 years and also have not earned any money. I have no assets in the US, income or anything else.

Thanks for any pointers you might have.


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## Nononymous (Jul 12, 2011)

You did not *renounce* your US citizenship in 2013. If you obtained Nicaraguan citizenship with the intention of giving up US citizenship, then you *relinquished* US citizenship. However, the US government will not recognize this and issue a certificate of loss of nationality (CLN) unless you go to a consulate and document your relinquishing act. Funnily enough, they will charge a fee of $2350 to do this - the same cost as renouncing, which is a simpler administrative procedure.

I don't think you actually lied to the Nicaraguan government. You honestly intended to relinquish your US citizenship when you naturalized. You are, in a theological sense, no longer a US citizen. The only issue is that the US government won't recognize this and provide proof unless you pay them $2350. If you don't need written proof - a CLN - then you're free to ignore it. All good.

Moving to a third country should not be a problem from an immigration perspective, but financial institutions may treat you like a US citizen if you were born in the US and have a US birthplace on your Nicaraguan passport. To stop this from happening you may need a CLN, which will cost you $2350. If it's not a big deal, or if banks don't really care, then ignore it. If it is a big deal and you don't want to be subject to FATCA reporting, you have a problem. (If you weren't born in the US, just say "no" when asked and you'll be fine.)

These are all citizenship matters, quite independent of tax status. You can renounce your US citizenship, or document your prior relinquishment, without ever filing a US tax return. I can't really tell you how to do this because there are no instructions: you simply renounce or document relinquishment, pay your money, and that's it. The consulate does not ask for proof of tax compliance. Treaties with the US generally mean nothing - enforcement is extremely difficult.


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