# Renouncing Green Card after 5 years with semi-significant assets



## Martins909 (Aug 14, 2021)

Thank you for the wealth of information on here! I'm desperately looking for a second opinion on my situation from someone who isn't motivated by making a fee and can take a "realist's" point of view. The accountant I've talked to wants to go the complicated route. Maybe he's right. But I also worry about over-disclosing and getting "entangled" with the IRS beyond the necessary.

Here are the facts surrounding my situation:

* I'm a Swedish citizen who returned to Sweden last year. I had a US Green Card for a total of 5 years and will renounce it this year (pre-8-years, so no exit tax).

* I filed 2020 taxes normally as a US resident

* When I returned to Sweden around Christmas 2020 I formed a Swedish company, but the company wasn't active or making money until this year. Because it wasn't active, I never disclosed it with my 2020 US return.

* This year my company is doing above expectations and is surpassing a 6-digit revenue (USD) and growing. It's paying Swedish taxes of course. I'm very reluctant to put it on the IRS' radar in my final tax year. But as a Green Card holder renouncing this year, I technically would need to report/disclose my ownership of the company in both the 2020 and 2021 returns.

What my accountant wants to do:

I've found an accountant in the US who says I won't be allowed to actually "exit" the US tax system until I comply with all filing requirements and that I could be liable to pay US taxes until this is the case. (Frankly, I thought this type of compliance was only an issue for residents renouncing post 8 years and not for "short term" residents?).

My accountant says I'll need to amend my 2020 return to disclose the Swedish company - even though it made no money that year. Same for 2021 of course. He says I should probably file 2021 as a non-resident under the tax treaty - but still disclose the company with a full balance sheet as well as my bank accounts under FBAR/FATCA rules.

This is a level of disclosure that feels overwhelming as I'm a foreign citizen living in my home country, and by the time I'm filing in 2022, I won't even be a Green Card holder anymore.

I worry that I'll end up feeding the IRS my whole life on a platter with the risk that they'll use some of that information against me in one way or another now or in the future. Especially if my company continues to grow.

I can't help but wonder if ignoring these disclosures is actually a better move since the company and my bank accounts in Sweden were never on the IRS' radar before and I'll renounce my GC pre 8 years. The risk of the IRS ever digging up info on me after I leave the US seems non-existent, but giving them all my info might trigger more audit risk etc.

Either option feels risky to me.

Here's my question at last:
I had originally hoped I could just file my final tax return (for 2021) focusing only on my US income, which will be 0 - and my salary income in Sweden, which will be below the foreign earnings threshold. That way, I would exit the US system with a simple tax return and without putting my company / bank accounts on the radar with the IRS.

The accountant suggests disclosing everything and making some very complicated returns (including an amended 2020 return). He says this is the only way to do it properly and actually earn the right to exit. But I worry that I draw more attention to myself this way and run risks that I can't even foresee - for instance if the IRS suddenly wants to scrutinize my Swedish company's balance sheet.

I'm curious for some thoughts on this from real people as I feel any lawyer/accountant will smell the opportunity to earn a fat fee!

* For what it's worth: My wife is American and she will continue to file separately in the US. She's not a co-owner of my company and her income is below the foreign earnings threshold. So as long as my situation doesn't lead to any wonky filing requirements for her, we're not worried about her continued filing requirements after I renounce.

Thanks for reading all this and would love some insights!


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## Nononymous (Jul 12, 2011)

Your instincts are correct, I would say. The accountant may be technically correct on some points, but the accountant is also an idiot.

Is there any way the company accounts could be subject to FATCA reporting? In other words, did you identify yourself as a US person (green card holder) when you set it up with the bank? Also, do you have any US assets?

I personally would just submit the I-407 to renounce the green card and file the simplest tax return possible - a return with minimal income that does not mention the company. It's highly unlikely that the IRS will notice or care. People have also been known to file the I-407 and stop there, or simply leave the country and do nothing, and the US government can't really do much about it.

There's a risk that you will overestimate the reach and power of the IRS. They can't do anything to a Swedish citizen in Sweden. They can't demand to look at your company's balance sheets (well, I suppose it's theoretically possible that they could demand it, but they could not compel your cooperation). But in your case you have an American wife so presumably you will want to return in future for visits.


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## Martins909 (Aug 14, 2021)

Thanks so much for your helpful reply! I agree with you but I guess my main worry about just filing a minimal return is that they could say - at any point in the future - that I never actually expatriated because I didn't comply with the filing requirements(?) Even though I filed an I-407 in 2021. The Swedish commercial register is public so the IRS could prove I formed a company while being a GC holder and never disclosed it.

As a result, could they then make me liable for paying/filing US taxes for every year after my return to Sweden, even if this came up in 15 years from now? Could they make me subject to exit tax at that point? That's where my concerns are going.

I fear something could come up if for instance my wife got audited or if we decided to move back to the US / bought a house in the States. Or, for instance, if I sold my company to a US company. That's where the "blissful ignorance" route feels risky.

But on the contrary, the full disclosure route proposed by the accountant also feels SUPER risky to me as I'll voluntarily put my Swedish company and bank accounts in the IRS' system for scrutiny now and in the future. There are also certain things that are tax free here in Sweden, which could be taxable in the US and by suddenly handing the IRS a balance sheet on a platter to analyze, I worry about adding to my tax burden at worst or causing a lot of questions and issues during my expatriation at best. All that I could easily avoid by just keeping it simple. That's why this is such a big conundrum.

Anyway, I realize I'm repeating myself here. I do appreciate your honest take @Nononymous and it was something like that I was hoping for. But where that actually leaves me in terms of what I'l have to do is something I still need to consider  Any other perspectives would be deeply appreciated.


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## Nononymous (Jul 12, 2011)

All of those bad outcomes are theoretically possible. None of them are even remotely likely in the real world.

It's a case of pick your poison, I suppose - take whichever route lets you sleep at night. Currently neither option does, because you're worried about both. In which case we can't really help you assess the relative risk of each, unfortunately. So you can either toss a coin or choose the option that's cheapest and easiest.


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## JustLurking (Mar 25, 2015)

Martins909 said:


> I've found an accountant in the US who says I won't be allowed to actually "exit" the US tax system until I comply with all filing requirements and that I could be liable to pay US taxes until this is the case. (Frankly, I thought this type of compliance was only an issue for residents renouncing post 8 years and not for "short term" residents?).


It _used to be_ the case that the US would not recognise form I-407 _alone_ as termination of US _tax_ residency, and you had to have filed an "initial" form 8854 with the IRS _as well_, before you could get clear of US tax. That potentially left people in a state where they definitely had no right to live in or even visit the US, but were still fully taxed by the US on their worldwide income.

Clearly problematic under practically every legal framework (except, of course, the US's own skewed and self-interested one). Introduced in 2004, but swept away in 2008 by section 877A and the 'exit tax'. Your accountant may be thinking of this pre-877A rule. Post-877A, filing an I-407 alone terminates your US tax liabilities as of its filing date. Given this, it seems that the IRS would find it highly awkward to claim in future that you had not terminated your US tax liabilities. The best they could probably do is seek to apply the 'exit tax' rules, or perhaps some penalties for filing an 'incomplete' return for a year or two, but even these seem like a stretch.

Some history here: Expatriation Tax | Internal Revenue Service

Finally, watch out for trap-like rules around the way the US counts years for the 'exit tax'. The rule is having held a green card *in* eight years. So at the limit, six years and two days could be enough, Dec 31 in year 1 to Jan 1 in year 8 inclusive. Life might have been simpler had you ditched the green card back in 2020, but unfortunately that ship has sailed.


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## Nononymous (Jul 12, 2011)

Well there you go. Personally I'd just file the I-407 and the final-year return with only minimal employment income. The IRS will be none the wiser.

Two important but unanswered questions from my first reply:

Did you identify yourself as a US person (green card holder) when you set up your company's accounts with the bank? 

Do you have any US assets?


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## Martins909 (Aug 14, 2021)

Thank you, both! This is incredibly helpful.

@Nononymous:
I don't know if my Swedish bank has any knowledge of my US Green Card status. But I opened the account as a Swedish citizen, using Swedish IDs. Whether or not the fact that my wife is American - or that I told them I had just moved back from the US - influences anything, I don't know? As for American assets, I just have some money in a savings account that I'm planning on transferring back to Sweden before the end of the year - but after I put in my i-407. (I don't know if such a transaction will trigger any alerts with the IRS as it's a pretty big amount. But either way, it's money I've already paid taxes on in previous years).

Other than that, this is incredibly useful knowledge. It confirms how hard it is to rely on legal advice in these matters. My gut since the beginning was that the accountant was more interested in making a big fee than helping.

Ironically, my main worry is a "best case scenario" worry. My company is in medical tech and there's a big chance it will fail of course. If that happens, I have no worries pertaining to the IRS as I won't be worth any money to pay them. But on the off-chance that my company "goes to the moon" in years from now, I'd be worried about having an inconclusive ending with the American tax system. Especially if I sold the company to an American buyer one day, wanted to move back to the US - or my wife got audited.

I guess the thing I'm still trying to suss out is:
Let's say there's a best case scenario playing out in 10 years from now and my company is worth 1.000x what it is now... I get on the IRS' radar for whatever reason. Maybe my wife and I are buying a cabin in the US, moving back - or the company is starting an entity in the US... Is THE WORST consequence of having not disclosed my company in 2020+2021 that I would get a fine for those two years (2x $10.000) + be subject to exit tax AT THE TIME OF FILING THE I-407, i.e. 2021? .... OR: Is the worst that could happen in this scenario that I would be subject to exit tax with my assets AT THEIR 2031 VALUE since I never got out properly according to the IRS' definition?

I would feel OK about running the risk of the fine for not disclosing and being subject to exit tax as per my 2021 net worth as I believe I'd fall below the threshold anyway. But I would feel less good about possibly being on the hook with two tax systems for a 10 year period - retroactively.

I know I'm pretty much asking the same thing again. But every time I do it seems that I get a little more useful information. I can't thank you enough for providing it 

Finally, as for my ethical point of view (if anyone cares): I believe in paying taxes. I'm a Swede. But since the end of last year I've lived in Sweden and been paying taxes / complying with the local rules here. And by the time I file my 2021 tax return in the US I won't have had a Green Card for more than 6 months. This is why I believe it unjust that IRS would need this information from me. It feels like it shouldn't be any of their business what I do in my home country after having moved away before the 8-year exit tax mark.


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## JustLurking (Mar 25, 2015)

Martins909 said:


> ... OR: Is the worst that could happen in this scenario that I would be subject to exit tax with my assets AT THEIR 2031 VALUE since I never got out properly according to the IRS' definition?


I can't see this being a realistic scenario. As noted above, filing the I-407 should terminate your US taxable person status as well as your US immigration status. Post-877A, I don't see how there can really be any argument about that.

Not only this, but if you file the I-407 before the magic eight years (or six years, two days, if your timing is spectacularly poor), you are not a 'long-term' green card holder, and so out of scope for the US's Soviet-style exit tax anyway, regardless of asset levels and so on. So I believe you have no need to file the ultra-invasive form 8854, just a normal final year return (typically, a 'split year' one).



Martins909 said:


> This is why I believe it unjust that IRS would need this information from me. It feels like it shouldn't be any of their business what I do in my home country after having moved away before the 8-year exit tax mark.


Of course it's none of their business. It's distasteful, and demeaning to you. That doesn't stop them prying anyway.

The thing is, though, unlike their normal processes with US resident taxpayers, and now with some non-US resident citizens under FATCA, the IRS will receive no 'third-party' information on you, and so have little choice but to take whatever you tell them on trust. There is no such thing as a 'part-year' FBAR (the US bureaucracy is either too lazy or too incompetent to create one), but you should nevertheless not declare on that anything that occurred after filing the I-407. Same for any FATCA 'information' filing with the IRS.

Once no longer a green card holder, you will want to get all of your assets out of the US as soon as possible. Sweden has no estate tax treaty with the US, so if you hold more than a mere $60k in 'US situs' assets, you risk US estate tax of 26-40% of these should the worst happen. There is some relief on this if the beneficiary is a US citizen spouse, so your wife could inherit without problems. Any other heirs might not be so lucky, though.

As a general rule, the less you now have to do with the US and the IRS, the better. Cut them out of your life to the maximum possible.


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## Nononymous (Jul 12, 2011)

Good, your bank is not aware of your US person status (otherwise they would have asked for your SSN). Keep it that way.

File your I-407 and get your money out of the US. If you feel compelled to file anything at all, file the simplest possible return with no mention of your company. The IRS does not have the bandwidth to dig around offshore.


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## Moulard (Feb 3, 2017)

JustLurking said:


> There is no such thing as a 'part-year' FBAR (the US bureaucracy is either too lazy or too incompetent to create one), but you should nevertheless not declare on that anything that occurred after filing the I-407.


I haven't read the regulations for title 31, but a literal reading of the FBAR instructions would suggest that one does not have to file for the prior year IF one is not a US person on 31 December.

A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.

Once you are no longer a US person, you no longer have a filing requirement at all.


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