# Form 8854



## Panzer

Trying to find someone to do my ex-pat taxes for the first time abroad and have copied all my documents for filing, except for Form 8854 - since I expatriated in 2014, I have to give my previous five years of US income tax liability for part 4. Not sure what this means - can I get this from previous tax statements?


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## maz57

Yes, that would be the total tax owed for each of the 5 previous years. You can take that number straight from your 1040 for each year.


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## Panzer

If I lived in the US for the past five years and paid federal from my W2 earnings and only owed to New York state, does that mean my taxes are zero for the US or do I put in my New York owed tax for each year?


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## BBCWatcher

Always please refer to the line number(s) you're asking about. I assume you're asking about IRS Form 8854 Part IV Section A Item 1, but please correct me I'm wrong.

The question asks for your "U.S. income tax liability." Note that's "liability," i.e. what you legally owed, not necessarily what you actually paid. (Interesting word choice there and an important distinction for some.)

OK, the reason they're asking this question is to determine whether you're a "covered expatriate." Item 1 is one of the threshold questions. If inclusion of your New York State income tax would not throw you into "covered expatriate" status -- if you're not anywhere near about $150K for per year in your answers -- then it doesn't actually matter which way you answer this question. But I would interpret "U.S. income tax" as meaning U.S. _federal_ income tax. My interpretation seems to be quite safe since it's consistent with the tax code that underlies Form 8854.

The _manner_ in which your U.S. federal taxes were paid doesn't matter. If federal income taxes were withheld from your paycheck, they're still taxes. The question asked for your _liability_, what you legally owed. If you also owed income tax to New York State it's hard to imagine your U.S. federal income tax liabilities were zero. They're not asking how much _more_ federal income tax you paid (or didn't pay) when you got to your year end tax filing.

They are not asking for what you legally owed in U.S. payroll tax -- Social Security and Medicare. Payroll tax is not income tax.


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## maz57

BBC has it right. Form 8854 asks for federal tax liability. This is the amount of federal tax you paid for each of the years in question. It doesn't matter if taxes were withheld at source and you owed nothing when filing the return for that year; you still owed (and paid) X amount during that year. Line 63 on your 1040.

Ignore state taxes on Form 8854; you are exiting the US federal tax system. Nothing to do with state taxes.


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## maz57

Upon looking at a 1040, I think I may have got that wrong. I think line 56 might be the number to use because the number on line 63 includes taxes other than income tax. BBC should be able to confirm.


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## cuerna1

Hmm - 8854 is not one of the forms in my current (about to be filed) TurboTax prepared - 28 page (!) - short form return. Which contains (5) 8938's and a foreign tax credit. We are reporting all of our earned income as taxable in the US. What do you think is the real purpose of this form 8854 ? Thanks

Edit : I really do think that you should be able to _request_ an audit to make sure you have the template correct for future years.


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## Bevdeforges

cuerna1 said:


> Edit : I really do think that you should be able to _request_ an audit to make sure you have the template correct for future years.


Trust me, you do NOT want to request an audit. The IRS lets LOTS of stuff simply slide when it comes to the overseas taxpayers. The regulations are not written to consider non-US sources of income, and they generally rely on the taxpayers to sort out how these foreign income sources are reported (or not).
Cheers,
Bev


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## cuerna1

Bevdeforges said:


> Trust me, you do NOT want to request an audit. The IRS lets LOTS of stuff simply slide when it comes to the overseas taxpayers. The regulations are not written to consider non-US sources of income, and they generally rely on the taxpayers to sort out how these foreign income sources are reported (or not).
> Cheers,
> Bev


Ya know - it has been about 15 years (maybe more) but I was working as a sub-contractor. The company I was working for - with perhaps a few hundred employees decided to offer a 401K program. I signed up and maxed out. At the end of the year I left for a new contract - rolled my 401K over into an existing IRA. Perhaps 3/4 months later I got a letter saying that the 401K program was deemed illegal due to lack of participation. So I had to take an early withdrawal from my IRA (to back out the conversion) and then the IRS hit me with not properly estimating my pre-payments. I tried to complete all the paper work on my own (I'm a humble programmer) but finally set up an appointment at the local IRS office seeking help. The guy was really nice/helpful. After perhaps an hour or so he proclaimed - tell you what - I'll write a letter in your file that you are an honest guy - send us a check for $100 and we will call it even.


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## maz57

Unless you renounced your US citizenship in 2014, Form 8854 is not for you. It is the form on which it is determined whether or not you are deemed a "covered expatriate" and how much exit tax (if any) you owe to exit the US tax system forever.

Its not likely TurboTax or any other tax software can handle Form 8854 but maybe they should consider adding that capability. The IRS is receiving more and more of them.


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## Bevdeforges

cuerna1 said:


> Ya know - it has been about 15 years (maybe more) but I was working as a sub-contractor. The company I was working for - with perhaps a few hundred employees decided to offer a 401K program. I signed up and maxed out. At the end of the year I left for a new contract - rolled my 401K over into an existing IRA. Perhaps 3/4 months later I got a letter saying that the 401K program was deemed illegal due to lack of participation. So I had to take an early withdrawal from my IRA (to back out the conversion) and then the IRS hit me with not properly estimating my pre-payments. I tried to complete all the paper work on my own (I'm a humble programmer) but finally set up an appointment at the local IRS office seeking help. The guy was really nice/helpful. After perhaps an hour or so he proclaimed - tell you what - I'll write a letter in your file that you are an honest guy - send us a check for $100 and we will call it even.


Having a sit-down session with the IRS is somewhat different from requesting an audit.
Cheers,
Bev


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