# Streamline Program and Renouncing question



## marc9477 (Mar 28, 2011)

I have a question in which hopefully someone can shed some light on. I'm an expat that has lived outside of the US since 2000. I now have a UK Passport, but live in Hong Kong. I had not filed any tax returns since 2007. In the past few weeks, I've worked with an account that has helped me file under the streamline program. 

My account had me fill out 6 years worth of FBar's and the last 3 years for returns. I owed a small amount of tax, to cover me for that period 

My plan is that I would like to renounce my Citizenship next year. I know I won't return to live in America, and my Income will be taking a significant jump next year which will entail me starting to owe large amounts of money to a country I haven't lived in, in almost 15 years and have no intention to return to.

My question is this: will I be able to to renounce considering my filing in the Streamline program, even though I've only submitted returns for 3 years through this program, and not 5. Or, will I need to file returns for the 2 years prior to these 3 years. 

My accountant tells me that I will be considered up to date with the IRS, yet I've seen some conflicting info online. 

Any advice would be greatly appreciated.


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## DavidMcKeegan (Aug 27, 2012)

Hello 

With regards to your message yes, you would be considered up to date on your US taxes by filing only the last three years of returns (Streamlined program). This is a great solution for those who want to keep their citizenship and continue filing year after year. However, it gets a bit tricky if you want to immediately renounce. That is because in order to not be considered a "covered expatriate", you need to have the last five years of taxes filed and in order. 

As such, you have a few options.

*Keep your US citizenship and continue to file yearly.

*Keep your US citizenship for a few more years (until you have accrued five years) filed and then renounce at that time. 

*Back file the additional years and then renounce at the embassy this year. Then you will file your final return and Form 8854 next year.

I hope this helps!


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## StewartPatton (Aug 5, 2014)

marc9477 said:


> My accountant tells me that I will be considered up to date with the IRS, yet I've seen some conflicting info online.
> 
> Any advice would be greatly appreciated.


Well, your accountant is correct, it's just that his correct answer is to the wrong question. The IRS Form 8854 does not ask you to certify that "you are up to date with the IRS." It asks you to certify that "you have complied with all of your tax obligations for the 5 preceding tax years."

Now, the word "for" in the second quote above is pretty tricky. It could mean either (i) you are currently in a state of being considered to have complied with all tax obligations imposed on you during the preceding 5 years or (ii) you contemporaneously complied with all of your tax obligations during each of the preceding 5 years. After using the Streamlined program, you would be able to make the certification under the interpretation in clause (i), but you wouldn't be able to make it under the interpretation in clause (ii).

So, which interpretation is "correct"? I have no idea, and neither does anyone else, because there is not definitive guidance on this issue. 

The safest course is to take one of the options that DavidMcKeegan recommends. If you wanted to roll the dice a bit, you could renounce and make the certification, but if the IRS disagrees, then you have already renounced and so you would owe the exit tax. Other issues to consider here are enforcement avenues against you (which depends on where your assets are and what types of agreements Hong Kong has signed with the US).


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## marc9477 (Mar 28, 2011)

DavidMcKeegan said:


> Hello
> 
> 
> 
> ...


Thanks for your responses! Very helpful. 

One follow-up question: For my circumstances I wouldn't be ready to renounce until next year, as it will not be until then that I'm absolutely certain around a significant increase in earnings, which would make renouncing worthwhile. 

That being said, for option 3 that you have suggested, would it make sense for me to file the 2 additional years to complete 5 years during this calendar year, then renounce my citizenship mid-way through 2015. Do you see there being a problem with that?


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## DavidMcKeegan (Aug 27, 2012)

I don't see you having a problem if you go that route. If you are not ready to renounce until 2015, then go ahead and file the last three years now so that you are considered up to date via the Streamlined program. Then, by the time you are ready to renounce, you should have the five years ready to go (add 2014 and 2015 returns to the previous three).

If you renounce mid way through the year, your 2015 return will simply include both a 1040 and a 1040NR to accommodate your time as a resident and as a non resident. I would certainly recommend an accountant for that year in particular as they can do the necessary leg work in completing the forms.

Waiting a little bit also gives you time to make sure that renouncing is the best move for you.

Good luck!


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## StewartPatton (Aug 5, 2014)

Found an interesting tidbit on this issue today. Apparently a tax blogger talked to someone at the IRS who said that a person can file 5 years as part of the streamlined program and then renounce. This is a nice clarification and makes sense. 

Here's a link to another blog reporting on this: Federal Tax Crimes: Tidbits on the New Streamlined Procedures (8/16/14)


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