Navigating the US Expatriation Tax Regime: Strategies for Green Card Holders and US Citizens

Some of your clients are US citizens who may be thinking of giving up their citizenship. This number may be small, but many of your clients are green card holders. How many green card holders truly understand that the US expatriation tax regime can apply to them once they hold the card for 8 “tax years”  (that can be far less than 8 calendar years!) and then relinquish the card?

How many understand that merely because the card has “expired” for immigration purposes, the mere expiration does not let them off the hook for tax purposes? This not only means they remain liable for US tax on worldwide income but means they continue to hold the card for purposes of calculating whether it has been held for 8 “tax years”

Green card holders with expired cards remain liable for paying US tax as tax residents. In addition, those “expired” years count in determining if they have held the card long enough to be subject to the “expatriation” tax regime once the card is formally relinquished or administrative action taken.

If the US citizen giving up citizenship, or the green card holder giving up the card is classified as a “covered expatriate” (CE), the expatriation regime applies.  The regime will impose an “exit tax” on a deemed sale of the client’s worldwide assets. Additionally, a 40% transfer tax will be imposed on any US recipients of a gift or inheritance from the CE at any time in the future.

Understanding how to advise clients about the complex tax aspects of the US “expatriation” tax regimes can create a whole new line of business for tax advisors, enrolled agents and return preparers seeking to expand their US tax practice. Don’t lose potential big business opportunities because you do not fully understand the expatriation rules. The regimes should be understood by any client who is thinking of obtaining a green card or US citizenship, as well as to those thinking of relinquishing the card or citizenship.  Family offices can make great use of this information to avoid serious pitfalls.

Expatriation matters have grown in importance over the years as more and more individuals are divorcing the United States.  The IRS now has an audit campaign in place for individuals expatriating any time after June 2008. It is aggressively seeking unpaid exit tax and penalties.   Now more than ever, tax professionals need to understand the expatriation rules and how to engage in constructive tax planning for clients to escape the harsh results. This webinar provides all the information you need.

Join Virginia La Torre, JD., for this information-packed webinar for an in-depth examination of the overall framework and rules surrounding the expatriation tax rules. This is one of the US international tax’s most complex and misunderstood areas.  The rules have changed several times over the years, adding to the complexity.  This session makes it easy and digestible. 

Webinar Agenda

• What to do if your client has already expatriated but has not been US tax compliant prior to giving up US status?
• What to do if your client never filed form 8854 after expatriation?
• How to advise a green card holder who may be challenged upon re-entry to the US and pressured to give up the card at the border.  This can result in an immediate expatriation.
• Planning techniques to prevent “covered expatriate” classification.  

Webinar Highlights

• Learn the various ways a US citizen can “expatriate” and which carry greater tax risks and issues.
• Learn how a green card holder is considered to “expatriate” – you will be surprised.  Some green card holders can be treated as “covered expatriates” just like US citizens who give up US status and are subject to the same expatriation tax regime.  How can you help your green card holder clients?
• Use of Treaty tie-breakers for a green card holder –it can help or harm.
• Understand who will be treated as a CE subject to the harsh expatriation regime and learn planning techniques to help avoid the triggers. 
• Learn how to use possible exceptions to CE status for US citizens who have had limited US physical presence and who are younger persons or certain dual nationals.
• Learn how to compute a client’s “net worth” for purposes of the Net Worth test triggering CE status.
• Learn about computing net worth for married couples – it’s not so easy!  How do you deal with community property?
• What does it mean to meet the tax compliance test for expatriation purposes? Is “compliance” covering only income tax?
• Learn the IRC Section 877 and 877A “expatriation” regime rules – Exit Tax and how the tax applies to various assets including the principal residence, IRAs/Coverdell’s, US and foreign pensions, interests in trusts.
• Learn how US recipients of gifts or an inheritance from a CE will be subject to a 40% transfer tax; learn about IRS final regulations issued January 10 2025, US recipients must be prepared to prove the gift or bequest was not given to them by a CE.   
• Learn about the Reed Amendment and possible ban on re-entry to the US. How much of a risk is this? 
   

Who Should Attend

Tax professionals, tax advisors and consultants, enrolled agents, certified public accountants, family offices, wealth advisors and wealth planners