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Expatriating Taxpayers and Unfiled Form 8854: Administration Proposes Disparate Treatment Based on Financial Status

August 2022

Hale E. Sheppard article on Expatriating Taxpayers and Unfiled Form 8854: Administration Proposes Disparate Treatment Based on Financial Status

Hale E. Sheppard
International Tax Journal

Certain U.S. individuals who cease their relationship with the United States must pay an expatriation tax, which is also known as the exit tax. One major problem, at least from the perspective of the Internal Revenue Service (“IRS”), is that some taxpayers intentionally fail to file Form 8854 (Initial and Annual Expatriation Statement) to notify the IRS of their departure, keep a low profile for a few years until the general assessment period expires, and thereby avoid paying the exit tax.

Other taxpayers, particularly so-called accidental Americans, do not maintain U.S. tax compliance and do not properly expatriate for less nefarious reasons. The current Presidential Administration has recently suggested
changes for both categories of taxpayers. This article analyzes the main concepts
of the exit tax, an existing IRS relief program for certain individuals who incorrectly expatriated in prior years, and pending proposals that could harm some
taxpayers and benefit others.

Read the full article here.