Yes, it’s true. You do NOT want to be a “covered expatriate”.
There are many unanswered questions about the tax consequences of Sections 877 and 877A. The language in the statute is not clear as to its meaning for those who file incomplete, fail to file, or fail to “timely file” IRS Form 8854. Be careful to understand the meaning and how the IRS interprets the law.
One of the greatest risks for anyone who thinks they will notbe a “covered expatriate” because of the asset test or income tax liability test, is the certification requirements set forth in Section 877(a)(2)(C).
Anyone who renounces their citizenship at the Embassy or Consulate will find that process relatively easy. See forms. However, no one at the U.S. Department of State will provide tax advice or try to interpret the meaning of Section 877(a)(2)(C). Indeed, the Foreign Affairs Manual used to read to the person taking the oath, simply provides the…
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