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Can I Receive Relief from the Individual Expatriation Tax?

 Posted on October 19, 2020 in Taxation Law

San Jose, CA tax compliance and audit attorney

U.S. citizens and residents are required to meet a variety of tax obligations, and in some cases, they may continue to owe taxes even if they no longer live in the United States. For those who have not met their requirements, the Internal Revenue Service (IRS) may be looking to collect expatriation taxes that are owed, and it may perform audits on individuals who are not in compliance with their tax obligations.

What Is the Expatriation Tax?

When moving to another country, adult citizens of the United States can relinquish their citizenship, and non-citizens may terminate their resident status in the United States. For those who expatriated after June 17, 2008, an expatriation tax will apply if they meet one of the following criteria:

  • They have a net worth of at least $2 million on the date of expatriation.

  • In the 5 years prior to expatriation, their average annual net income tax liability exceeded a certain amount. This amount is adjusted for inflation each year, and for 2019, this amount is $168,000.

  • They were not able to certify that they were in compliance with their federal tax obligations for the 5 years prior to expatriation.

Expatriates are generally required to pay any applicable expatriation taxes. However, for those who expatriate after March 18, 2010, relief procedures may be available that provide another method for a taxpayer to meet the certification requirements in cases where that taxpayer was not in compliance with his or her tax obligations. 

To be eligible for relief, a taxpayer’s failure to file the necessary tax returns must have been non-willful, meaning that it occurred because of negligence, mistakes, or a good-faith misunderstanding of tax laws. This form of relief is available only to U.S. citizens who have a net worth of less than $2 million and a total tax liability of $25,000 or less for the year of expatriation, as well as the previous 5 years. A person will be required to submit all applicable tax returns for these 6 years, including gift tax returns, Statements of Foreign Financial Assets, and Foreign Bank and Financial Account (FBAR) reports, and that person must pay all taxes and penalties that are owed.

Contact Our San Jose, CA Tax Compliance Attorney

If you are being audited regarding your expatriation tax obligations, or if you want to determine whether you qualify for relief from these taxes, John D. Teter Law Offices can provide the legal help you need. We will review your situation and help you understand the best options for becoming compliant and avoiding tax penalties. Call our reputable San Jose tax compliance and audit lawyer today by calling 408-866-1810 to schedule your confidential consultation.




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