Guide
Form 8854: the certification that decides your status
Updated
Most of the exit tax turns on valuations. One part of it turns on a signature, and that is the part people lose.
What the form does
Form 8854 is the Initial and Annual Expatriation Statement. It is where an expatriate reports the deemed sale, reports net worth, and certifies under penalty of perjury that federal tax obligations have been met for the 5 tax years preceding the expatriation date (instructions). Failing that certification is the third covered expatriate test in its own right, under section 877(a)(2)(C).
Who has to file
- Anyone who relinquished US citizenship in the year, or whose long-term resident status ended in the year.
- Anyone who expatriated in an earlier year and deferred tax under a section 877A(b) election, so the deferred balance stays reported.
- Anyone who expatriated in an earlier year and holds eligible deferred compensation items or an interest in a non-grantor trust, because those regimes run on after the expatriation year.
The related forms
Form W-8CE, Notice of Expatriation and Waiver of Treaty Benefits, is given to payors of deferred compensation and to trustees. It is what switches on the 30% withholding regime for eligible deferred compensation items and non-grantor trust distributions, and it is why treaty relief cannot then reduce that 30% (Notice 2009-85, section 5).
The green card trap
Long-term resident status is measured in tax years, not calendar days. A green card held for part of 8 separate tax years can be enough. Notice 2009-85 also confirms that lawful permanent resident status ends for section 877A purposes not only when the card is revoked or abandoned, but when the holder starts being treated as a resident of a treaty country, does not waive the treaty benefits, and notifies the IRS on Forms 8833 and 8854. People trigger expatriation this way without ever handing anything back.
Renouncing at a consulate is a separate act with a separate consular fee, and it is the immigration step, not the tax step. The tax consequences follow the expatriation date defined in section 877A(g)(3), and they follow whether or not Form 8854 is filed on time.