Question regarding late filing of form 8854

[Wallaby]

Assume the following imagined situation:

1. The I-407 was filed on 10/30/2010 but no f8854 was filed for that year

2. In August of 2024 it was discovered that a f8854 should have been filed in 2010

3. A f8854 is in preparation to be filed on 8/20/2024

For this scenario the instruction for Form 8854 of 2018 is relevant.

More specifically the section “Expatriation After June 16, 2008” is relevant.

Below are my questions:

1. Net worth needs to be calculated on the date of expatriation. What is the date of expatriation? 

Is it the date when the I-407 was filed (10/30/2010)? Or is the date when the initial f8854 will be filed (8/20/2024)?

2. The instructions say:

Attach your initial Form 8854 to your income tax return (Form 1040 or Form 1040NR) for the year that includes your expatriation date, and file your return by the due date of your tax return (including extensions).

Again, what is the expatriation date? And to what year of tax return does the f8854 need to be attached? 2010 or 2024?

3. Also in Part V, Schedule A and B the expatriation date determines what data needs to be entered into the form 8854. Again. What is the expatriation date?

Please somebody explain.

[M-MTax]

Not sure anyone here can answer your question but you should see a tax pro for this and one experienced in expats. This is complicated stuff.

[pk]

@Wallaby , without adding my own take on this , may I refer you to the instructions for the form 8854 , which clearly stipulates / answers your questions ( as posted here ).   

Here is the reference to this :

Instructions for Form 8854 (2023) | Internal Revenue Service (irs.gov)

If thereafter you still have questions on this , please welcome to add to this post.

[Wallaby]

Thanks for your reply.

I read i8854 (2023). The expatriation date is the date the I-407 was filed.

I have a couple more questions.

1. f8854 (2023) seems not to be the right form to file f8854 for somebody who expatriated in 2010.

I believe f8854 (2018) needs to be filed. Is that correct?

2. In i8854 (2023 and 2018) it says:

"Attach your initial Form 8854 to your income tax return (Form 1040, 1040-SR, or 1040-NR) for the year that includes your expatriation date, and file your return by the due date of your tax return (including extensions). "

Question: Applied to the example, does that mean one needs to attach f1040 from 2010 to f8854 and file in 2024?

[pk · Accepted solution]

@Wallaby  given your situation of 

(a) having filed  I-407  correctly and intime and  missing to file form 8854 and  because so many years have passed, I would file form 8854 as Initial and final , with a note explaining the reason for missing the  original  filing back along with your tax return for the  year of filing I-407.

( b) or call IRS  or visit  the IRS office  ( generally there is one  in the embassy of US in each country ) and ask for help for this oversight.

Note that there is always a risk that IRS would take the position that while you had abandoned Resident status  ( from  an immigration standpoint )  you still remained  a Resident for Tax purposes  , implying that they have right  to  tax your world income.     I don't believe they would especially if  your current tax home is in a  country with a Tax treaty with US.

 Personally I prefer option (b) if possible  first  and then follow up with option (a) or whatever the  IRS suggests.

Is there more I can do for you ?

I am sorry I could not provide  a lot of good news on this.

pk

[Wallaby]

Thanks for your message. Your response is good. Now I know what I need to do.

I now know that in need to base my net worth calculation on the date I filed my I-407. And I know now that I need to file along with the f8854 (2018) my f1040 from the year I filed the I-407. The 1040 will show how much income I had that year. 

Both, net worth calculation in the f8854 and the 1040 will be used to determine whether or not I am covered expatriate. So it makes sense that I need to file the 1040 from back then. I suspected that this is what I have to do. I just wanted to confirm it. You did that. Thank you.

Contacting the IRS directly and personally at an Embassy near my location is also a good idea. I will look into that. I did not know about this option.

[pk]

@Wallaby  ,  I am glad.

We are volunteers here and strive to help other users.  So if I have answered your question and satisfied you , please consider   up-voting and/or accepting my answer.   If I have not been that then please tell me what more I can do earn that.

pk

[Wallaby]

@pk 

I would like to ask you another question about this issue.

Assume again that the expat year is 2010.

I have carefully read i8854 for 2018 and 2023 and looked at the Forms of each year.

What I cannot figure out is where I need to enter my net worth calculation.

It seems that neither on f8854 (2018) and on f8854 (2023) there is a section dedicated for after 2008 filers.

[pk]

@Wallaby  I don't know the answer off the top -- I need to look in to this --- will come back  later today or early tomorrow morning.   Please forgive my inability.

pk

[Wallaby]

@pk 

I have the feeling that people who filed I-407 in 2010 need to file f8854 (2010). Only if the expatriation date is between 2004 ans 2008 does one need to file f8854 (2018). 

Is that also your conclusion?

[pk]

@Wallaby , I don't believe  you are correct  -- all they have done is raise the bar for covered individual.  This is from the instructions for form 8854

"  

Who Must File

You must file your initial Form 8854 (Parts I and II) if you relinquished your U.S. citizenship in 2023 or you are a long-term resident (LTR), defined below, and terminated your residency in 2023.

You must file your annual Form 8854 (Parts I and III) if you expatriated before 2023 and you:

1. Deferred the payment of tax,

2. Have an item of eligible deferred compensation, or

3. Are a beneficiary of a nongrantor trust.   "

Your earlier question about where to enter your net-worth ---- I show below  the appropriate portion opf form 8854 --->

Part II Initial Expatriation Statement for Persons Who Expatriated in 2023
Section A Expatriation Information
1 Enter your U.S. income tax liability (after foreign tax credits) for the 5 tax years ending before the date of your expatriation.
Caution: These amounts are not your balance due. See instructions.
1st Year
Before Expatriation
$
2nd Year
Before Expatriation
$
3rd Year
Before Expatriation
$
4th Year
Before Expatriation
$
5th Year
Before Expatriation
$
2 Enter your net worth on the date of your expatriation for tax purposes . . . . . . . . . . . $
3 Did you become at birth a U.S. citizen and a citizen of another country, and do you continue to be a citizen
of, and taxed as a resident of, that other country? . . . . . . . . . . . . . . . . . . . Yes N

 -- the copy  function did not  copy the format -- but you can look at the form itself.

I also think that  perhaps you should  visit the IRS section  at the embassy nearest to you and see what they suggest .   I think  they might look upon this as a case where  it was a mistake that you forgot to file a form 8854 along with your return for the year you renounced the LTR.   

Good luck

pk

Does this solve your issue  ?

[Wallaby]

@pk 

I think you forgot that the expatriation date based on Form I-407 is 2010.

The Who Must File you quoted states: ... and terminated your residency in 2023

For that reason I think the 8854 (2023) cannot be used.

If as person expatriated between 2004 and 2008 and files 8854 in 2023, that person has to use 8854 (2018).

But 8854 (2018) cannot be used for people who expatriated in 2010. Because there is no section to report 5-year income period and net worth for 2010 expatriates.

I know in which sections 5-year income period and net worth has to be entered. The question is only which year Form 8853 needs to be used if the person expatriated in 2010. I am not convinced that it is 8854 (2023).

[pk]

@Wallaby  my mistake on the details but the general thought process is still holding.   Here is the instructions for  2018  which clearly  states the  income limits for the filing years  post 2008.    You are correct, this is messy.

------->     2018 Instructions for Form 8854 (irs.gov)

pk

[Wallaby]

@pk 

It seems that 2010 expatriates have to file f8854 (2018). A table shows that they have to fill out Part 1 and Part 3. 

Part 3 has to be filled out only for deferred tax, eligible deferred compensation and interest in a nongrantor trust

There is no dedicated section to report 5-year income period and net worth for 2010 expatriates. Part V is for that purpose but it is dedicated for 2018 expatriates only.

So, I am still wondering how 2010 expatriated report 5-year income period and net worth