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Failed to file Form 8854 - Now What?

Failed to file Form 8854 - Now What?
Ines Zemelman, EA
05-Nov-17

In order to cease being a U.S. resident for tax purposes, simply filing I-407 (renounce Green Card) or giving up citizenship at the U.S. embassy, is not enough. The key in the entire operation is Form 8854. This article will address a few interesting scenarios, and how to proceed in order to mitigate your U.S. tax issues.

So, in order to stop being a U.S. person for tax purposes, you need to file form 8854. This begs the question - what do you need to do to file form 8854? You must have filed 5 years of tax returns.

No income to report, do I have to file 5 years of returns?

Yes - 5 years are required for 8854, even if not required to file (NRF) otherwise.

When must Form 8854 be filed?

8854 must be filed in the year following the year of expatriation, along with your timely filed final tax return. A copy should be attached to the return, and another should be sent to a separate processing center. We will provide you with concise filing instructions at the end of the process.

Specifically, what must I file, and when?

If you expatriated in 2017, you must file a dual status tax return for 2017, along with form 8854.

  • You must have filed 2011, 2012, 2013, 2014, 2015, 2016 tax returns (in order to certify that you have filed 5 tax returns)
  • Your 2017 dual status tax return must be timely filed (regular extension options apply)
    • Form 1040: Jan 1 - year of expatriation 1040,
    • Form 1040NR: Date of expatriation through Dec 31
    • Form 8854

I expatriated in a prior year, but never filed form 8854 - now what?

This is the tricky area. If, for example, you expatriated in 2015, but never filed 8854, if you file form 8854 now, it is going to be late, and you risk both penalties (up to $10k), and you risk becoming a covered expatriate. Both of these are not desirable outcomes.

Luckily, there is a solution to this problem. Continuing the prior example, you should file a 2016 tax return, and file a final return for the entire 2017, along with form 8854.

This solution works primarily because you remain a U.S. tax resident even after expatriation until form 8854 was filed. So you are actually doing what you are supposed to - continuing to file returns. This workaround allows you to timely file form 8854 with your 2017 return, reducing the big risks outlined above.

Ines Zemelman, EA
Ines Zemelman, EA
founder of Taxes for Expats