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Tax Formalities When Renouncing U.S. Citizenship or Relinquishing a Green Card

September 25, 2013

AG Tax has recently seen an increase in the number of people interested in renouncing their U.S. citizenship or relinquishing their U.S. Green Card. Our AG Tax cross border specialists have put together a brief overview of the various requirements necessary to complete these processes. Numerous immigration issues are present when seeking to renounce/relinquish, and so it is advisable that individuals consult a U.S. immigration attorney regarding immigration related requirements. Please be advised that avoiding U.S. taxation is not a valid reason for renouncing U.S. Citizenship or relinquishing a Green Card.

Tax Filing Requirements for Renouncing Citizenship/GreenCard:

If expatriation takes place mid-year, Form 1040NR (Tax Return of Non Resident Alien) and various other applicable forms may need to be filed and attached to Form 1040 (U.S. Individual Income Tax Return).

Form 8854 (Initial and Annual Expatriation Statement) is a mandatory form required to be filed with the Internal Revenue Services (IRS) when renouncing U.S. citizenship or relinquishing a Green Card. It includes details of an individual’s income, assets, and liabilities, and needs to be filed irrespective of whether there will be any expatriation tax or not. It will also ask whether all of the U.S. federal tax obligations for the previous five tax years before expatriation have been complied with. This is required in order to obtain the Compliance Certificate/Sailing Permit to leave the country. Failure to file may result in a penalty of $10,000.

If determination of abandonment is initiated by the individual, their resident status is considered to be abandoned when they file either their application for abandonment, or their Alien Registration Receipt Card (with attached letter stating intent to abandon resident status), with the US Citizenship and Immigration Services or U.S. consular officer. However, unless the taxpayer receives proof that the letter has been processed, they will still be considered a U.S. person by the IRS for tax purposes.

Expatriation Tax:

If a taxpayer is a ‘covered expatriate’, the federal government considers all personal property as deemed to be sold at fair market value on the date of renunciation or relinquishment. Any gain from this deemed sale beyond the current threshold ($663,000 for 2013) is subject to U.S. federal taxation, known as the ‘Expatriation Tax’.

 • A taxpayer is considered a ‘Covered Expatriate’ if any of the following apply:

o Average annual net income tax for the last 5 years is more than a $147,000 for 2011, $151,000 for 2012, and $155,000 for 2013

o Net worth is $2 million or more on the date of expatriation or termination of residency

o Failure to report on Form 8854 that all the required US federal tax obligations have been met for the last five taxable years before expatriation

Immigration Filing Requirements for Renouncing Citizenship/GreenCard

While AG Tax will be able to advise on the tax related requirements for individuals renouncing their US Citizenship or relinquishing their Green Card, there are many additional immigration filing requirements that should be completed. These include:

• Obtaining a new passport

• Filling out a number of required forms for the US State Department

• A meeting with a consulate officer to finalize the process

An immigration lawyer should be consulted to ensure all forms, disclosure, statements, and any required documents have been filed correctly in accordance with the State Department’s and US Citizenship and Immigration Services’ requirements. AG Tax LLP is able to provide references for immigration lawyers that we work with regularly.


If you have any tax-related queries, need assistance with tax planning or filing your tax returns please contact us. Our team comprises of highly experienced tax professionals with extensive knowledge of U.S. and Canadian tax laws as well as cross-border compliance.

Furthermore, as a full service accounting firm, AG Tax associates are dedicated to assist you with even your most complex tax needs.

We can assist with:

  • Canadian Personal and corporate tax returns
  • Cross Border Taxation and Business Planning
  • U.S. Personal and Corporate Taxation
  • Disclosure of Foreign Assets and other information filings
  • Retirement planning
  • Estate Planning, Inheritance tax advice

To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:

  • 416-238-5920 (Greater Toronto Area, ON)
  • 604-538-8735 (Greater Vancouver Area, BC)
  • 780-702-2732 (Greater Edmonton Area, AB)


Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.

ABOUTAylett Grant Tax, LLP
With offices across Canada, we are positioned to manage and process the full scope of your Canadian, US and US Canada cross-border tax filing needs.
12752 28th Ave, Surrey, BC, V4A 2P4
104–4220 98 St NW Edmonton AB, T6E 6A1
With offices across Canada, we are positioned to manage and process the full scope of your Canadian, US and US Canada cross-border tax filing needs.
12752 28th Ave, Surrey, BC, V4A 2P4
104–4220 98 St NW Edmonton AB, T6E 6A1

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