Expatriation Can Trigger Major Tax Obligations

Renouncing U.S. Citizenship Last Resort When Tax Planning, Says Financial Adviser

ATLANTA, March 24, 2022 /PRNewswire/ -- The Internal Revenue Service may demand a parting gift from those who renounce U.S. citizenship, says IRS Enrolled Agent ReKeithen Miller.

Miller, a senior client service manager for Palisades Hudson Financial Group LLC, has published a new article on expatriation (available online at https://www.palisadeshudson.com/2022/03/tax-consequences-of-expatriation/). The article provides an overview of the process of renouncing U.S. citizenship, as well as a close look at the potential tax implications.

"The exit tax, also known as an expatriation tax, is among the United States' means of discouraging citizens from renouncing citizenship just to avoid global taxation," Miller says. This "mark to market" regime means that citizens who meet particular criteria owe tax as if they had sold their worldwide assets for fair market value the day before expatriation. This obligation can be burdensome, especially when no actual sale took place.

Miller also notes that some "accidental Americans" fail to realize their U.S. tax obligations. This category includes individuals born in the United States or a U.S. territory to noncitizen parents. He observes that the IRS has made provisions for exit tax relief that apply to individuals who previously failed to file or pay out of genuine ignorance.

"Expatriation is not the first strategy to consider if your aim is simply to lower your overall tax burden," Miller writes. "In fact, it should likely be the last option on your list, considering the difficulty, the drawbacks, and the extent to which the U.S. tax authorities are likely to maintain a presence in your financial life even after you leave." If you do plan to renounce your U.S. citizenship, be sure you give the IRS its due on your way out the door.

ReKeithen Miller supervises the staff of client service professionals in Palisades Hudson's Atlanta office, where he has been based since 2008. In addition to the EA designation, ReKeithen holds the CERTIFIED FINANCIAL PLANNER™ credential. His advice has appeared in articles for publications including Barron's, Bloomberg and Kiplinger's Retirement Report, and he is among the authors of Palisades Hudson's two books, "The High Achiever's Guide to Wealth" and "Looking Ahead: Life, Family, Wealth and Business After 55." Both are available on Amazon.

Contact: Amy Laburda, [email protected]

SOURCE Palisades Hudson Financial Group LLC