Check System
Send us your comment!

Your comment will be read by our web staff, but will not be published.

Please do not enter any personal information. Your comment is voluntary and will remain anonymous, therefore we do not collect any information which would enable us to respond to any inquiries.

However, provides a How to Contact the IRS page where you will find guidance on where to submit specific questions.

Share this presentation
Copy and paste the following URL to share this presentation
To email a link to this presentation, click the following:
This program writes a small 'cookie' locally on your computer when you set a bookmark.
If you want to utilize this feature, check the following checkbox. Otherwise, bookmarks will be disabled.
This is an IRS
audio presentation.

To view this page, ensure that Adobe Flash Player
version 10 or greater is installed.

Get Adobe Flash player

Slides PDF

PHILIP YAMALIS: Welcome to today's webinar, Relief Procedures for Certain Former Citizens. We are certainly very glad you are joining us today. My name is Philip Yamalis and I am a Stakeholder Liaison with the Internal Revenue Service and I will be your moderator today's webinar which is slated for 100 minutes. Before we begin, if there is anyone in the audience that is with the media today we ask that you please send us an email message to the address listed at the bottom of this slide. Be sure to include your contact information and the news publication that you are with. Our media relations and stakeholder liaison staff will gladly assist you and answer any questions that you might have. As a reminder, this webinar will be recorded and posted to the IRS Video Portal in a few weeks. This portal is located at That's Please note, Continuing Education credit or Certificates of Completion are not offered if you view an archived version of our webinars on the IRS video portal. More information about continuing education credits will be with you later. Technology problems, talk a little bit about that. In case you do experience a technology issue, this slide shows helpful tips and reminders. Again, we posted a technical help document that you should download from the materials button on the left side of your screen. This document provides the minimum system requirements for viewing this webinar along with some best practices and quick solutions.

Now if you've completed and passed the system check yet you're still having problems, try one of the following. First, close the screen where you're viewing the webinar and simply re-launch it. The second option is to click on the gear icon. Now, some of you might not see the gear icon, it depends of course on your web browser, but if you do have that gear icon that you could see on the screen before you, it will be in the top right corner of the slide and photo boxes.

You'll be given two choices once you click on that. Select Flash instead of HLS from the available media box. That solution should do it for you. I do want to share with you that you should have received today's PowerPoint in a reminder email. But if not, no worries, you can download it by clicking on that same Materials button located on the left side of your screen, as shown on this slide. Closed captioning, folks, is available for today's presentation. Now if you are still having trouble hearing the audio through your computer speakers, please click the CC button on the left side of your screen. This feature will be available throughout the webinar. During the presentation, we'll take a few breaks to share some knowledge-based questions with you. At those times, a polling style feature will pop up on your screen with a question and some multiple-choice answers. Select the response that you believe is correct by clicking on the radio button next to your selection and then click submit. Some people may not get the polling question. We've discovered that this may be because you have your pop-up blocker on. So please take the moment now to disable your pop-up blocker so that you can answer the questions as they pop up on your screen. Now if you have a topic-specific question today, please submit it by clicking the Ask Question button. Again, that's a topic specific question on today's webinar. Submit it by clicking on the Ask Question button. Enter your question in the text box and then simply click Submit. Please, please, do not enter any sensitive taxpayer-specific information or ask questions about specific situations. As you probably know, we cannot provide guidance for individual situations in this particular forum. Now audience, the presenters will be making several references to information on And they ask that the viewers have the ability to do the same on their personal viewing device. So we know that is currently your favorite website. So why don't you go to it, have it open on your device as this presentation is going on. So let's move along with our session this morning.

Let me take this opportunity to introduce today's speakers. First, we have Lara Banjanin.

Lara Banjanin is a Senior Counsel in the Office of Associate Chief Counsel International. And she focuses on a variety of subject matters including but not limited to income tax treaty interpretation, transfer tax treaty interpretation, cross-border compensation and pension issues, foreign trust and estate taxation and expatriation. Welcome, Lara. We also have Daniel Price who is an attorney with the Office of Chief Counsel in the Internal Revenue Service. And he advises the IRS on national issues relating to voluntary disclosure practice, streamlined filing compliance procedures, certain LB&I Withholding and International Individual Compliance Programs, as well as emerging issues. Welcome, Daniel. From the Department of State, we have Carol Farrand, an attorney advisor in the Overseas Citizens Services Directorate Office of Legal Affairs in the Bureau of Consular Affairs. Now Carol has been an attorney at the Department of State for 13 years with a portfolio that has included citizenship, diplomatic immunity, privacy, as well as litigation. Welcome, Carol Also, from the Department of State we have Paul Peek. He is the director of Passport Services, Office of Adjudication. Paul Peek has worked on passport and citizenship matters for the Department of State for over 27 years. Welcome to all our speakers. At this time to get us going, I am going to turn it over to Dan, Daniel Price to begin our presentation. Welcome, Dan. DAN PRICE: Thank you very much, Philip. We welcome everyone to our webinar today on the Relief Procedures for Certain Former Citizens. Today's webinar is designed to assist taxpayers or representatives assisting taxpayers, who are interested in using the relief procedures for certain former citizens. Now these are unique procedures designed to help a specific population of taxpayers that give up or renounce their U.S. citizenship. And allow me to explain the title of these procedures very briefly. The first word is relief, that clearly shows the purpose, provide relief. For whom? For certain former citizens. This focuses on a narrow population of persons that were U.S. citizens but gave up their U.S. citizenship by renouncing. And for purposes of today's webinar, we'll use the terms renouncing and relinquishing interchangeably, but there are subtle nuances for nationality law purposes.

Renouncing citizenship is an irrevocable, serious decision, and using the relief procedures involves weighty decisions. We strongly urge anyone pondering the use of these procedures to consult with legal advisors before you renounce your citizenship or use the procedures. I am going to turn it over to Lara who will review what we are going to cover during today's webinar.

LARA BANJANIN: Thanks, Dan. Good morning, everyone. Throughout today's webinar we will be providing a brief background on the acquisition of U.S. citizenship at birth and the tax implications of relinquishing that U.S. citizenship. We are going to broadly outline the purpose of the relief procedures which I guess is probably the reason why most people are here today. And we are also going to discuss the specific filings that are required under the relief procedures, some common issues that taxpayers and practitioners may encounter, and how the IRS will be handling the submissions that come in. I am going to turn it to Paul from the Department of State who will cover the rules regarding the acquisition of United States citizenship. PAUL PEEK: Thank you. Generally speaking, anyone born on U.S. soil which includes territories and possessions such as Puerto Rico, Guam and the Commonwealth of the Northern Marianas Islands, acquires U. S. citizenship automatically. There's a very limited exception for individuals born in the United States of parents who had diplomatic agent level immunity, obviously this would be pretty rare people who are working in a foreign embassy or consulate or perhaps from the United Nations in the United States at the time that their child was born. That child may not have acquired citizenship at birth. This is obviously a very complicated and nuanced situation. Any individual that believes they may be a U.S. citizen should reach out to the nearest U.S. embassy or consulate to work with them to establish whether or not they are in fact a U.S. citizen.

People born to U.S. citizen parents overseas which is sometimes referred to as derivative citizenship has nuances that are beyond the scope of this presentation, but again, anyone who falls into that category will want to make sure that their situation has been explored fully.

The term, Accidental American, is not a term used by the government. This generally refers to a person who gains U.S. citizenship by birth and is not aware of that citizenship until informed by a third party. With the passage of the Foreign Account Tax Compliance Act or FATCA, on March 18th, 2010, foreign financial institutions have been verifying whether customers are citizens or lawful permanent residents of the United States. All customers must provide the foreign financial institution, a certification that includes their name, address, date and place of birth, and if the place of birth is within the United States, Social Security number, or provide proof of loss of United States citizenship. With that, Dan, I will turn it back over to you.

PRICE: Thank you, Paul. Our slide covers common federal tax responsibilities of U.S. citizens.

This is not a comprehensive slide. It's meant to illustrate some of the most common responsibilities that U.S. citizens, especially those residing abroad, have. First, annually file required information returns. They annually file Foreign Bank and Financial Accounts Reports.

These are known as FBARs on FinCEN Form 114. Most importantly, annually filing income tax returns reporting worldwide income and if applicable, filing gift tax returns. Now other tax filings may be required for specific circumstances. Remember this is not an exhaustive list.

And we are going to discuss FBAR filings in more detail later in the presentation. Now one additional comment concerning various information returns, very common information returns for U.S. citizens residing abroad include Form 8938. That's the statement of specified foreign financial assets. Other common information returns include Form 5471 relating to reporting ownership of controlled foreign corporations. Additionally, Form 3520 reports transactions of foreign trust and receipt of certain foreign gifts for foreign inheritances. Carol, it looks like you are up next. CAROL FARRAND: You're right, Dan. I am, thanks. U.S. citizens have the right to lose U.S. nationality. Section 349(a) of the Immigration and Nationality Act or INA, A United States Code or U.S.C 1481(a), enumerates seven potentially expatriating acts.

A U.S. citizen who performs one of these acts voluntarily and with the intention or relinquishing U.S. nationality, shall lose U.S. nationality. Potentially expatriating acts under 349(a) include naturalizing in a foreign state upon one's own application after the age of 18. That's 349(a)(1). Taking an oath of allegiance to a foreign state after the age of 18, 349(a)(2), entering or serving in the Armed Forces of a foreign state engaged in hostilities against the United States, 349(a)(3)(A), accepting, serving in or performing the duties of any office code or employment under the government of a foreign state after the age of 18, that's 349(a)(4).

But the acts we will highlight today is making a formal renunciation of nationality pursuant to INA 349(a)(5), 8 USC 1481(a)(5). Section 349(a)(5) of the INA governs the right of a U.S. citizen to renounce U.S. citizenship abroad. That section provides for the loss of nationality by voluntarily and with the intention of relinquishing U.S. nationality, making a formal renunciation of nationality before a diplomatic or consular officer of the United States in a foreign state in such form as maybe prescribed by the Secretary of State. A person wishing to renounce U.S. citizenship must voluntarily and with the intent to relinquish U.S. citizen, 1, appear in person before a U.S. consular or diplomatic officer, 2, in a foreign country at a U.S. embassy or consulate, and 3, sign an Oath of Renunciation. Renunciations abroad that does not meet these conditions have no legal effect. Because of the provisions of INA 349(a)(5), U.S.

citizens can only renounce their citizenship in person, and therefore cannot do so by mail, electronically or through agents. The current fee for administrative processing of the request for a Certification of Loss of Nationality is $2,350, the 22 Code of Federal Regulations 22.1.

That fee may not be waived. For further information on fees, please see the 2015 public notice on the Schedule of Fees for Consular Services at 80 Federal Register 51464. That's 80 Federal Register 51464. If the Secretary of State approves, an individual who has taken an oath of renunciation or performed another expatriating act voluntarily and with the intention of losing U. S. nationality will be issued a certificate of loss of nationality. Now let's briefly go through the process of renouncing U.S. nationality. As a first step, a U.S. citizen would go to the website of the nearest U.S. embassy or consulate for information on the process, including scheduling an appointment and documents required. Because of the serious consequences of loss of U.S. nationality, a person normally has two separate interviews with consular staff with some interim time for reflection before the person may make the oath of renunciation. The diplomatic or consular officer must confirm the U.S. citizenship of the renunciant and assess voluntariness and intent. There are several forms to be signed before a diplomatic or consular officer.

There's Form DS-4081, which is the statement of understanding concerning the consequences and ramifications of renunciation or relinquishment of U.S. nationality. Form DS-4082 is the Witnesses' Attestation certifying the personal appearance of the renunciant before the diplomatic or consular officer, and that the officer explained the seriousness and consequences of relinquishing U.S. citizenship as outlined in Form DS-4081. Form DS-4080 is the oath or Affirmation of Renunciation of Nationality of the United States. And finally, there is the Form DS-4083, the top half of which is on the screen and that's the Certificate of Loss of Nationality of the United States. The next slide shows the bottom half of the Form DS-4083. Pursuant to INA Section 358, 8 USC 1501, the diplomatic or consular officer will then submit a report certifying the fact along with the forms I discussed to the Department of State for its decision. If the Department of State approves the certificate of the loss of U.S. nationality, loss is effective as of the date of making the oath of renunciation. Phil, how about stopping here first for a polling question. YAMALIS: That sounds like a great idea. Let's do it. Our first polling question, folks. Here it is. What are some of the common tax responsibilities of United States citizens? Now is the correct response, A, annually file income tax returns reporting worldwide income if income is over a specified threshold. B, annually file all required information returns, C, annually file Foreign Bank and Financial Accounts or FBAR on FinCEN Form 114, or, D, all of the above? Please click on the radio button that you believe most closely answers this question. I'll give you a few seconds to make your selection. OK, let's stop the polling now and we'll share the correct answer on the next slide. And the correct response is D, all of the above. OK. I see that 97 percent of our audience responded correctly. That's an awesome response rate. Thanks for your attention, folks. So with that, let me turn it over to Lara who is going to speak to us about the U.S. tax consequences of expatriating. Lara, take it away.

BANJANIN: Thanks, Phil. So I want to provide a little bit of context to these relief procedures by explaining what the current applicable tax law is to individuals who expatriate, who give up their U.S. citizenship. There are some dense contents here. So I am going to start by unpacking them and hopefully making them accessible to the audience. Section 877 of the Internal Revenue Code is the law that addresses and applies to U.S. citizens who relinquish their U.S. citizenship. And it's applicable to those who give up their U.S. citizenship after June 16 of 2008. It also applies to certain green card holders who relinquish their green card if they are what the statute calls a long-term permanent resident. A long-term permanent resident is a green card holder who has had their green card for at least eight out of the last 15 years. However, the relief procedures that we are going to be talking about later today only apply to citizens who give up their U.S. citizenship and do not apply to green card holders who give up their lawful permanent resident status. All U. S. citizens relinquishing citizenship and long-term residents, remember those that are green card holders for eight out of the last 15 years who terminate their lawful permanent resident status, need to file a Form 8854 when they expatriate.

This is an IRS form. The Form 8854 is used in part to be able to certify tax compliance for the five years prior to expatriation and to avoid being treated as a covered expatriate. If an individual is treated as a covered expatriate, there can be significant tax consequences that result from that expatriation. One consequence is that a covered expatriate is subject to the mark to market regime under Section 877A which effectively treats that individual as having sold all of their worldwide assets on the day prior to expatriation while they are still a U.S. person and having to pay tax on that gain. This is known as the Exit Tax. As a result of the Exit Tax, the covered expatriate is required to pay tax on all that gain resulting from the deemed sale. There is a statutory exclusion amount on the gain of $600,000 which is indexed for inflation and it's allocated on an asset by asset basis. For 2019 up to $725,000 of deemed gains is excluded. PRICE: Hey, Lara, how should a taxpayer determine what assets are subject to the Exit Tax? BANJANIN: Yes, for purposes of computing the Exit Tax, a covered expatriate is considered to own any interest in property that would be taxable as part of that covered expatriate's gross estate, had the person died the day before they expatriated while they were still a U.S. citizen. So hypothetically, if you died on the day before you expatriated any asset that would be includable in your gross estate is treated as having been sold and any appreciation resulting in gain is subject to the Exit Tax. So, in addition to that Exit Tax, a covered expatriate is subject to certain additional tax consequences with respect to three different items of income or property which are really beyond the scope of today presentation, but I just want to highlight them for the audience. These items are, include deferred compensation of the covered expatriate, specified tax deferred accounts, and certain trust distributions. We've talked about the tax consequences of expatriating and being treated as a covered expatriate, but we've not discussed how to determine whether that individual is a covered expatriate which is a critical piece. So a covered expatriate, that term is a statutorily defined term and it's defined in Section 877A(g)(1)(A) and that cross references Section 877 which is the previous expatriation regime that was in force prior to 877 in 2008. So an individual will be treated as a covered expatriate if they meet at least one of the following three threshold tests; the average income tax liability test, the net worth test, the certification test. And I will break each one down further in turn. The average income tax liability test looks to whether for the five tax years, prior to expatriation, the individual had an average income tax liability in excess of a particular amount that's indexed for inflation.

So for example, if an individual expatriated in 2018 and for the five tax years prior to 2018, that individual had an average annual income tax liability of $165,000 or more, then that individual would be treated as a covered expatriate for purpose of 877A. The second threshold test is the net worth test. And if an individual has a net worth of $2 million or more on the expatriation date, then that individual is a covered expatriate. And lastly, the certification test, if the individual fails to certify tax compliance for the five tax years prior to expatriation which is done in the Form 8854, then the taxpayer is treated as a covered expatriate. And this last threshold, the certification test, has historically been a trap for the unwary so you've got to be aware of that one. To be able to certify tax compliance for the five years prior to the year of expatriation, the individual must actually have been in tax compliance prior to expatriation. And again, as I mentioned that certification is done under penalties of perjuries on the IRS Form 8854. I should also note here that there are two statutory exceptions to being treated as a covered expatriate and one is for certain dual citizens at birth, that continue to be citizens and residents of that other foreign country of birth. And the other is for certain minors who expatriate under the age of 18 and a half. So if an individual qualifies for either exception, either they are a dual citizen at birth or the minor exception, they are not subject to the average annual income tax liability test nor the net worth test. That said, though they are still subject to the tax certification test and must be tax compliant and must certify that tax compliance on a Form 8854 in order to avoid being treated as a covered expatriate. I want to emphasize that to certify tax compliance for the five years before expatriation which is done on a Form 8854, the taxpayer must have completely and accurately reported information and filed all income tax, gift tax and information returns that apply. And for example, assume that a taxpayer relinquished their citizenship in January of 2018, assume that the taxpayer generally filed returns for tax year 2013 to 2017, the five-years before expatriation, but now as they're getting ready to file their returns for 2018, they realized that for each of the five years prior to expatriation, this individual failed to include a Form 8938 reporting several foreign financial accounts in which a taxpayer held an interest that were in excess of the reporting threshold. So currently as things stand, taxpayer would not be able to certify tax compliance prior to expatriation, because at the time that he expatriated, we were just told that he had failed to file those information reporting forms which are required. Dan will go into more detail as to the eligibility requirement for the release procedures that we are about to discuss, but I want to note that to the extent an individual has already expatriated and has not filed the Form 8854, the individual should use the version of the Form 8854 that corresponds to that individual's year of expatriation. So if you expatriated in 2011, use the Form 8854 for the 2011 tax year in order to file as part of these procedures which we'll go through. The slide contains a few references to the IRS website and products that may be helpful. There's also a link to find older versions of the Form 8854. You can click on How to Find Older Forms and then look for the section titled Other Items You May Find Useful.

Philip, why do we stop here for our second polling question? YAMALIS: Lara, that sounds very good to me. So, audience, are you ready for the second polling question? Here it is. I've heard this enough, so I think we all got this, but here it is. On what IRS form must individuals who relinquished citizenship certify compliance for the five years before expatriation? Is the correct response Form 911, B, Form 5471, C, Form 8854, or D, Form 8939? You know how this goes.

Click on the radio button that you believe most closely answers this question. Let me give you a few seconds to make your selection. On what IRS form must individuals who relinquished citizenship certify compliance for the five years before expatriation? Couple more seconds.

OK. Let's go ahead and stop the polling now. And we'll share the correct answer on the next slide. And the correct response is C, Form 8854, Initial and Annual Expatriation Statement. I know I heard Lara refer to that form so many times and I'm glad that 90 percent of you responded correctly, the Form 8854, Initial and Annual Expatriation Statement. Available where? Yes, on That's a great correct response rate, by the way, 90 percent. Thanks so much for paying attention, folks. Dan, it looks like now that I'm turning it to you to discuss relief procedures. You're on. PRICE: Thank you, Phil. The relief procedures provide an alternative means for satisfying the tax compliance certification process for citizens who expatriate after March 18th, 2010. If individuals meet all of the requirements for the relief procedures and I repeat, all of the requirements, then the individual would not be a covered expatriate under 877A The relief procedures will also relieve the need for these individuals who meet the eligibility criteria, pay tax, pay interest and to pay penalties, so long as their noncompliance was non-willful for the year of expatriation and for the five years before expatriation. Now, we're going to discuss all the details of eligibility as we proceed with this presentation. But first, let's see where the relief procedures are posted on and a few features. Well, this slide shows a screenshot of the relief procedures on, but we encourage everyone to read the entire text of the procedures and the associated frequently asked questions for the relief procedures before making a submission. And check for any updates, as the IRS gets feedback, there's a chance we may post some additional FAQs. Beyond the FAQs for the relief procedures, there's a hyperlinked document on our website. Specifically, it's a joint fact sheet answering many common questions about surrendering nationality, obtaining Social Security cards and related topics. The Department of Treasury, the Department of State, the Internal Revenue Service, and the Social Security Administration prepared this joint fact sheet on obtaining Social Security numbers, expatriation, the tax implication of expatriation, so I encourage you to also read that joint fact sheet. But for purposes of this webinar, when we refer to FAQs, we'll be referring to the frequently asked questions and answers relating to the relief procedures. Let's proceed with discussing eligibility. Only individual taxpayers, not entities, only individuals whose past compliance failures were due to non-willful conduct may use these procedures. Non-willful conduct is defined as a conduct that's due to negligence, inadvertence, or mistake, or conduct that's the result of a good faith misunderstanding of the requirements of the law. Notice that non-willful conduct encompasses a wide range of errors and mistakes. Let's review the specific eligibility criteria for the relief procedures. First is the date. Must have relinquished citizenship after March 18th, 2010. Must have no filing history as a U.S. citizen or U.S.

resident. They must not have exceeded the threshold related to average annual net income tax for the five tax years before the date of expatriation. Now, we have six eligibility criteria in total. We want to emphasize that the eligibility criteria needs to be interpreted strictly.

We'll discuss later consequences of not meeting the eligibility criteria. Let's proceed with our next point. Taxpayers must have had a net worth of less than two million dollars, note, at the time of expatriation and at the time of making a submission under these procedures.

Taxpayers must have an aggregate total taxpayer liability of $25,000 or less for the five years preceding expatriation and the year of expatriation. The taxpayers need to agree to file their federal tax returns for the six years at issue including all required schedules and information returns. Phil, is this time for our next polling question? YAMALIS: Dan, I think it is. Thank you so much. So, audience, this question this polling question is a bit different from our normal questions. It's a fill-in-the-blank question as you can see here. So let me read the sentence and I need you to select the correct option below that completes this sentence.

Taxpayers whose past compliance failures were blank may use the relief procedures. Is the correct response A, benign; B, non-fraudulent; C, non-willful; or D, willful? So at this point, click on the radio button that you believe most closely completes the sentence and fits there in the blank. Taxpayers whose past compliance failures were blank may use the relief procedures.

Let me give you just a few more seconds to make your selection here, folks. OK. Let's go ahead and stop the polling now. And we'll share the correct answer on the next slide. OK. And the correct response is C, non-willful. Taxpayers whose past compliance failures were non-willful may use the relief procedures. So I see that 82 percent of you answered that correctly. Not a bad response rate. Again, thanks for paying attention. At this point, Dan, let me turn it back to you. PRICE: Thanks, Philip. Now, we'll discuss the various eligibility criteria in detail. So first, the date of relinquishing. A taxpayer must have relinquished U.S.

citizenship after March 18th, 2010. And we direct your attention to FAQ 6. Additionally, when considering this, please also look at FAQ 11, item one. Let's dive into no filing history.

Taxpayer must have had no filing history as a U.S. citizen or resident. Now, filing a 1040-NR, a tax return for a non-resident alien under the good faith belief that you were not a U.S. citizen doesn't disqualify you from using these procedures. Additionally, we've received some questions already about whether filing an extension of time to file would count as filing history as a U.S. citizen or resident. The direct answer to that question is no. Extensions of time to file wouldn't automatically disqualify the person under this eligibility criteria. Lara let's go back to you. BANJANIN: Thanks, Dan. The average annual income tax liability test is the third eligibility criteria that must be met to use these procedures. And I previously touched on this criteria in the context of the three tests which could trigger covered expatriate status under Section 877A and it's the same here. So, again, the taxpayer must have an average annual net income tax liability for the five years before expatriation below a specified amount in order to eligible. And this amount will, again, vary depending on the year of expatriation. Later on, Dan will actually talk about ineligibility criteria under the relief procedures that relate to $25,000 of aggregate U.S. tax liability, and this will further narrow actually this particular eligibility criteria, so I wanted to point that out there. Another eligibility criteria is the net worth criteria, which I also previously mentioned in the context of the three tests to be treated as a covered expatriate under Section 877A. In the context of these procedures, however, an individual's net worth must be less than two million dollars both at the time of the expatriation and at the time of making the submission under these relief procedures, so that is a change. The balance sheet on the Form 8854 can be used to arrive at your net worth. Guidance is found both in the instructions of the Form 8854 and can further be found in IRS notice 97-19.

So, first, you determine the property that you are considered to own and for purposes of determining your net worth, you are considered to own any interest in property that will be taxable as a gift under Chapter 12 of the Internal Revenue Code had you transferred it immediately prior to expatriation. So assume that you own something, you own a house, and that you decide to gift it, if you're able to gift it, then you're treated as owning it for this purpose. Then you have to determine the value of your interest in the property using the valuation principles of the gift tax rules and that's under IRS Code Section 2512 and the regulations that generally you essentially are looking at your assets and minus your liabilities to arrive at your net worth. And you can use good faith estimate for fair market value and basis for this purpose. Formal appraisals are actually not required to determine your net worth.

So, Dan, with respect to taxpayers who consider coming in to these relief procedures, what records might these taxpayers want to retain relating to how they considered and how they value their assets for purposes of the net worth test? PRICE: That's a really good question, Lara.

So, first, taxpayers should maintain records of their tax basis in their files. And additionally, as taxpayers research the fair market value of their assets, they should if they use internet research or other sources, they should print out a copy of whatever they use to establish the fair market value of their assets and maintain those records. Although audits are not common, the IRS may audit or examine a submission. And valuation may be an issue in some cases. So, keeping good records is important. So now let's proceed with discussing the aggregate total tax liability eligibility criteria. Some might look at the term aggregate total tax liability and think, that sounds really redundant, aggregate and total. Let's break down the term. We can view the term total tax is really a term of art and we'll explain that a little further by referencing a specific line on the 1040. What we're doing, we're aggregating the total tax liability for really six years, the five years preceding expatriation and the year of expatriation. That's considered after all applicable deductions, exclusions, exemptions, and credits. And that would include the foreign tax credit. In computing the aggregate total tax liability, we'd exclude the application of 877A, the mark to market tax. We'd also exclude any payments made, any withholding and any refundable credits like the earned income tax credit.

Now, let's briefly focus on FAQ 9, Hypotheticals one and two. We're not going to read these Hypotheticals, but the IRS drafted these Hypotheticals to help illustrate how the eligibility criteria works. So, in Hypothetical 1, we have John, who was born in the U.S. and became a U.S.

citizen at birth. He renounced his citizenship on October the 1st, 2019. In making a submission, he tallies up his total tax liability and it's under the 25,000-dollar threshold.

Now, here's an important point. It was stated in the Hypothetical. John uses his best efforts in computing his total tax for each year. John computed the income from his foreign mutual funds and reported them as ordinary income on the other income line of his Forms 1040. Anybody that's familiar with foreign mutual funds knows that they're treated as special categories of investments. John should have used a Form 8621. The title of that form is Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund. We often refer to these as PFICs. So, John should have reported his PFIC on a Form 8621 with some special computation, but he didn't. He tried his very best. He knew it was a special category of income and he reported it as other income. Now, implicit in this Hypothetical is that John explained what he did in his submission, so that the IRS could understand that he used his best efforts. Now, we won't elaborate on Hypothetical 2, but Hypothetical 2 illustrates that John doesn't qualify for the relief procedures because his aggregate total tax liability exceeds the 25,000-dollar threshold. Now let's focus on the line in the 1040 that we have been talking about that total tax line. The next slide presents the first page of a 2018 Form 1040 simply for context. But let's proceed to the second page of the Form 1040 and notice the highlighted field.

On the second page of the Form 1040, there's a highlighted field, total tax. This is the line to focus on for each tax year in computing the aggregate total tax liability. Now note further on that form, there's a line 22, amount you owe, don't send money. We'll talk more about that later on. Even if there's an amount you owe on line 22, we'll talk about that later. Lara, do you have some resources to help the audience on common issues they may face as they prepare their tax returns? BANJANIN: Yes. There are many resources on, but I will highlight a few things that are likely to be relevant on computing tax liability for expatriating individuals. So many individuals who will consider filing under these procedures will likely be residents of a foreign country. They're going to be living there. They're earning and paying taxes on the income that they're earning in that foreign country. However, because the United States taxes its citizens on a worldwide base, it's likely that many U.S. citizens will be subject to tax in a foreign country and subject to U.S. tax in the United States on that same income. So, this will essentially lead to double taxation, right, you're taxed in the foreign country on the same income and in the United States on the same income. The U.S. tax law does provide mechanisms to relieve double tax and the most important mechanism is the double tax credit. The double tax credit allows a U.S. person to take a credit against their U.S. income tax on foreign source income. So foreign tax credits can only reduce your U.S. taxes on foreign source income, they cannot reduce your U.S. taxes from your U.S. source income. And sources is can be a complicated concept, but just very generally, let's assume that we're talking about wages, or earned income. So if you're earning wages for performing services in the United States, that's going to be U.S.-source income. If you're earning wages for performing services in a foreign country, that's going to be foreign-source income as a general matter. So, if the foreign tax rate on that income is lower than the U.S. rate, then the U.S. tax rate on the foreign income is going to limited to the difference between the two rates, and that way you're not double taxed. You may also be able to deduct your foreign taxes which will reduce your U.S.

taxable income, however, if it's available, using the foreign tax credit is generally better as it reduces your U.S. income tax liability on a dollar-for-dollar basis. So if you choose to take the foreign tax credit and the taxes that you pay or accrue exceed the credit limit for the tax year, you may be able to carry forward for 10 years or carry back for one year, the excess foreign taxes in order to offset foreign-source income in that tax year. The foreign tax credit is claimed on the IRS Form 1116 and there is an excellent publication, Publication 514 that deals with foreign tax credit for individuals and goes into a lot more detail. The other thing I wanted to highlight here is the foreign-earned income exclusion or FEIE. You can also, depending on circumstances, consider whether you can exclude a portion of your foreign-earned income under the foreign-earned income exclusion, which is set out in Section 911 of the Internal Revenue Code. The requirements to exclude foreign-earned income from U.S. tax is generally that the person is a U.S. citizen or resident who lives abroad. They must have a tax home in a foreign country and must have foreign-earned income. So if you meet these general criteria, you may be able to qualify to exclude your foreign-earned income up to a certain amount, which is adjusted for inflation, as many things are today that we've been talking about. I wanted to go back and just I mentioned that the person has to live abroad, and you must have a tax home in a foreign country. So, a tax home is a bit of a term of art. In general, you use the area of your main place of business, employment, post of duty regardless of where you maintain your family's home.

So, if your tax home is in a place where you are permanently or indefinitely engaged to work as an employee or a self-employed individual, that's going to be your tax home. And having a tax home, again, where you're sort of working in a given location doesn't always mean that that location is your residence or domicile for tax purposes and in fact, in this context, it may not. So, if you exclude your foreign-earned income, though, you cannot take a foreign tax credit on the income you excluded. That's an important point. Internal Revenue Service Publication 54 also provides information for U.S. citizens and residents who are abroad and has some additional information that may be helpful. Another eligibility criteria in order to use the relief procedures, is that the individual must agree to file federal tax returns for the six years at issue. So the five years prior to the year of expatriation and the year of expatriation and that makes up for a total of six years. In the year that an individual expatriates, the person will likely have two tax statuses, in the portion of the year before you expatriate where you'll be treated as a U.S. person and the portion of the year after you expatriate where you're treated as a non-resident. So, this is called a dual status year and in a dual status year, a person must file what's called a dual status return. That requires that the person file a Form 1040-NR with the Form 1040 attached as a schedule to reflect the income for the portion of the year that the individual is treated as a U.S. person. For the portion of the year that they're treated a U.S. person, they're reporting worldwide income on the 1040 and then after they expatriate, they are treated as a non-resident and are filing a 1040-NR, and so this dual status return rule is further covered in more technical detail in Treasury Regulation 1.6012-1 and this is also covered in Chapter 6 of IRS Publication 519. If a person successfully expatriates on January 1, then that person will not be required to file a dual status return because they will have been a non-resident for that full year, but that's very rare. You can also see IRS Notice 2009-85 for more information on this filing obligation for the year of expatriation. And I wanted to ask Dan sort of from a practical perspective what about earlier years, Dan? Let's say someone hasn't file a tax return in 20 years and will proper submission through these relief procedures now bring them into compliance? PRICE: That's an excellent question, Lara. So, assuming the taxpayer meets the eligibility criteria, it makes the proper submissions through the relief procedures, that will bring the taxpayer into complete compliance with the IRS. So, let's talk about submissions under the relief procedures. FAQ 11 talks about documents that need to be submitted in a relief procedure. A copy of the Certificate of Loss of Nationality of the United States, which is Form DS-4083 would need to be provided. That's really what we're going to focus on. The vast majority, the common scenario for taxpayers using these relief procedures will involve a CLN or Certificate of Loss of Nationality. Additionally, taxpayers need to provide copies of their identification. So, don't send originals. Don't send original passports or driver's licenses. We need, one, a copy of a valid passport, meaning it's a current, usable valid passport, or copies of the birth certificate and other current government-issued identification. Please send clear photocopies, preferably color copies. Now, using the second option of a birth certificate and other government-issued identification, if there's a name change between the birth certificate and your current government identification, you'll need to explain the name change and then provide additional documents establishing the name change. In the year of expatriation, taxpayer, as Lara mentioned, will have to file a dual status return including the 1040-NR with all required information return. An additional submission requirement, number four, are the five years of returns for the year before expatriation specifically Forms 1040 with all required information return. Now, a tip, on the first page of every document submitted, write in red ink, Relief for Certain Former Citizens.

That way, if your submission is, if one document from your submission is somehow separated, we'll know how to process them. Now, additionally if any gift tax returns are due, submit them with your other submission documents. Don't file the gift tax return separately. Now, a common requirement or a critical requirement for all tax returns is taxpayers disclosing and using their Social Security number. The slide presented currently shows the Social Security number field highlighted. Now, as the default rule under U.S. law, U.S. citizens must file their tax returns using a Social Security number as mandated by Internal Revenue Code Section 6109 and the Treasury Regulations there under expand on that. Now, some citizens that may want to use these relief procedures may not have an SSN. We'll talk more about that. Additionally, very few persons that are citizens that have been living abroad for many, many years might have accidentally through a misunderstanding have applied for an ITIN before realizing they had U.S.

citizenship. If that applies to you and you were actually assigned an ITIN by the IRS, you can use your ITIN number in the Social Security field for purposes of these relief procedures, but I need to stress in general U.S. citizens cannot use ITIN. They must use an SSN for their file.

Now, even rarer, if you for some reason, you corresponded with the IRS, made some type of filing in the past, and didn't include any number at all, the IRS may have assigned a temporary identification number known as an IRSN. If you're ever issued an IRSN, you could use that number for purposes of these relief procedures, but please note that it's an IRSN and add a note about when it was assigned to you, attach any related correspondence. Now, if you don't have an SSN, don't worry. You can still make a submission under these procedures. Simply leave the boxes blank where SSN is requested. Include a note with your submission that you don't have an SSN.

Take a look at FAQ 16. That discusses that further. Now, we realize that some tax preparation software may require you, during the beginning phases of preparing an income tax return, to enter an SSN. So if you don't have an SSN and you're trying to self-prepare your returns and your return preparation software is asking for something, just enter a placeholder number all 1s. When you print out the returns, before you submit it to the IRS, use a marker to redact or cover over that placeholder number. Let's show you an example of this on the next slide. If you didn't have an SSN and you used a placeholder so that your tax software would allow you to print your returns, mark through the placeholder number on your returns before you submit it to the IRS. Also, remember, just include a note with your submission that you never had an SSN.

Let's talk about payment. We mentioned payment a little earlier. Let's talk about payment further. If you're eligible to use these procedures, then no payment is required. The relief procedures are meant to provide a relief from paying taxes, interest, and penalties for the certain population of former citizens that meet the eligibility criteria. So, in providing you the relief, the IRS isn't asking for payment, but note, withholding will not be taken into account, and I direct your attention to FAQs 12 and 13 on those points. Now, where do you mail submissions? We have a special address for submissions under these procedures. You choose to mail your submission anywhere else, the IRS is going to process your returns under normal procedures. Lara, some practitioners have noted that the relief procedures don't apply to long-term permanent residents that are treated as expatriating when they surrender their green card. What if an LPR surrendered his or her green card? Let's assume the LPR filed all past returns but was unaware of the requirement to file an 8854, so didn't file one in the year of expatriation. Is there any provision for people like that? BANJANIN: Yes. Thanks, Dan, for asking the question. It's a question we get a fair bit. The IRS does anticipate providing additional guidance that would address the narrow circumstance where a taxpayer fails to timely file a Form 8854, which can, raise a concern as to whether that individual has failed to certify tax compliance and therefore is treated as a covered expatriate but it's a, you know, significant consequence. So the anticipated guidance will address the situation as you put, posit a Green Card holder who, at the time expatriation, was under the two million net worth threshold, was under the average income tax liability test threshold and had been compliant with our tax obligations for the five years prior to expatriation. So, the only failure was the failure to timely file a Form 8854 and certify that the tax, that they had been tax compliant, then that individual would be eligible to file their 8854 late by attaching a reasonable cause statement to explain the lateness of the filing and filing that with the IRS at this address actually. So, look out for that additional guidance which will be forthcoming. PRICE: Thanks, Lara. Returns submitted under these procedures are subject to verification. The IRS has the right to verify accuracy and completeness and we may check the submissions against information received from other sources. Returns will not be automatically subject to audit, but like with any submission to the IRS, the IRS may select it for an audit or corr exam. Now, additionally there's no provision to request a pre-clearance or a placeholder while a taxpayer is preparing their returns. So, also direct your attention to FAQs 15 and 17 on those points. Now, I promised to talk about FBARs more. Let's talk about FBARs and their connection with these relief procedures.

So, filing an FBAR is not an eligibility criterion for purposes of these relief procedures.

But if you have an FBAR filing requirement, you should file them on FinCEN. If your eligible usage procedures and file FBARs either before or contemporaneously with your submission to the IRS, the IRS will not assert FBAR penalties. Now, don't send your FBARs to Austin. Those need to be e-filed with FinCEN. Now, let's briefly talk about the trigger or requirement for FBAR filing. A U.S. person which is a citizen or a resident we're really focusing on FinCENs for purposes of today's presentation. The U.S. person needs to file FBARs if they have a financial interest in or signature authority over a foreign financial account and the aggregate value in the foreign financial accounts exceeds $10,000 during one year. Those criteria are met, the U.S. person has an FBAR filing requirement. Now, let me direct your attention to an excellent resource on the FBAR filing. The publication BSA, Electronic Filing Requirements or Report of Foreign Bank and Financial Accounts is available on the FinCEN BSA website. It provides definitions and line-by-line instructions for e-filing FBARs. We'll talk more later about other resources we can use for FBAR filing. Now, if a taxpayer fails to file FBARs, the IRS may assert FBAR penalties, if your submission is later selected for examination. The taxpayers with question about filing FBARs electronically should contact FinCEN's help line and the numbers are displayed on our webinar's slide. , Later in our slides, we also have a link for a webinar on e-filing FBARs. Philip, I think this might be a good time for another polling question. YAMALIS: I think you're correct. That sounds good to me. So, here's our fourth polling question, audience members. Which one of these is not one of the submission requirements for the relief procedures? Which is not one of the submission requirements for the relief procedures? Is the correct response: A, copy or certificate of loss of nationality of the United States; B, identification; C, for year of the expatriation dual status return for any part of the tax year; D, for five tax years preceding the tax year of expatriation Forms 1040NR. Again. Which one of these is not one of the submission requirements for the relief procedures? Let me give you a few more seconds to make your selection. OK. Let's go ahead and stop the polling now and we'll share the correct answer on the next slide. And the correct response is D, for five tax years preceding the tax year of expatriation, Forms 1040NR. So, it's five years of Form 1040 tax returns, not Form 1040NR tax returns. So, let's check out and see how many have answered that correctly. 67 percent of you answered that correctly. So, this might have been a trick question.

But, Dan, let me ask you to go ahead and clarify this question for us. Which one of these is not one of the submission requirements for the relief procedures? Let's just explain why D would not be the answer or D would not be one of the submission requirements, but it is the correct answer. PRICE: Yes. YAMALIS: You want to enlighten us a bit Dan. PRICE: Sure. YAMALIS: OK.

PRICE: So, I encourage everyone to look back at the FAQs and walk through the submission requirements. And for the five years preceding the year of expatriation, taxpayers need to file Forms 1040, not 1040NR. 1040NRs are used by non-citizen, not for citizen. YAMALIS: Yeah. That might have been a little bit of a trick question. I have to admit that. But, kudos to those of you that got it correct, very good. All right, thanks, Dan, for that clarification. Lara, let's go ahead and turn it over to you to talk about receiving notifications from the Internal Revenue Service. How do we handle that? BANJANIN: Thanks, Philip. I wanted to just give a little bit more information because I know we'll get asked this question. But essentially, after you make a submission under these relief procedures, just procedurally the IRS will review the submission, focusing especially on ensuring that you met the eligibility criteria that we just went over.

So, it's imperative that you answer truthfully under penalties of perjury. The IRS will then send you a notification that your submission was received and it's complete. If you get that, that's going to be in a Letter 6225. Then, you know you've submitted everything you need to and should generally not be hearing further from the IRS. The review process is going to take some time and I know everyone will be eager once they make a submission. But please, give us at least two months before contacting the IRS to find the status, find out the status of your submission. If you make a submission and your submission is incomplete, let's say you leave off a form or something, that the IRS will correspond with you for more information, this correspondence is going to be done on Letter 6227. So, if you get that, you should look through that and make sure you provide whatever additional information is missing. If you receive a letter, basically informing you that your submission is incomplete and you don't perfect it, you don't correspond back and provide the additional information, then, you will receive a denial letter and that letter is Letter 6226, and that letter will notify you that your submission was not complete or was ineligible and your submission will be processed under normal IRS procedures with all the consequences that that entails. So, after you file under these procedures, you have satisfied your U.S. tax obligations and are no longer a U.S. person, I should say after you expatriated, you're no longer a U.S. person, but under these procedures, you've satisfied your tax obligations that you're accepted. So, then, from a U.S. tax perspective, you're now taxed like any other nonresident alien, any foreign person which means that you may not have any U.S.

tax filing obligations ever again depending on your particular facts. Going forward, however, if you do spend a significant amount of time in the United States, you might become a U.S. resident again under what we call the substantial presence test which looks at the number of days that you are spending here. So, if you spend more than 183 days in a particular year, then, you are treated as a U.S. resident. If that happens, then you are again subject to U.S. tax on a worldwide basis and would have to file a 1040NR for that year, or a 1040, excuse me, for that year. So, after you expatriate, let's assume that you don't become a resident alien again, you'll be taxed as a nonresident alien which means that you're taxed on your U.S. source for that income like certain interests, dividends, as well as income that's connected with a U.S. trade or business. So, for example, assume you're a foreign person but that you're a partner in a partnership engagement in U.S. trade or business, you will have a U.S. filing obligation and will need to file a Form 1040NR, reporting that income associated with the U.S. trade or business on that Form 1040NR. IRS Publication 59 has some additional information that may be helpful to determining your tax status as a resident or a nonresident, if you are spending a significant amount of time after your expatriation in the United States. Dan, I'm going to ask you a question that I know that we are going to get. How long will these IRS procedures be available? PRICE: Thanks, Lara. Right now, the IRS is offering these procedures without a specific termination date. The IRS will make an announcement prior to terminating the procedures. But we encourage everyone, use the procedures sooner than later, make your submissions and take advantage of these unique relief procedures while they're available. So, let's talk about submissions not meeting the eligibility criteria. What happens if you make a submission and it doesn't meet the eligibility criteria as discussed in the next slide? So, if you're not eligible to make a submission under these procedures and still make one, the IRS will process your returns using normal processing procedures. You'll be liable for all taxes, penalties, and interest associated with the submission. But, what does that mean? If a person is liable for taxes, penalties and interest, the IRS will try to collect those liabilities. Collection procedures will go forth for ineligible submissions. So, if you know you don't meet the criteria, use a different path.

File your delinquent returns following instructions for normal filing. I'd like to point your attention back to FAQ 9, Hypothetical 2. Now, we talked about this hypothetical taxpayer, John.

In Hypothetical 1, he met the eligibility criteria. His aggregate total tax liabilities were under $25,000. But in Hypothetical 2, John's aggregate total income tax liability exceeded $25,000. So, he wouldn't be eligible for the procedures. If John made a submission to the procedures, the IRS would process returns using normal processing procedures. He's going to be liable for all taxes, penalties and interest. But John could request relief for penalties under the first-time abatement policy for the first year of the submission, 2014. John can also request abatement of penalties if he has reasonable cause for the remaining years. Additionally, if he qualified, he might be able to file an Offer in Compromise. So, just remember, if you don't meet the eligibility criteria, and you know that upfront, don't use these procedures. There's no ability to take back a submission. Philip, we have time for one more polling question?

YAMALIS: We absolutely do, Dan. OK. Audience, this is our final polling question. Let's go for it. How will the IRS handle submissions under the relief procedures not meeting the eligibility criteria? We're looking for a hundred percent on this one. Is it: A, send the submission back to the taxpayer; B, allow the taxpayer a do-over and give the taxpayer another chance; C, process the submission but apply no penalties; or, D, process the return using normal processing procedures? You know how this works, ladies and gentlemen. Review the question again and please click in the radio button that you believe most closely answers the question. We'll give everyone a few more seconds to make your selection. Come on, I know we can do it, high response rate. Hoping for a high correct response rate, right? OK. All right, let's go ahead and stop the polling now and let's show the correct answer on the next slide. And the correct response is D. We'll process the return using normal processing procedures. So, that means the taxpayer would be liable for all taxes, penalties, and interest associated with the submission under normal processing procedures. Seventy-six percent answered that correctly, Dan. What do you think? You want to clarify that? PRICE: Sure, Phil. Now, 76 percent is passing. But let me just emphasize the importance of this point. If a submission does not meet the eligibility criteria, there's no option to do a do-over. Lara will talk about possibility of the IRS inquiring about missing items, but if it's clear a taxpayer doesn't meet the eligibility criteria, the IRS will process the returns using normal processing procedures. Taxes will be assessed. Penalties will be assessed. Interest will be assessed. Then, the IRS is going to ask the taxpayer to pay those amounts. YAMALIS: Well clarified, Dan. Thank you. Well, it looks like you're going to finish us up with some procedural assistance and some resources that would benefit our audience today. PRICE: Thanks, Philip. Questions may arise about how to make a submission. If a taxpayer or a representative has a procedural question about using his relief procedures, first, I'd recommend listening to this webinar again after it's posted on Additionally, there'll be a transcript. If you have questions, you can also call an IRS hotline for these relief procedures. The number is on the screen. Leave a message.

Provide your name, the best time of day to contact you, where you're located. State your question. Maybe even restate your question. An IRS employee will get that message and then call you back. Now, note the IRS cannot provide tax or legal advice. Now, practitioners especially may start raising questions about these procedures. They may see trends relating to their client or they may have other questions. So, this is a question for you, Lara. If a tax practitioner has input or suggestion on these relief procedures, is there a way to communicate that input to the IRS? BANJANIN: That's a good question, Dan. Thanks for asking. Yes.

Practitioners or anyone can provide input by email to the IRS. And we have provided that address, the address is Again, that email address information on the slide in front of you. But, just to make sure that you have the correct email where you can provide input on trends that you're seeing or issues that maybe haven't been answered is at And if you do send that email, it may be helpful to include in the subject line something related to the relief procedures for certain individuals who give up U.S. citizenship. Additionally, if you missed that email address, you can feel free to call the hotline that Dan mentioned that's listed on the screen and they can provide additional information. But again, the LBI email address is on the slide in front of you. Thanks, Dan. PRICE: Thanks, Lara. YAMALIS: So, let me just clarify that for both Lara and Dan. This is not the new practitioner priority service. This is the number related to LB&I's input for these types of procedural assistance questions, right? PRICE: Good question. Good question, Phil. So, the phone number on the screen can be used by practitioners or individual taxpayers that have procedural questions about these relief procedures. And additionally, the email address on the screen is used for practitioners or others to provide feedback about the procedures to the IRS. So, that was a good question. YAMALIS: Excellent. PRICE: We'd also direct everyone's attention to FAQ 23. YAMALIS: Thank you. PRICE: But speaking of resources, you're welcome, Phil. Speaking of resources, our slides have a few excellent resources. The IRS has worked hard to put together webinar resources to assist taxpayers and tax professionals.

There's one of the foreign earned income exclusions. There's a fantastic one on electronic FBAR filing. Additionally, on the next slide, we have some resources on the foreign earned income exclusion. Phil, that's all I have, back to you. YAMALIS: OK. Thanks so much, Dan, excellent presentation. It's me again. This is Philip and I'll be moderating the question and answer session. Before we start the question and answer session, I want to thank everyone for attending today's presentation, relief procedures for certain formal citizens. I also want to thank our excellent presenters for the phenomenal information. Daniel, Lara, Carol and Paul will be staying on with us and will be answering your questions, your many, many questions that have come in. If you haven't input your question, there's still time. So, go ahead and click on the "ask question" button, type your question, click submit. One thing before we start, we probably may not have time to answer all the questions submitted. However, let me assure you that we'll answer as many as time allows. So, if you're participating today to earn a certificate and related continuing education credit, you'll qualify for two credits by participating for at least 100 minutes from the official start time of the webinar, which means that first eight or nine minutes or so of chatting and administrative items that we engaged in before the top of the hour does not count towards that 100 minutes. Sorry about that. Now, if you stayed on only 50 minutes from the official start time, you'll qualify for one credit. Again, that time chatting before the webinar started doesn't count towards the 50 minutes as well. OK. Everyone, I hope you're ready. We have received a lot of questions. Let's go ahead and get started so we can get to as many as possible. OK. Get over to the screen here. Here we go. Let me start with a question for Paul from the Department of State. Paul, a question came in that says, "I understand that citizenship is automatic based on birth in the United States. But don't people who are born overseas need to take some sort of action before they acquire United States citizenship?" PEEK: Well, thanks for that question. While it's true that people who are not born U.S. citizens generally do have to take some sort of action to obtain U.S. citizenship, people who are born abroad to U.S. citizen parents may have acquired U.S. citizenship automatically at birth. If an individual is born overseas and has a U.S. citizen parent, they would need to ensure that their citizenship status has been explored completely. YAMALIS: OK, excellent. Thank you. It's awesome that we have the Department of State on with us today to help us with those kinds of questions. Thank you so much, Paul. Well, then, Dan, let me turn this question over to you. It says here, "I'm an adult accidental American, OK, who just recently realized that I have U.S.

citizenship based on my birth on U.S. soil. Now, I'm trying to make a decision about whether I apply for an SSN and embrace the tax burdens of citizenship or renounce my citizenship and use the relief procedures. What's the process for a U.S. citizen residing overseas to obtain an SSN?" Dan? PRICE: That is a good question. A joint fact sheet that I mentioned early on in the presentation, provides some guidance on that point. So, if the audience locates the relief procedures webpage on, both near the top and at the very bottom are hyperlinks, to the joint fact sheet. And in fact, question number four asks and answers, "Where can a U.S. citizen overseas apply for a social security card?" Question number six, answers the question, "What documentation is required to apply for a Social Security card?" The Q&;A in the joint fact sheet provides some guidance. It would allow somebody contemplating obtaining an SSN to make an informed decision. YAMALIS: Excellent. Thanks, Dan. I knew those frequently asked questions would be asked somewhere in this presentation. That's great that they're available at the reference that you mentioned. So, Carol, I have a question for you. Can a minor, a person under the age of 18, renounce United States citizenship and/or may a parent do so on the minor's behalf? We're looking at somebody under the age of 18. Can they renounce U.S. citizenship or could their parent do so on their behalf? FARRAND: Good question, Phil. It's technically possible for minors to renounce U.S. citizenship, but such cases are extremely rare. While there is no age requirement for making a formal oath of renunciation, children under the age of 16 are presumed not to have the requisite maturity and knowing intent to relinquish U.S. citizenship.

And that can be found in the, 7 Foreign Affairs Manual 1292. As to the second part of the question, citizenship is a status that is personal to the individual. Therefore, no one including parents and guardians may renounce another person's U.S. citizenship. Minors seeking to renounce their U.S. citizenship must demonstrate to a diplomatic or consular officer that they're acting voluntarily without undue influence from parents, and that they fully understand the implications and consequences attendant to the renunciation of U.S. citizenship.

There is more information on renunciation in minors and renunciation at (INAUDIBLE)

YAMALIS: Excellent. Carol, thank you so much. So, let me ask one of you from the Department of State, either Paul or Carol, to handle this question on dual citizenship. How does dual citizenship come into play with these relief provisions that we talked about today on the webinar? Paul? Carol? PEEK: This is Paul. I don't know how they would apply to the relief procedures. But, the United States government dual citizenship, if you are a U.S. citizen, the United States government considers you a U.S. citizen, period. YAMALIS: OK. PEEK: Regardless of how many other citizenships you may hold. YAMALIS: Got you, got you. OK. Carol, do you want to add to that? FARRAND: I can't speak to the relief procedures, but one thing I would add is that U.S. law does not prohibit dual citizenship. So, we recognize people can hold other citizenships. You do not lose your U.S. nationality simply by holding another citizenship.

YAMALIS: OK. That makes sense. I appreciate that. Lara, let me turn things over to you and ask you a question here that came in. What assets do I need to include in my net worth? I have a house in the United States that is furnished, a car, a U.S. bank account. Do they all need to be included when applying for the relief procedures? BANJANIN: Yes. In determining your net worth both in the context of the relief procedures and in the context of just if you're not coming into the relief procedures, but you're filing you're expatriating in a final return, the Form 8854. To determine your net worth, you need to include all the assets that you own worldwide, so, your U.S. house you said, I think. The furniture from that house, your car, a U.S. bank account, all of those need to be included. But, I also want to add that in addition to any U.S. items because I know that's in the question you asked they're all U.S., any foreign assets also need to be included in determining your net worth. So, not just the physical ones from the U.S., you have to include your U.S. or foreign bank accounts, your foreign or domestic investment portfolios, foreign or domestic real estate holdings, foreign or domestic business holdings, et cetera. So, remember that if you're treated as owning that asset under the gift tax rules, then, that should be included and the value of that asset would generally be off the gift tax valuation rules which will look to the fair market value. So, you can use the Form 8854 to help you go through your net worth determination. YAMALIS: OK, worldwide net worth, not just U.S.

net worth. Worldwide is the key. That's what I heard from your answer. BANJANIN: Yes. That's right. YAMALIS: OK, very good. Thanks. All right, Dan, here's a question that comes in very often. And I know you mentioned the FBAR in your presentation. Only U.S. citizens should file the FBAR form? Is that what we're hearing? PRICE: That is a very common question, Phil. FBARs are required to be filed by a United States person and that's a defined term. A United States person includes a United States citizen and United States residents. I'd encourage taxpayers interested in more information on FBAR filing to read the line-by-line filing instructions provided on the FinCEN BSA website. YAMALIS: And as you mentioned earlier, there is an archived webinar on FBAR that was done recently that is an excellent webinar and serves as a good resource so thanks for that, Dan. Yes, there's always that distinction between person, citizen, get you.

Lara, let me come back over to you and asking for a clarification, what was the regulation for dual status return that was provided with one of the slides. There was a regulation on the dual status return that was provided with the slide. BANJANIN: Yes. Yes. The Treasury regulation that addresses this is 1.6012-1(b)(2) and there are some additional details there they can look at. YAMALIS: Lara, repeat that one more time. BANJANIN: Sure. It's 1.6012-1(b)(2) and recall that you can also look at Notice 2009-85 which will go into some detail about the year of expatriation which is the dual status year for most people. YAMALIS: Excellent. We may not have placed that on the slide. We want to remind our viewers that they can download the slides from the materials button on the webinar. So, just in case it wasn't on the slide, I appreciate you repeating that for us. Let me take it over to someone from the Department of State. So, if you served, for example, as an officer in the Army but you're serving in the Netherlands, do you lose your nationality? We'll turn that over to somebody from the Department of State. Carol, Paul, anyone of you want to handle that? FARRAND: I'll take that one, Paul. Thank you. Simply serving in a foreign government or in the Army in a foreign government does not result in loss of U.S. nationality. The expatriating acts enumerated in 349(a), all must be performed voluntarily and with the intention of relinquishing U.S. nationality. There is an administrative presumption that the department has adopted that persons who naturalized in a foreign country take a routine oath of allegiance or accept non-policy level employment with a foreign government are presumed to intend to retain their U.S. nationality. I hope I've answered the question but please let me know if not. YAMALIS: OK. Thank you, Carol, appreciate that. So, let me take us to you, Dan, and I guess internal procedures. What to do if I did not submit the Loss of Nationality Certificate to the IRS with the submissions. I failed to submit the Loss of Nationality Certificate to the IRS, what happens? PRICE: That's a good question, practical question. The IRS will correspond if a document is missing. So, let's say, a CLN is referenced but missing or identification is missing, the IRS will send a form letter specifying what appears to be missing and allow the taxpayer a reasonable amount of time specified in the letter to perfect the submission. YAMALIS: OK. Excellent. So, Lara, I heard something about the maximum $2 million worth of assets. What's the exit tax rate on the maximum $2 million worth of assets? BANJANIN: Well, it's not really an exit tax rate. I guess, if you are over the $2 million net worth threshold, then you will be treated as a covered expatriate in general.

And so then you would look and mark-to-market all your worldwide assets so most likely it's going to be likely the same assets that you used for determining your net worth and you're going to see what appreciation is in those assets. So, let's say, you bought like a house for $100,000 and now it's worth $3 million. As part of the exit tax, you're going to have to pay gain on that deemed sale because you're called that, you're treated as having sold those assets even though you're not actually selling them. It's just Hypothetical, right? You're treated as having sold them which is mark-to-market means and then you pay tax on that gain and you put that on your final income tax return. But, again, it's not an actual sale because I felt the question is related to that. You're not required to sell your assets as part of your expatriation. It's just a deemed sale but you have to pay tax on the appreciation. YAMALIS: Right. Got you. All right. That terminology "exit tax" got me as well so thanks for clarifying that, appreciate that. BANJANIN: OK. YAMALIS: Let me take it to Carol again over at the Department of State. I think this is question for you but, again, correct me if it's not. How long is the renunciation process, the renunciation that we talked about in the webinar?

This process can take a while. What is the estimate? FARRAND: So, that's a good question and the answer is it really depends on which U.S. embassy or consulate the U.S. citizen plans to go to. There can be wait times. So, what I suggest is checking the website of the U.S. Embassy or Consulate as often information on wait times for interviews including taking the oath itself are posted there. Also, there is no restriction as to which U.S. Embassy or Consulate a person might use. U.S. citizens seeking to renounce about citizenship abroad may go to any U.S. Embassy or Consulate that processes loss of nationality cases. Just be sure to check the website before you go. YAMALIS: Great. And that handles another question here that I was going to ask you next. Do you have to go to D.C. or does each state have local offices here in America. You talked about embassies but what about here, do you have to go to D.C.? FARRAND: While there is a provision in the INA 349(a)(6) that submits renunciation of U.S. citizenship while in the United States if the United States is in a state of war, this provision is not administered by the Department of State. So, in fact, there are no U.S. Embassies and Consulates are only abroad. The section of the law I discussed, 349(a)(5) requires that the person renounce U.S. citizenship before a U.S. diplomatic or consular officer at a U.S. Embassy or Consulate abroad.

So, there are no... YAMALIS: OK. FARRAND: OK. YAMALIS: Got you. I understand. So, talking about embassies abroad not necessarily offices here in the states. Let me ask another citizenship question and, Paul, maybe you can take this one. What if a child is born in the United States to two non-United States citizens from two different countries, is the child that was born in the United States automatically a citizen? PEEK: Yes. Under the 14th amendment of the constitution, anyone born in the United States, or territories, is considered to be a U.S. citizen. Again, as I stated early in the presentation, the only exception to that is if the parents have diplomatic agent status with the country that they're from since they're working at a foreign embassy or consulate in the United States or perhaps from the United Nations, that's a complex situation and that would need to be explored with the Department of State if somebody's parents were in that status. Otherwise, if you are born in the United States, you are a U.S. citizen whether you intended to be or not. YAMALIS: Excellent. Excellent. Thank you. That's why we have the Department of State on with us, folks, and we appreciate that. Dan, I see a lot of questions on where we can find the Frequently Asked Questions that you referred to. One more time, on, what would you enter as the keyword search to get to these Frequently Asked Questions that you and Lara have been referencing today? PRICE: Thanks, Phil. In the search feature, use the complete term, Relief Procedures for Certain Former Citizens. YAMALIS: OK. Relief Procedures for Certain Former Citizens. And then once you get there, there's a Frequently Asked Question tab on the top of the page, is that correct? PRICE: Yes. The page will start with some narrative and then the Frequently Asked Questions are presented below the narrative. I think it might depend on what type of device you're using to view the page. A PC may differ from a mobile device. YAMALIS: All right. So, on, keyword search, Relief for Certain... PRICE: Relief Procedures... YAMALIS: OK. I'm sorry. PRICE: ...for Certain Former Citizens. YAMALIS: Got it. Got it. So, I hope you all got that. That's where you can refer to these Frequently Asked Questions as often as you need. Very good. I think you answered this earlier, Lara, but let me go ahead and throw it at you again. Do you anticipate opening these Relief Procedures up for long term residents as well? BANJANIN: I think so.

That's an excellent question. I can't answer that question at this time in terms of with any real knowledge. But I think we're always looking for input from practitioners and advice. So, I mean, if that's something that practitioners and the taxpayers anticipate is there's a need for that, I think we really like to hear about it and the reasons why. But, yes, I can't sort of definitively answer it at this time. YAMALIS: OK. Fair enough. Fair answer. So, let me throw another question at you, Lara. If the taxpayer does not have enough income to be over the filing threshold, do they still need to file a tax return to expatriate? BANJANIN: Yes. So, if it's a citizen and they're under the filing threshold and they're expatriating, they would need to file the 8854 to let us know that they are under those big threshold criteria that I've talked about, the average income tax liability threshold, the net worth threshold and the tax certification so the 8854 I'm assuming in the context of this individual would be the key point.

So, they would need to file the citizen who expatriate would need to file an 8854 to sort of add they have been tax complaint even if they are not required to file an income tax return.

YAMALIS: OK. So, Dan, when you talked about no filing history, does that mean the taxpayer that has not filed a tax return in the last five years? What exactly does no filing history mean?

PRICE: we'd expect practitioners and individual taxpayers to use reasonable efforts in determining whether a taxpayer had a prior filing history. The service won't limit that to simply five years. If a practitioner has a question, they may request information from the IRS about the taxpayer they're representing. Perhaps, they can also pull a transcript to determine the taxpayer's filing history in recent years. YAMALIS: OK. So, here's an interesting question that came in. Let me throw that at you, Dan. Take a shot at it. Just out of curiosity, what happens to someone that fails to do any of these, that fails to complete the relief procedures or they falsify the returns and never return to the United States? PRICE: Well, so we certainly hope that nobody would falsify a return. Please focus on the second component of that question. What would happen if somebody falsify their return and then never return to the United States? PRICE: Well, filing a false return is a crime. And such a person may be subject to prosecution. The United States has extradition agreements with various foreign countries. So, from a law enforcement perspective, simply leaving the country wouldn't extinguish one's obligations to the United States. YAMALIS: Very good. Very good. OK.

Getting a note from my producer that I wanted to kind of catch here. Dan, let me throw another one at you. You said something about this aggregate total tax liability, and you clarified that by talking about what that aggregate total tax liability is. But does this include interest and penalties through to the date that you file or is this purely just the tax liabilities when you talk about aggregate total tax liability. PRICE: That includes only the tax. So, focusing on the total tax line of the Form 1040 is the key. It's a good question. Some practitioners may try to compute certain automatic penalties and interest but that's not what we're focusing on, that $25,000 threshold only focuses on tax. YAMALIS: OK, Dan. How are refunds on any of the past five years returns processed? So, when we talk about this, the refunds on any of the five years of returns, how are they processed? PRICE: The FAQs address withholding and credit, that's going to be a decision each taxpayer needs to make. If a taxpayer uses the relief procedures, the IRS is not focusing on withholding and credit. In other words, the relief procedures are designed for those that owe tax. YAMALIS: Got you. Got you. OK. You said something about returns without an SSN or an ITIN and filing those returns for the relief procedures, are these eligible for e-filing? I know that it's pretty difficult to e-file a return without a Social Security Number and ITIN. PRICE: I'm glad that question was raised.

All returns submitted through these procedures need to be paper returns mailed to the special address in Austin, Texas. e-filing is not an option. If returns are e-filed, they're going to be processed through normal procedures, tax interest and penalties will be assessed if applicable and collection may proceed if there's a balance due. So, just to reemphasize, any submission to the unique procedures need to be submitted on paper to the special address in Austin and then at the top of each document, write in red ink Relief Procedures for Certain Former Citizens. YAMALIS: OK. And you gave us that address on one of the slides. Very good.

No e-filing for these relief procedures. Lara, let me throw one over to you. How many months a year is an individual allowed to spend in the United States after relinquishing citizenship? I know you talked a little bit about the substantial presence test. How many months a year is an individual able to spend in the United States after relinquishing citizenship? BANJANIN: Well, I don't think that there's any limit as to the amount of time the individual can spend in the United States after they relinquish their citizenship provided that they're here legally under visas or what not. But if the question relates to how much time before they're treated as a U.S. person, as you mentioned, I did talk about the substantial presence test which essentially says that if you spend more than 183 days in a particular tax year, then you're going to be treated as a U.S. resident. If you're here in consecutive tax years, there's also a test that applies to see if you've been here within that threshold so, just kind of depending on the facts.

But if it's just one year, if 183 days spent here will cause you to be treated as a U.S. resident unless, of course, you may be eligible for claim like a treaty for term position or something that you're not resident for U.S. income tax purposes. So, that's also a possibility.

YAMALIS: Right. OK. So, let's pay attention to that substantial presence tax as well as treaties. Very good. One more question. I think I'm being queued here to get off the questions but let me this is an important one because I heard you mention something about photocopies of documents. So, the photocopy of a passport, that's different from what is required from the W-7 where certified copy of the passport is requirement is required. So, confirm, does it have to be a certified copy? Do we need certified copies of documents or will a simple photocopy suffice? Dan, you want to try that one? PRICE: Yes. That's a very good question. Obviously, from a practitioner who has experience, this requirement of providing photocopies, we're not asking for certified copies in the context of these relief procedures.

Simply provide a good, clear photocopy of the passport or other acceptable identification.

YAMALIS: OK. Excellent. Well, guys, I am getting the high five from my producers that if I take any more questions, I'm going to get a demotion. We don't want that, right? Well, so, listen, there's a lot of questions and I'm sure we're going to clarify a lot of those questions on future FAQs. Before we close the Q&;A session, Lara, what are the key points that you want our attendees to remember from today's webinar? BANJANIN: Well, I think the biggest key point is that the relief procedures along with the FAQs that we've been talking about are posted in and there's a link on the slide that people should feel free to go to and look through that may answer a lot of the questions that have been asked. And additionally, just to remind everyone that the purpose of the relief procedures and that is to provide an alternative means for satisfying tax compliance, the tax compliance certification process and it's available for certain citizens who expatriate after March 18, 2010 and going forward. So long as the procedures are open, people can continue coming in and filing under these procedures. YAMALIS: Excellent. Dan, how about you, some key points you want our audience to remember? PRICE: Yes, I think so. Obviously, emphasize the eligibility criteria, test compliance failures were due to non-willful conduct. Taxpayer must relinquish U.S. citizenship after March 18, 2010, no filing history as a U.S. citizen or resident. The taxpayer did not exceed the average annual net income tax threshold for the period of five years ending before the date of expatriation. Net worth needs to be less than $2 million at the date of expatriation and at the time of making a submission under these procedures. The aggregate total tax liability must be $25,000 or less for the five years before expatriation and in the year of expatriation. We're focusing on the six tax year submission. The taxpayer needs to file their federal tax returns for the six years at issue including required schedules and information returns. YAMALIS: OK, Dan, thank you so much. I want to thank I want to thank you, Lara, as well as our guests from the Department of State Paul, Carol for a phenomenal webinar today, something that was completely over my head and I know I learned a lot, I'm sure our audience did, too. Audience, we're planning additional webinars throughout the year so remember, to register for an upcoming IRS webinar, visit using keyword webinar, select the Webinars for Tax Professionals or Webinars for Small Businesses. We'll be offering certificates and CE credit for other upcoming webinars coming soon to an site near you. Visit the IRS Video Portal at Again, it's This portal contains the video and audio presentations on many topics of in to small businesses, individuals, tax professionals. You'll also find video clips of tax topics in archived versions of live webinars. Again, a reminder that continuing education credits or certificates of competition are not offered if you view an archived version of any of our webinars. Again, a big thanks to our speakers for a great webinar, sharing their expertise. I want to thank you, our attendees, for attending our webinar today, Relief Procedures for Certain Former Citizens. Again, if you attended today's webinar for at least 100 minutes from the official start time, you'll receive a certificate of completion that you can use with your credentialing organization for two possible CPE credits. If you attended for at least 50 minutes, you'll receive a certificate of completion that you can use with your credentialing organization for one CPE credit. If you're eligible for continuing education from the IRS and you register with your valid PTIN, your credit will be posted in your PTIN account. If you're eligible for continuing education from the California Tax Education Council, your credit will be posted to your CTEC account as well. And those of you in the Florida Institute of CPAs, your participation information will be provided directly to them. So, if you qualify, and you've not received your certificate and/or credit by October 31st, take a look at address on the slide,, send us an email and we'll send you an answer regarding your certificate, again, that's by October 31st. The email is on the slide. If you're interested in finding out who your local Stakeholder Liaison, I'm here in Pittsburgh throughout Pennsylvania, you could send us an email using the address shown on the slide. We'll send you that information; again, use the email on the slide. Folks, we would appreciate it if you just take a few minutes to complete a short evaluation before you exit our webinar today. If you like to have more sessions like this one, let us know, if you have thoughts on how we can make them better and let us know that as well. If you have any request for future topics or pertinent information you like to see in an IRS Fact Sheet, a Tax Tip or Frequently Asked Questions on, include your suggestions in the comment section of the survey. Click the Survey button on the left side of your screen to begin. If it doesn't come up, don't forget that pop-up blocker, disable it. Hey, it's been my pleasure to be here with you today. On behalf of the Internal Revenue Service and our presenters, we thank you for attending today's webinar. Thanks again for your time and attendance. We wish you much success in your business or practice.

This now concludes today's webinar. You may exit the webinar at this time.