long-term green card holder seeking advice on expatriation process

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anglik
Posts: 11
Joined: Sun Feb 24, 2008 11:42 pm

long-term green card holder seeking advice on expatriation process

Post by anglik » Sat Apr 15, 2017 11:04 pm

Have any long-term permanent residents been through the expatriation process or are you currently planning to do so? I have only recently become aware of the procedure and it's making me a bit nervous. My wife and I are hoping to return to Europe in a few years. At that point we will have been in the US more than 20 years. I don't really know at this point if we will surpass the threshold of $2 million in assets that would make us liable to pay the expatriation tax. One of the things that worries me is that the tax is calculated on gains in asset values. But it can be very difficult to figure out the original value of an asset to calculate the gain. for example, I participated in an employer pension plan in the Netherlands and I am told that i will be paid an annual pension of just under 12,000 euros per year. but how would i value that and calculate the "gain" for purposes of the expatriation tax? Has anybody out there already dealt with these issues or are they preparing to do so? How about professional tax advice? Are tax pros really up to speed with all the issues and able to complete the necessary filings to the complete satisfaction of the IRS? I would be most grateful for any light that bogleheads can to shed on this.

natureexplorer
Posts: 4191
Joined: Thu Sep 03, 2009 10:52 am
Location: Houston

Re: long-term green card holder seeking advice on expatriation process

Post by natureexplorer » Sun Apr 16, 2017 5:42 am

Why not become US citizens and never pay the exit tax?

You may also find the following useful: https://www.forbes.com/sites/robertwood ... 75c3c0287d

TedSwippet
Posts: 1458
Joined: Mon Jun 04, 2007 4:19 pm

Re: long-term green card holder seeking advice on expatriation process

Post by TedSwippet » Mon Apr 17, 2017 3:39 am

anglik wrote:Have any long-term permanent residents been through the expatriation process ...
I surrendered my green card and "expatriated" from the US in 2008. In my case this was a direct response to the 'exit tax' law, which hadn't yet been passed but once it was, would have immediately rendered me a 'covered expatriate' and have cost me over $100k in unrecoverable double-tax on my retirement savings. Because I left early enough I ducked out before it passed. 'Covered expatriate' is something to be avoided wherever possible, but avoiding it needs planning.

You're more than welcome to PM me with any specific questions. To cover the one specific one you did pose about pensions... it sounds like this is a 'defined benefits' pension. In that case you need to get some type of actuarial estimate of the current 'value' of the future payments. Your pension provider should be able to help; otherwise you can follow the IRS's process here to come up with a number for the expatriation form. There is some "guidance" -- I use the term loosely -- in IRS notice 2009-85. Remember that for anything owned before you entered the US you get a 'step up basis' to its value when you first became US-taxable.

If you're comfortably under the $2mm asset limit reasonable estimates will suffice, since there's no actual tax liability. If you're over, your best bet is to do whatever you need to get under. Gifting assets is the usual route for that, and green card holders have the edge over citizens when gifting.

Some tax pros can complete this process for you, but they are few, far between, and expensive. My experience with one of the 'big four' (paid for by my employer) was far from positive, so if you do use one be sure to choose carefully. It is possible to do-it-yourself here, though, provided you read, research, read, research, and read and research some more to be certain you've covered all the angles.
natureexplorer wrote:Why not become US citizens and never pay the exit tax?
US citizenship is an enormous tax and paperwork burden if you do not live in the US. Local (non-US) tax advantaged accounts, pensions, retirement savings, and perhaps capital gains advantages can all be destroyed by holding US citizenship; what the local country does not take in tax the US will. FATCA has worsened the situation, with some non-US banks now simply refusing service to US citizens. The result is that a record -- and rising -- number of US citizens living outside the US are choosing to renounce US citizenship to avoid US tax hassles.

If you do not plan to live in the US in future, there is no incentive to subject yourself to that burden if it is avoidable. The only case where that makes sense is if one is so deep into exit tax territory that there can never be any escape. In that case, your only choice is to take US citizenship if you want to live outside the US, since a green card holder not resident in the US would eventually see their status considered abandoned, which leads to them being 'involuntarily' expatriated by the US, followed by a large tax bill for that 'expatriation'.

anglik
Posts: 11
Joined: Sun Feb 24, 2008 11:42 pm

Re: long-term green card holder seeking advice on expatriation process

Post by anglik » Wed Apr 19, 2017 9:46 am

Thanks for helpful responses. I think this thread could help a lot of folks. I will post at greater length soon. I'm a bit busy now.

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