Relinquishment of Citizenship for Tax
The date that a taxpayer relinquishes their US citizenship is an important date because that is the day that they are no longer considered a US person for tax purposes. Especially for US citizens who relinquish their US citizenship but have a significant amount of US source income, this date of relinquishment is crucial as it may result in a significant tax liability if the date is extended beyond the date the taxpayer intended. Thus in accordance with Notice 2009–85 and section 877A, there are four specific dates that may be utilized to determine the date of relinquishment, noting that usually the earliest date will apply.
Notice 2009-85/Section 877A(g)(4)
Section 877A(g)(4) provides that a citizen will be treated as relinquishing his or her U. S. citizenship on the earliest of four possible dates:
“the date the individual renounces his or her U.S. nationality before a diplomatic or consular officer of the United States pursuant to paragraph (5) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)), provided the renunciation is subsequently approved by the issuance to the individual of a certificate of loss of nationality by the United States Department of State,
the date the individual furnishes to the United States Department of State a signed statement of voluntary relinquishment of U.S. nationality confirming the performance of an act of expatriation specified in paragraph (1), (2), (3), or (4) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(1)-(4)), provided the voluntary relinquishment is subsequently approved by the issuance to the individual of a certificate of loss of nationality by the United States Department of State,
the date the United States Department of State issues to the individual a certificate of loss of nationality, or
the date a court of the United States cancels a naturalized citizen’s certificate of naturalization.”
Date of Renouncement
When a US citizen wants to relinquish their citizenship, they will go before a diplomatic or consulate office of the United States. Once this is completed — and usually within the next few months — the citizen will receive a DS-4083 which represents a certificate of loss of nationality. The important takeaway from this section is that even if it takes several months to receive the certificate, the date of relinquishment would relate back to when the individual renounced before the officer – and this can have a significant impact when it comes to tax filing. (e.g., when did the US person’s tax status officially terminate)
Furnished a Signed Statement of Relinquishment of Nationality
Alternatively, the taxpayer may be able to provide a side statement of voluntary relinquishment without going before an officer. In this type of situation, the taxpayer will also receive a certificate of loss of nationality and the date of expatriation will date back to the date when they furnished the voluntary relinquishment and not when they received the certificate.
DOS Issues Certificate Loss of Nationality
If the taxpayer utilizes other means in order to relinquish their citizenship, then the date that the US Department of State issues that certificate of loss of nationality will be the day that they can use as the date of relinquishment.
Court Cancels Certificate of Naturalization
If a court determines that a naturalized US citizen should have their naturalization canceled, then the date that the court canceled the naturalization is the date that they are no longer considered to be a US person for expatriation purposes.
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