In more news about international taxpayers, the IRS has apparently decided to make US residency issues a priority in 2006. To that end, they have been sending out notices to expatriates who have not complied with the requirements to file federal form 8854, Initial and Annual Expatriation Information Statement. The form is intended for US citizens who have renounced their citizenship and long-term residents who have ended their US resident status for tax purposes, in other words, individuals who have expatriated or terminated their U.S. residency status. Individuals may also be required to file under other circumstances.
So, what’s the big deal with the notices? Just a piece of paper, right? Well, it might also be accompanied by the penalty for failure to file or fully complete the form: $10,000. Yes, four zeros.
Why now? You could be cynical and claim that it has something to do with raising revenue in a deflated economy. Or it might be more timely for other reasons: in this election year, we are reminded that the last time changes were made to the so-called expatriation tax rules was the American Jobs Creation Act of 2004 – which just so happened to be in an election year.
