The IRS Letter 2399C For Failure to File Form 8854 Explained

IRS Letter 2399C For Failure to File Form 8854 

When a US Citizen or a Long-Term Lawful Permanent Resident wants to expatriate from the United States – and either relinquish their Green Card or renounce their US Citizenship – they must file a Form 8854 Expatriation Statement. And, depending on whether a bond was issued or the expatriate still has US assets such as a 401K — annual reporting may be required. In 2020, TIGTA deemed expatriation a key enforcement priority for the IRS. This was because many taxpayers are seemingly leaving the U.S. without properly filing the Initial and Annual Expatriation Statement, Form 8854. If the IRS catches wind of the noncompliance, they can issue an IRS Letter 2399C, and fines and penalties may follow. Let’s take a look at IRS Letter 2399C:

WHY WE ARE CONTACTING YOU 

• • • You are receiving this letter because our records show that you have lost your U.S. citizenship but have not properly given notice to the Internal Revenue Service. Such notice is given by filing an initial Form 8854, Initial and Annual Expatriation Information Statement. 

    • You are receiving this letter because our records show that you have terminated your lawful permanent resident status, having been a lawful permanent resident for 8 of the last 15 years (long term resident), but have not properly given notice to the Internal Revenue Service. Such notice is given by filing an initial Form 8854, Initial and Annual Expatriation Information Statement. 

WHAT DOES THE LAW REQUIRE

• • • Internal Revenue Code (IRC) section 7701(n) requires that a citizen or long-term resident of the U.S. who otherwise stops being a citizen or resident will continue to be treated as such for federal tax purposes.

    • The law requires this individual to be treated as a citizen or resident until the individual

      • (1) gives notice of an expatriating act or termination of residency (with the required intent to relinquish citizenship or terminate such status) to the State Department or the Department of Homeland Security and

      • (2) provides a statement to the IRS based on the revised requirements of IRC section 6039G, which can be done by filing a complete initial Form 8854.

    • Until you comply with both 1 and 2 above, notification and information reporting requirements, you will continue to be treated as a citizen or resident of the United States for federal income tax purposes regardless of your status under U.S. immigration laws.

    • If IRC section 877 applies to you, IRC 6039G also states that you must file an annual Form 8854 for 10 tax years following the date of your expatriation, whether you owe taxes under IRC section 877 for each tax year or not.

    • The first annual Form 8854 you file must include the date of your expatriation or termination of long-term resident status.

    • This annual form will be due by the same due date of filing a Form 1040-NR (generally by June 15) or, if you are present in the United States following your expatriation and are subject to tax as a U.S. citizen or resident, by the due date of filing a Form 1040 (generally by April 15).

WHAT YOU NEED TO DO

• • • If you want to establish that you are no longer to be treated as a U.S. citizen or resident for federal tax purposes and you have never submitted the initial Form 8854, please do so now.

    • You will continue to be treated as a U.S. citizen or resident for federal tax purposes until the date you file your completed initial Form 8854 with us.

    • The postmark date will be considered your date of expatriation for federal tax purposes. For your convenience, we have included a Form 8854 and the related instructions with this letter and ask that you complete all of the pertinent sections and return to the address at the top of this letter.

    • If you submitted an incomplete initial Form 8854, you will need to complete another one and mail it to the address at the top of this letter.

    • You will continue to be treated as a U.S. citizen or resident for federal tax purposes until the date you file your completed initial Form 8854 with us. The postmark date will be considered your date of expatriation for federal tax purposes.

    • For your convenience, we have included a Form 8854 and the related instructions with this letter and ask that you complete all of the pertinent sections and return to the address at the top of this letter.

    • If you are required to file an annual Form 8854 but fail to do so, do not include all of the information required by the form, or the form includes incorrect information, you could be assessed a penalty of $10,000 for each tax year that a required annual Form 8854 is not filed, unless you can show that your failure to file the form was due to reasonable cause and not willful neglect.

    • It is important to note! Filing an initial Form 8854 only satisfies your information reporting obligations resulting from your expatriation for tax purposes.

You are still required to: –

• • • File an annual Form 8854 for the 10 tax years following the date of your expatriation for tax purposes, if:

    • Your net worth as of the date of your expatriation is $2 million or more;

    • Your annual net income tax liability for the 5 years ending before the date of your expatriation is greater than; or 

    • You fail or are not able to certify on Form 8854, under penalty of perjury, that you met your tax obligations for the 5 years ending before the date of your expatriation. – Compute any tax due, if applicable, under IRC section 877.

HOW TO CONTACT US (IRS)

• • • If you have any questions, please call the contact person whose name and telephone number are shown at the top of this letter or refer to “The American Jobs Creation Act” information on our IRS.gov web site at http://www.irs.gov/businesses/small/international/index.html.

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