Hello! This is Olivier Wagner from 1040 Abroad. This week’s question is: If you live outside the U.S. and relinquished US citizenship by performing an expatriating act after June 3, 2004, but failed to inform the Department of State are you still a U.S. taxpayer?

Answer

Yes. In 2004, IRC sections 7701(50) and IRC section 877A(4) were passed ensuring that you would remain a US taxpayer until not only the Department of State was notified of the expatriating act.

Summary of US taxpayer status

Here is section 7701(50):

(50) Termination of United States citizenship for 

(A) In general

An individual shall not cease to be treated as a United States citizen before the date on which the individual’s citizenship is treated as relinquished under section 877A(g)(4).

Referring to section 877A(g)(4):

(4) Relinquishment of citizenship

A citizen shall be treated as relinquishing his United States citizenship on the earliest of—

(A) the date the individual renounces his United States 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)),

(B) the date the individual furnishes to the United States Department of State a signed statement of voluntary relinquishment of United States 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)),

(C) the date the United States Department of State issues to the individual a certificate of loss of nationality, or

(D) the date a court of the United States cancels a naturalized citizen’s certificate of naturalization.

Subparagraph (A) or (B) shall not apply to any individual unless the renunciation or 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.

Now, (A) would apply to a renunciation, not a relinquishment.
(B) would be met when the individuals informs the Department of State (i.e. the US consulate), not when the expatriating act occurred.
(C) practically speaking, this is not going to be the earliest event (A or B would occur before)
(D) is not applicable to us

Hence based on the following, the individual would no longer be a US taxpayer when informing the US consulate of the expatriating act.

Provided that a certificate of loss of nationality is later issued… meaning that the only kind of notification accepted is the one which now cost $2,350

The good news 

Since the law was passed on June 3, 2004, those who relinquished before that would no longer be US taxpayers regardless of the notification given.

FREE U.S. tax guide for Americans abroad

The only e-book about U.S. international taxation, which you need to read as U.S. expat:

1. Foreign Tax Credit vs. Foreign Earned Income Exclusion

2. What is the danger of holding a Controlled Foreign Corporation?

3. Why more and more people are renouncing U.S. citizenship?

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