Form 8854 Expatriation Statement: Who Files, When and the Covered Expatriate Tests

Form 8854 expatriation statement: an introduction

The Form 8854 expatriation statement is the IRS form you file when you give up US citizenship or end long-term US residency. It tells the IRS your expatriation date, your assets and your tax record for the previous five years. From those answers, the IRS works out whether you are a covered expatriate. That label decides whether the exit tax applies to you.

This article explains who files, when the form is due and how the tests work. It also shows how the State Department process ties in. Renunciation is often the last step after years of catching up, so our guide to IRS Streamlined Filing from the UK is a useful companion.

What the Form 8854 expatriation statement is

The IRS calls Form 8854 the Initial and Annual Expatriation Statement. The initial statement is filed once, for the year you expatriate. The annual statement is filed in later years, but only by people with certain deferred items. Expatriation is the legal end of your US tax status, either as a citizen or as a long-term green card holder. In short, the form is the tax side of leaving.

Why the IRS asks for it

The filing duty comes from section 6039G of the Internal Revenue Code. It requires a statement from anyone the expatriation rules apply to. The rules themselves sit in section 877A, which created the mark-to-market exit tax. Therefore, the form is how the IRS sees whether section 877A bites. Without it, the IRS treats you as if you failed the compliance test.

Who has to file Form 8854?

You file the initial form if you relinquished US citizenship or ended long-term residency during the year. You file the annual form in later years only if you have deferred tax, deferred compensation or a nongrantor trust interest.

Citizens who relinquish

The Form 8854 instructions for 2025 say you file an initial statement if you relinquished US citizenship in 2025. The same rule applies each year. Relinquishment is the formal loss of citizenship, usually by renouncing at a US embassy. Notably, the filing duty does not depend on wealth. Even a person with modest savings files the Form 8854 expatriation statement to certify their past compliance.

Long-term residents who end residency

A long-term resident is a green card holder who was a lawful permanent resident in at least 8 of the last 15 tax years. That definition comes from section 877(e)(2). Years in which you were treated as a resident of a treaty country, without waiving treaty benefits, do not count. Accordingly, some green card holders who moved to Britain fall short of the 8-year mark.

Residency usually ends when the green card is surrendered or treated as abandoned. However, the IRS expatriation tax page adds a second route. A long-term resident can also end residency by claiming treaty residence abroad and notifying the IRS on Forms 8833 and 8854.

People who file every year

The annual statement uses Parts I and III of the form. According to the instructions, you file it if you expatriated in an earlier year and deferred the payment of tax. You also file if you hold an eligible deferred compensation item or are a beneficiary of a nongrantor trust. Most people who renounce never file an annual statement. For them, the initial form is the only one.

When is the Form 8854 expatriation statement due?

You attach the initial statement to your income tax return for the year that includes your expatriation date. It is due when that return is due, including extensions.

With your final return

The instructions say to attach the initial form to Form 1040, 1040-SR or 1040-NR for the year of expatriation. For a citizen, that year usually calls for a dual-status return. A dual-status return covers the part of the year you were a US person and the part you were not. The IRS relief procedures page describes it as a Form 1040-NR with Form 8854 and a Form 1040 information return. Our article on taxes after renouncing US citizenship covers that last return in more detail.

If no return is required

Sometimes no income tax return is required for the year of expatriation. In that case, the instructions say you still send the form by the date the return would have been due, including extensions. You post it separately to the IRS address in Austin, Texas, given in the instructions. Consequently, low income is never a reason to skip the form.

Your expatriation date

Your expatriation date is the day your US tax status ends. For a citizen, the instructions give the earliest of four events. First comes renouncing before a US diplomatic or consular officer, if a Certificate of Loss of Nationality later confirms it. Second is a signed statement of voluntary relinquishment, confirmed the same way. Third is the date the State Department issues the certificate. Finally, there is a US court cancelling a certificate of naturalisation.

In practice, most people renounce at an embassy, so the renunciation date is usually the expatriation date. However, the certificate can arrive months later. Therefore, the year of the oath, not the year the certificate arrives, normally sets which return carries the form.

How does the State Department process tie in?

The State Department decides whether you have lost US nationality, and the IRS decides your tax position. The Certificate of Loss of Nationality links the two.

Renouncing at an embassy

Under 8 USC 1481(a)(5), a formal renunciation before a US diplomatic or consular officer abroad causes loss of nationality. The act must be voluntary and made with the intention of giving up nationality. Americans in Britain normally renounce at the US Embassy in London. Our guide on how to renounce US citizenship walks through the appointment and the paperwork.

The Certificate of Loss of Nationality

A Certificate of Loss of Nationality is the State Department document, Form DS-4083, that approves the loss of citizenship. The IRS relief procedures page asks for a copy of it. Until it is approved, your renunciation date is not confirmed for tax purposes. Keep the certificate with your tax papers, because you may need it for later returns and bank forms.

What the IRS learns from other agencies

Section 6039G(d) requires the Secretary of State to send the IRS a copy of each approved certificate. Similarly, the immigration authorities pass on the names of green card holders whose status was revoked or abandoned. The IRS also publishes the names of people losing citizenship in the Federal Register each quarter. As a result, the IRS knows you have left even if the Form 8854 expatriation statement never arrives.

What makes you a covered expatriate?

You are a covered expatriate if you meet any one of three tests: the tax liability test, the net worth test or the certification test. Two narrow exceptions can switch off the first two tests.

The net income tax liability test

This test looks at your average annual net income tax for the five years before you expatriate. Net income tax is your US income tax after credits, not your income. The threshold is indexed each year. The IRS expatriation tax page gives $206,000 for 2025. For 2026, Revenue Procedure 2025-32 sets it at $211,000. Many Americans in the UK pay little US tax because of foreign tax credits, so this test often matters less than the others.

The net worth test

You meet the net worth test if your net worth was $2 million or more on your expatriation date. Unlike the tax test, this figure is not indexed. It covers worldwide assets, including your home, pensions and shares, less your debts. Therefore, a London house and a workplace pension can take a household over the line quickly.

The certification test

The certification test is the one people miss. You must certify on Form 8854, under penalty of perjury, that you met all US federal tax obligations for the five tax years before expatriation. If you cannot or do not certify, you are a covered expatriate, whatever your wealth. Accordingly, the Form 8854 expatriation statement is as much a compliance record as a balance sheet.

Exceptions for dual citizens and minors

The dual-citizen exception covers someone who became a US citizen and a citizen of another country at birth. On the expatriation date, they must still be a citizen of that country and taxed as its resident. They must also have been a US resident for no more than 10 of the last 15 tax years. Similarly, the minor exception covers someone who relinquishes before age 18 and a half, with no more than 10 years of US residence. Both exceptions switch off only the tax and net worth tests. You still file Form 8854 and certify five years of compliance.

What happens if you are a covered expatriate?

A covered expatriate is taxed as if they sold everything the day before expatriation. Some items, such as deferred compensation and tax-deferred accounts, follow their own rules.

The mark-to-market tax and the exclusion

Section 877A(a)(1) treats all property of a covered expatriate as sold at fair market value on the day before the expatriation date. The resulting net gain is reduced by an exclusion amount, which is indexed each year. The instructions give $890,000 for 2025. For 2026, Revenue Procedure 2025-32 sets it at $910,000. Our article on the US exit tax explains the calculation in full.

Deferred compensation and tax-deferred accounts

Deferred compensation and certain accounts are not marked to market in the normal way. For example, the instructions say a specified tax deferred account is treated as fully distributed on the day before expatriation. For eligible deferred compensation, you notify the payer on Form W-8CE. The deadline is the earlier of the day before the first payment or 30 days after expatriation. How a UK pension is reported on the Form 8854 expatriation statement depends on the plan, so it needs care.

The annual statement and deferral

A covered expatriate can elect to defer the mark-to-market tax, with security and an agreement with the IRS. IRS Notice 2009-85 contains a sample tax deferral agreement. If you defer, you file the annual statement until the tax and interest are paid. In addition, holders of eligible deferred compensation and trust beneficiaries file each year to report or certify distributions.

What happens if you do not file?

Not filing, or filing an incomplete or incorrect form, carries a $10,000 penalty. More importantly, you are treated as failing the certification test.

The $10,000 penalty

Section 6039G(c) imposes a penalty of $10,000 for failing to file, omitting information or including incorrect information. It does not apply if the failure was due to reasonable cause and not wilful neglect. Meanwhile, the larger risk is covered expatriate status. If you are wealthy enough, the mark-to-market tax can far exceed the penalty.

Relief procedures for certain former citizens

The IRS offers relief to some people who renounced without filing the Form 8854 expatriation statement. To qualify, you must have relinquished citizenship after 18 March 2010. Your net worth must be under $2 million, and your total tax for the six years at issue must be $25,000 or less. Your failures must also be non-wilful. The IRS says it offers the procedures without a specific end date.

Catching up before you renounce

Most people who renounce from Britain are behind on some filings. Therefore, getting the five certification years right comes first. The Streamlined Filing Compliance Procedures require only three years of returns. However, the certification covers five years. Practice differs on whether streamlined filing alone is enough. The cautious approach is to make sure all five years before expatriation are complete and correct.

An example: Helen's final year

Consider a typical case, which is an illustration rather than a real client. Helen was born in Ohio and moved to Bristol at 25. She later became a British citizen by naturalisation. In 2026, she renounces at the US Embassy in London, and her certificate is approved months later. Because she was not a dual citizen at birth, the dual-citizen exception does not apply.

Helen has filed every US return for the past five years, and her net worth is well under $2 million. Her average US tax is nil because of foreign tax credits. As a result, she can certify compliance and expects not to be covered. Her Form 8854 expatriation statement goes with her 2026 dual-status return, due in 2027. Nothing is guaranteed, but her position rests on a clean five-year record.

How US UK Tax Experts can help

We prepare the Form 8854 expatriation statement and the final US returns that go with it. First, we check that the five certification years are complete, and prepare any missing returns. Next, we work out the net worth and tax liability tests from your records. Then we prepare the dual-status return for the year you leave. We also prepare your UK return from the same file, so the two agree.

Our expatriation service covers the whole tax side of renouncing. We do not advise on whether to renounce; we prepare and file what the IRS requires.

Conclusion

In summary, the Form 8854 expatriation statement is required from every citizen who renounces and every long-term resident who leaves. It goes with the return for the year of expatriation, or on its own if no return is due. The form decides covered expatriate status through the tax, net worth and certification tests. For 2026, the thresholds are $211,000 and $2 million, with a $910,000 exclusion. Above all, file it, because a missing form costs $10,000 and fails the certification test.

Contact us

Are you planning to renounce, or have you already renounced without filing? Email us at hello@usuktaxexperts.com, or tell us about your situation through our contact page. We reply within one working day with what we would need from you.