Can I cancel my US nationality and not declare my income?

To be able to give up US nationality, you must have filed 5 years of US tax returns and you must have complied with the FBAR obligation for the previous 6 years. Therefore, following the Streamlined Foreign Offshore procedure doesn’t completely suffice here. The IRS wants to determine that there is no tax motif involved in taking this step. You can then make an appointment at the American Consulate to cancel and they will send you a number of forms. The Consulate requires a handling fee of $2,350.00 for the treatment of this application, which must be paid shortly after arriving at the Consulate.

1040 and/or FBAR

A return (1040) and/or FBAR must still be filed for the tax year in which US nationality is given up, until the date of termination. A form (8854) must also be filled out where one has to specify that declarations were filed the last 5 years and in which you have to state all your belongings. If the tax returns were not submitted, the passport may be taken but the IRS still doesn’t relieve the person of his/her US tax liability.

If your total possessions at the time of surrender amounts to more than $2 million or you haven’t filed any US tax returns for the past 5 years or your average tax load over the past 5 years was more than $161,000, an EXIT Tax may be imposed in some cases. If this situation applies to you, we recommend that you make an appointment with us before you visit the Consulate to give up your nationality, so we can look at your financial situation.

Unfortunately, it is a misconception that one can do away with one’s US nationality without having filed tax returns in the US.