By: Bernard Wolfsdorf, Esq. and Avi Friedman, Esq.
For U.S. citizens living abroad, especially those who have never resided in the United States, the discovery that they are required to file annual tax returns and may owe significant taxes to the IRS can be a shocking reality. Often, these individuals are labeled as “accidental citizens,” and while they may have no personal connection to the U.S., the law generally requires them to adhere to the same tax obligations as U.S. residents.
When these “accidental citizens” realize they are potentially liable for large tax debts, their only option may seem to be expatriation. However, the process of expatriating or renouncing U.S. citizenship—can be more complicated than anticipated. In this blog post, we break down the concepts of expatriation and renunciation, explain the legal requirements, and discuss how individuals in this situation can navigate the process.
Expatriation vs. Renunciation: What’s the Difference?
It’s important to understand that expatriation and renunciation are two separate, yet related legal concepts. They both involve the loss of U.S. citizenship, but they differ in the methods through which that loss occurs.
1. Expatriation: A Broader Concept
Expatriation refers to the voluntary or involuntary loss of U.S. citizenship. Under 8 U.S.C. § 1481 (Section 349 of the Immigration and Nationality Act), a U.S. citizen may lose their nationality by performing specific acts with the intent to relinquish. It can happen in several ways, including:
- Naturalization in another country: If a U.S. citizen becomes a naturalized citizen of another country, they may lose their U.S. citizenship.
- Oath of allegiance to another country: Taking an oath of allegiance to a foreign state can be grounds for expatriation.
- Serving in a foreign military: In some cases, serving in the armed forces of a foreign country can lead to expatriation.
- Renunciation: While formal renunciation is one form of expatriation, it is specifically a voluntary action to give up U.S. citizenship. Expatriation can occur through renunciation but can also result from other actions if done with the intent to relinquish U.S. nationality.
Thus, expatriation is a broader term that covers multiple actions that lead to the loss of U.S. nationality, and renunciation is simply one of the specific methods.
2. Renunciation: The Formal Process of Voluntary Expatriation
Renunciation, in contrast, is a formal, procedural process by which a U.S. citizen voluntarily gives up their citizenship, rather than an inferred intent from conduct.
This process must meet several requirements:
- In-person action: The renunciation must be done in person at a U.S. embassy or consulate located abroad.
- Official procedure: The renunciation must be done in front of a U.S. consular or diplomatic officer, and the individual must sign an Oath of Renunciation (Form DS-4080).
- Full understanding: The individual must be fully aware of the consequences of renouncing their citizenship, as it is an irrevocable act unless proven to have been done under duress or without proper understanding.
While expatriation can result from actions like naturalization or military service, renunciation is a formal, intentional process that requires legal documentation and a clear demonstration of intent.
Key Differences Between Expatriation and Renunciation
| Feature | Expatriation | Renunciation |
| Definition | Loss of U.S. nationality voluntarily or involuntarily | A formal process of voluntarily giving up U.S. citizenship |
| Method | Occurs through various acts (e.g., naturalization, military service, etc.) | Requires a formal declaration before a U.S. consular officer |
| Intent Requirement | Intent to relinquish citizenship must be proven in some cases | Explicit intent expressed through the renunciation process |
| Location | Can occur anywhere | Must be done outside the U.S. at a embassy or consulate |
| Reversibility | Generally irreversible unless lack of intent is proven | Irrevocable unless proven to be coerced or made under duress |
Why Accidental U.S. Citizens Might Consider Renunciation
For many individuals born in the U.S. to foreign parents, expatriation may be a desirable option, especially if they have no connection to the U.S. However, the tax implications can be severe, particularly for those who are not aware of their U.S. tax obligations. U.S. citizens, even if they have never lived in the country, are subject to U.S. taxes on their global income—a policy that can be financially burdensome for those who have only lived in another country.
If a person discovers that they owe the IRS significant back taxes, the only option to resolve this may be to prove that they have expatriated (i.e., renounced their citizenship). The process is retroactive, meaning that renunciation can absolve them from past tax liabilities that stem from their U.S. citizenship status.
Important Considerations: You Can’t Renounce to Avoid Taxes
It’s also important to note that renouncing U.S. citizenship solely to avoid taxes is not allowed under U.S. law. If a person renounces their citizenship and the U.S. government determines that the intent behind their renunciation was to evade taxes, they may be deemed inadmissible to the United States. This means that after renouncing, they could be barred from entering the country in the future, a critical factor to consider before proceeding with renunciation.
The Bottom Line: Renunciation Is a Tricky Process
Navigating the complexities of expatriation and renunciation can be tricky, especially for U.S. accidental citizens who are unfamiliar with the intricacies of U.S. immigration, tax law and citizenship policies. While renouncing U.S. citizenship might free individuals from tax obligations, it is not a decision that should be taken lightly.
If you’re in this position and considering renunciation, it’s crucial to understand the legal process, the potential consequences, and how it will affect your long-term future including ability to travel to the U.S. Consulting with a tax professional and an immigration attorney who focus on renunciation is critical to help ensure that you make an informed decision that aligns with your goals and circumstances.
Renunciation is a formal and irreversible act under U.S. law, so make sure you understand the ramifications fully before proceeding.
WR Immigration is a full-service immigration law firm known worldwide for its unmatched excellence in providing top-quality U.S. immigration representation. To schedule a consultation to discuss your case, please contact us here.
