You’re quite correct on the 10,000 penalty for failure to file the Form 8854 for ten years; HOWEVER, this regime is now gone for those expatriating after June 2008.

I should do a post on this topic, but the answer is yes, though with the proviso that (at least last I checked) there is an exemption for income up to the level of the cutoff point for Social Security contributions, which is somewhere in the neighborhood of $80 per year in gross income.

Even if you make less than that, though, the IRS still thinks you ought to be compelled to file an income and assets statement each year for 10 years, and, under certain conditions, become subject to a $10k/yr fine for willful failure to file. A bit more detail on that point is discussed in terms of utter mockery here: http://www.nostate.com/1201/confrontation-with-bureaucracy-part-3/

If you trigger one of those above, there are two possible regimes that could apply to you:

1. If you expatriated before 17 June 2008, the individual must file a four-page form (Form 8854) for ten years. This is called the ten-year shadow. HOWEVER, this shadow period is not PAYING US taxes it is rather a simple form (not the Form 1040 as you would normally file). And unless you have US-source income or gains (i.e., selling Apple shares for a gain, or receiving a dividend from IBM) will the taxpayer pay a penny of US tax. This regime is described in the Internal Revenue Code section 877.

2. If you expatriated after 17 June 2008, the ten-year shadow is GONE. You will however potentially pay an Exit Tax if upon expatriation you have more than US$600,000 of capital gain. In effect, the Exit Tax pretends you sold off your worldwide assets, and if the resulting gain is more than 600k you will pay about 15% tax (assuming it’s a long-term gain). The 600k is adjusted for inflation, the 15% tax could go up, and there are some downsides for the US estate and gift tax for kids that remain US citizen or resident. This regime is described in the Internal Revenue Code section 877A.

Remember…the above two regimes ONLY apply if you trigger one of the three items. This means you have to have quite a bit of money before any of these regimes affect you.

Cheers

alex

http://en.wikipedia.org/wiki/United_States_nationality_law#Nationals_who_are_not_citizens

I should do a post on this topic, but the answer is yes, though with the proviso that (at least last I checked) there is an exemption for income up to the level of the cutoff point for Social Security contributions, which is somewhere in the neighborhood of $80 per year in gross income.

Even if you make less than that, though, the IRS still thinks you ought to be compelled to file an income and assets statement each year for 10 years, and, under certain conditions, become subject to a $10k/yr fine for willful failure to file. A bit more detail on that point is discussed in terms of utter mockery here: http://www.nostate.com/1201/confrontation-with-bureaucracy-part-3/