Form 8854 Instructions for the Expatriation Statement

Form 8854, the Initial and Annual Expatriation Statement, is a declaration filed with the Internal Revenue Service (IRS) by individuals severing formal ties with the United States. It is required for U.S. citizens who relinquish their citizenship and for certain long-term residents who end their U.S. residency. The form serves as a final accounting of an individual’s worldwide assets and liabilities. This information is used to determine if an individual is a “covered expatriate” and subject to an exit tax.

Who Must File Form 8854

The requirement to file Form 8854 applies to two groups: U.S. citizens who have officially relinquished their citizenship and “long-term residents” who have terminated their U.S. residency. A long-term resident is defined as a lawful permanent resident (green card holder) who has maintained that status in at least eight of the last 15 tax years before their residency ends.

An individual who expatriated after June 16, 2008, is designated a “covered expatriate” if they meet any one of three specific tests. This status carries significant tax implications, including a potential exit tax.

The first is the Net Worth Test, which is met if an individual’s net worth is $2 million or more on the date of expatriation. The second is the Average Annual Net Income Tax Liability Test. This applies if the person’s average annual net income tax for the five preceding years exceeds an inflation-adjusted amount ($206,000 for 2025).

The final criterion is the Certification Test. An individual becomes a covered expatriate if they fail to certify on Form 8854, under penalties of perjury, that they have complied with all U.S. federal tax obligations for the five prior years. Failure to make this certification automatically results in this classification.

Completing Form 8854

The form is divided into several parts, and you will complete the sections that apply to your situation. It is structured to walk you through a logical progression from personal information to complex financial declarations. The official form and its instructions should be downloaded from the IRS website for the most current version.

Part I is for General Information. Here, you will enter your full name, address, taxpayer identification number, and details about your former U.S. citizenship or long-term residency. You will also state the date of your expatriation.

Part II is completed by individuals who expatriated on or after June 17, 2008. This section contains a series of questions to formally declare your status as either a covered or non-covered expatriate based on the three tests.

Part IV requires a detailed balance sheet listing the fair market value of your worldwide assets and liabilities as of the day before your expatriation. To complete this, you will need documentation for all assets, including:

• Cash held in bank accounts
• Stocks and bonds in brokerage accounts
• Retirement accounts such as 401(k)s and IRAs
• Appraisals for real estate
• Valuations for any interest held in a trust

On the liability side, you must list all outstanding debts, including mortgages, personal loans, and credit card balances.

In Part IV, the “mark-to-market” rule requires you to treat most of your property as if it were sold for its fair market value on the day before you expatriated. This deemed sale results in a calculated gain or loss on each asset, which is the basis for calculating the exit tax. For 2025, the first $890,000 of this net gain is excluded from income for covered expatriates.

Part V of the form is an income statement for the year of your expatriation. You will report your U.S. source income and deductions using documents like W-2s, 1099s, and K-1s. Part III of the form is for individuals who expatriated before June 17, 2008, and has different reporting requirements.

How to Submit Form 8854

The filing deadline for Form 8854 is the same as your annual income tax return, generally April 15 of the year following your expatriation. An extension filed for your income tax return also applies to Form 8854.

You must attach the completed Form 8854 to your annual income tax return for the year of expatriation. This will typically be a dual-status tax return, which may involve filing both Form 1040 and Form 1040-NR.

The entire package, including your tax return and Form 8854, must be mailed to the IRS service center designated in the form’s instructions. You must verify the address in the latest form instructions before mailing, as locations can change.

Failing to file Form 8854 on time can lead to a $10,000 penalty, even if you do not owe any exit tax.