On September 28, 2020, the Treasury Inspector General for Tax Administration (“TIGTA”) issued a report on the IRS’s Enforcement regarding expatriates.
In the report, TIGTA provided a graph showing the number of the names of expatriates published in the Federal Register from 2008 to 2018. If you add up the numbers for these 11 years, the total is 30,507. Interestingly, TIGTA then indicates that the IRS has an expatriate database which includes 41,058 records from the period June 18, 2008 to December 31, 2018.
Some of the difference between these two numbers may result from timing. The Wall Street Journal indicated in an article on October 16, 2020 that 2,907 names were published in the Federal Register for the first quarter of 2020, and the breakout of the actual dates of expatriations for these individuals was as follows:
Expatriated in 2020 3
Expatriated in 2019 941
Expatriated in 2018 441
Expatriated in 2017 unstated
Expatriated in 2016 unstated
Expatriated in 2015 736
Expatriated in 2014 713
Expatriated in other years 76
(2,907 or 2,910? As my dad used to say, “close enough for government work”.)
If the Wall Street Journal is right, it seems like the IRS is just getting caught up on publishing the names in the Federal Register, and perhaps we should expect the number of published expatriates to be substantial in the coming quarters (it looks like they are behind by about 10,000 names).
In any case, back to the TIGTA report. Of the 41,058 records in the expatriate database, the IRS had only received 24,260 Forms 8854. TIGTA indicated that 712 of the Forms 8854 were covered expatriates due to the tax liability test and 2,222 were covered expatriates due to the net worth test (having a net worth of over $2 million).
This means that the remaining number of the Forms 8854 (21,326) did not meet the tax liability test and did not meet the net worth test. These individuals would be filing the Form 8854 to certify that they complied with their US tax obligations for the 5 preceding years.
We don’t have data on all 41,058 records in the IRS expatriate database, but for the individuals that filed Form 8854, 88% (21,326 / 24,260) had a net worth below $2 million.
I am often asked: Is it mostly wealthy individuals that are expatriating? Defining the threshold of when an individual should be considered “wealthy” is a sensitive issue. However, Congress seems to have set the threshold at a net worth of $2 million in 2008. If you use $2 million of net worth as the definition of “wealthy”, it can be stated that IRS data indicate that 88% of individuals expatriating are not “wealthy”.