This is a bit of a Bombshell – If the IRS Criminal Investigation (“CI”) is investigating U.S. citizens renouncing their citizenship?
See the blog spot of Jack Townsend –
It is reported the IRS CI is interested in the reasons that U.S. citizens renounce their citizenship. Jaime Arora, IRS Criminal Investigation Division Looking Into U.S. Citizenship Renunciations, 2014 TNT 41-8 (3/3/14). The article is nonspecific about what the IRS is looking for and the consequences might be if they found something.
Still, there are tax requirements for renouncing citizenship in certain cases. I won’t go into them now, but link to blogs on the subject here.
I can imagine that mishandling the various forms and representations required for renunciation, including the tax forms and representations, could be a crime under various federal statutes — tax and nontax — and, at last if something was done wrong related to taxes, conceivably the renunciation conduct could refresh statutes of limitations for tax crimes that might have otherwise expired.
Importantly, why someone renounces their U.S. citizenship under the current tax law (IRC Section 877A) is not relevant as to the tax consequences to the individual who renounced. This is very different from the law that was passed in 1996. These rules changed in 2004 and yet again in 2008 to create an objective set of taxation rules. For this reason, it would be very odd for the IRS CI to be investigating (at least recent expatriates) former U.S. citizens to determine why, i.e., the reasons, they renounced U.S. citizenship.