Tax-Expatriation

Certifying Under Penalty of Perjury – Meeting the Requirements of Title 26 for Preceding 5 Taxable Years

Posted on March 18, 2014 Updated on April 25, 2015

The statutory language of Section 877(a)(2)(C) provides that the individual will be a “covered expatriate” if he or she ” . . . fails to certify under penalty of perjury that he has met the requirements of this title for the 5 preceding taxable years or fails to submit such evidence of such compliance as the Secretary may require.”

The reference to “this title” is to Title 26, which is commonly known as the “Internal Revenue Code” and covers all provisions of federal tax law and taxes, including income, estate, gift, excise, employment, alcohol and tobacco, etc.  The complexity of the law is discussed below at the bottom of this post.

This provision is commonly forgotten by two groups of individuals.

1.  Lawful permanent residents (“LPRs”) who abandon their status formally by filing Form I-407 or

by application of a U.S. income tax treaty and IRC Section 7701(b)(6).  See, U.S. TAX TREATIES AND SECTION 6114: WHY A TAXPAYER’S FAILURE TO “TAKE” A TREATY POSITION DOES NOT DENY TREATY BENEFITS

2.  U.S. Citizens (“USCs”) who renounce or relinquish their U.S. citizenship status; via the U.S. Department of State.

Filing Form DS-4080, Oath of Renunciation of the Nationality of the United States is a requirement for renunciation.

Under current law, both of these groups of individuals need to certify they have “met the requirements” of the tax law for the five preceding years.  How can any taxpayer feel comfortable they have met the requirements of such a complex law?

What steps does an individual in one of the above categories need to take to help assure they have met this requirement?  See, USCs and LPRs Living Outside the U.S. – Key Tax and BSA Forms for a basic overview of the foreign earned income law and forms, foreign tax credit law and forms and information reporting requirements under Title 26.

The Taxpayer Advocate Report identifies many of the complexities of this tax law, Title 26:

1. The Current Tax Code Imposes Huge Compliance Burdens on Individual
Taxpayers and Businesses.
Consider the following:
■■ According to a TAS analysis of IRS data, individuals and businesses spend about 6.1 billion hours a year complying with the filing requirements of the Internal Revenue Code.7 And that figure does not include the millions of additional hours that taxpayers must spend when they are required to respond to IRS notices or audits.
■■ If tax compliance were an industry, it would be one of the largest in the United States. To consume 6.1 billion hours, the “tax industry” requires the equivalent of more than three million full-time workers.8
■■ Compliance costs are huge both in absolute terms and relative to the amount of tax revenue collected. Based on Bureau of Labor Statistics data on the hourly cost of an employee, TAS estimates that the costs of complying with the individual and corporate income tax requirements for 2010 amounted to $168 billion — or a staggering 15 percent of aggregate income tax receipts.9
■■ According to a tally compiled by a leading publisher of tax information, there have been approximately 4,680 changes to the tax code since 2001, an average of more than one a day.10
■■ The tax code has grown so long that it has become challenging even to figure out how long it is. A search of the Code conducted using the “word count” feature in Microsoft Word turned up nearly four million words.11
■■ Individual taxpayers find return preparation so overwhelming that about 59 percent now pay preparers to do it for them.12 Among unincorporated business taxpayers, the figure rises to about 71 percent.13 An additional 30 percent of individual taxpayers use tax software to help them prepare their returns,14 with leading software packages costing $50 or more. For 2007, IRS researchers estimated that the monetary compliance burden of the median individual taxpayer (as measured by income) was $258.15

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