Moving from the USA Back to Europe: IRS, Shipping, Driving License

When you move back from America, you have two sets of authorities on your back: the American one, which wants to know your taxes are paid before you fly, and the European one, which sets its own deadlines for your shipment, your driving license and your registration. Know the right order and you save money, and possibly a second driving test.

When you move back from America, you have two sets of authorities on your back: the American one, which wants to know your taxes are paid before you fly, and the European one, which sets its own deadlines for your shipment, your driving license and your registration. Know the right order and you save money, and possibly a second driving test. This guide walks you through the way home: the IRS sailing permit, the end of your US tax liability, bringing your household goods in duty-free (with the differences for Switzerland) and your American car.

1The order: what happens before you fly and what comes after

A move back has two halves. In America, before you fly, you need to wrap up everything that can only be done there: the IRS sailing permit, canceling your lease, utilities and phone, shipping your household goods and, if you have a green card, deciding whether to give it up. Once you are home, several clocks start ticking: for registering your address, for declaring your household goods at customs and for your US driving license.

Plan the first half at least two months ahead. The container takes time, so does an IRS appointment, and your lease, utilities and phone all have notice periods. Don't close your American bank account too soon; keeping a US account and credit card is often useful if a tax refund, a deposit or a pension is still on its way. How best to move money between the two sides is covered in our article on transferring money from the USA to Europe.

2Saying goodbye to the IRS: sailing permit, final tax return and green card

Before a planned long-term or permanent departure, most foreigners need confirmation from the IRS that they have paid their US taxes: the Departing Alien Clearance, also known as the sailing permit (IRS, Departing Alien Clearance). It sounds nautical, but it applies just as much when you fly. Exemptions include diplomats, students, trainees and exchange visitors on F, J, M or Q visas who had no other US income, visitors on a B-2 visa, and business travelers on a B-1 visa or ESTA who spent no more than 90 days in the USA during the tax year. If you lived in the USA on an E-2, L-1, H-1B or green card, you generally don't qualify for an exemption.

There are two ways to get the permit. Form 2063, a short form with no tax calculation, if you had no taxable income in the current and previous year, or if you had income as a resident alien but your departure does not jeopardize tax collection. Otherwise Form 1040-C, on which you calculate and pay the tax from January 1 up to your departure. Either one is filed in person at an IRS office, by appointment. The IRS recommends getting the permit at least two weeks before you leave; you cannot get it more than 30 days in advance. Appointments can be scarce, so book one early.

Important: Form 1040-C is not an annual tax return. You still have to file the return for the year you leave, and you only get a refund with that return, not at the counter (IRS). For this final year you are usually a dual-status taxpayer: a resident until you leave, a nonresident afterwards. Your US tax liability as a resident generally ends on December 31. It ends earlier, on your last day in the country or on the day your green card status ends, if your tax home was abroad for the rest of the year and you can show a closer connection abroad; up to ten days of presence after that can be disregarded (IRS, Publication 519). What this means in detail is explained in our guide to the year of arrival and year of departure. Your state has its own rules; how to end your tax liability there is covered in State tax after you move away. And how the USA will record your last day in the country going forward is explained in our article on biometric exit checks.

2.1If you have a green card

If you want to formally give up your green card, you notify USCIS with Form I-407, which you mail to a central office (USCIS). Tax-wise, it gets serious if you held a green card in at least 8 of the last 15 tax years. You are then a long-term resident (Internal Revenue Code § 877(e)(2)), and the expatriation tax rules can apply when your status ends. For tax purposes, the status ends when the green card is revoked or its abandonment is established, for example with Form I-407, or when you elect to be treated as a resident of another country under a tax treaty and notify the IRS (§ 7701(b)(6)). As a long-term resident you then file Form 8854 (IRS, Expatriation Tax). More in our guide Giving up your green card and taxes.

3Shipping your household goods back: duty-free relief in the EU and Switzerland

On the way back, American customs law no longer applies; the rules of the European Union or Switzerland do. In the EU, the magic words are relief for household goods on transfer of residence. If you move your normal place of residence from a non-EU country to the EU as a private individual, you can bring in your household goods duty-free when three conditions are met (in Germany, for example, with form 0350). First, your normal residence must have been outside the EU for at least 12 months before the move; exceptions are possible if you can show you intended to stay that long, for example with an employment contract. Second, you or your family must have used the goods for at least 6 months in the non-EU country. Third, you must keep using them for the same purposes.

Private vehicles of every kind also count as household goods, from cars to boats. Alcohol, tobacco and tobacco products, and commercial vehicles do not. So yes, you pay duty on that Napa Valley wine. The customs declaration (in Germany form 0350) must be filed within 12 months of the move. After that, you may not hand the goods over to anyone for 12 months, so no selling, giving away or lending. You can also bring the goods in before you move; in that case you provide a security and commit to establishing your residence in the EU within 6 months.

Switzerland follows a similar principle with its own form. Household effects, collections, pets and your car come in free of duty if you move your residence to Switzerland and have personally used the items for at least six months and will keep using them. When you enter, you present Form 18.44 at the customs office, together with a list of the goods, proof that you have bought or rented your home and, if you don't hold a Swiss passport, your Swiss residence permit; customs can ask for further documents such as your employment contract or proof of deregistration from the country you are leaving (FOCBS, Moving to Switzerland, and Form 18.44).

The same practical rules apply as on the way over: choose your moving company carefully, keep an inventory, and read the insurance terms. What to watch out for is covered in our guide Containers and moving companies.

7Accounts and what to keep in America

Keep whatever would be hard to get back in America. A US credit history takes years to build; if you keep using your card and pay on time, it will still be there when you come back or want to buy a house in the USA. The guide to financial planning with your credit score explains how creditworthiness works in the US. A US cell phone number helps with banks that confirm by text message. And if you keep a US company, you still need a dollar account you can run from Europe. For our companies we open it through Mercury; find out more on the US Bank Account Opening page.

And if America won't let you go: the checklist Arriving in the USA covers what to do if you come back.

In short

• Most foreign nationals need a sailing permit from the IRS before leaving for good, using Form 2063 or 1040-C, no earlier than 30 days and no later than two weeks before departure. You still have to file your annual tax return.

How we help you

• Your US Tax ReturnForm 1040 or 1040-NR, handled in English.
• US Tax ConsultationYour US tax question, answered by people who know both sides.
• ConsultationOne hour with the firm: your case, your questions, a clear answer.
• Moving to the USAVisa, bank account, taxes and where to live: your move with Mount Bonnell Advisors.