What is the primary purpose of Form 8854?

The primary purpose of Form 8854 is to calculate and report expatriate tax liabilities. This form is specifically designed for individuals who have expatriated, meaning they have given up their U.S. citizenship or long-term resident status. When someone expatriates, they may be subject to a special tax regime that requires them to report certain information related to their tax obligations.

Part of this reporting requires expatriates to disclose their tax liabilities, including income that may be subject to the exit tax and any unrealized gains on their assets. This information is vital for the IRS to assess whether the individual owes any tax upon leaving the U.S. tax system. Therefore, the form is crucial for ensuring compliance with tax regulations for those who have chosen to expatriate.

In contrast, the other choices do not accurately reflect the intent of Form 8854. Applying for a loan for expatriates or claiming deductions against foreign income involve entirely different processes not related to the specific reporting requirements that Form 8854 addresses. Declaring foreign assets for tax purposes may involve different forms and reports, focusing on the timing and nature of income and assets, rather than the expatriate tax liabilities themselves.