Abandonment of Green Card, Expatriation and Exit Tax

Abandonment of Green Card, Expatriation and Exit Tax

Green Card Abandonment

Green Card Abandonment: For many Legal Permanent Residents, once they learn about the IRS tax liabilities for being a Green Card Holder, along with the potential future exit tax, being a U.S. person loses its luster. As a result, the green card holder wants to abandon their green card status and give up their U.S. Person status.

Whether or not the person resides in the United States or abroad (even if living overseas with no intention of returning to the United States), giving up a green card can have a significant impact on a person’s tax liability.

Before going to the consulate, and/or filing a Form I-407, keep the following tips in mind:

Voluntary vs. Involuntary Abandonment

Just because a person let’s their green card expire, does not mean that they have proactively expatriated for US tax purposes.

Stated another way, in order to give up U.S. person tax status, a person must file a form I-407, or submit to an alternative abandonment process.

If the US person let’s their green card expire, while it may impact their ability to remain in the United States legally – it does not relinquish their US tax status.

Just Living Abroad is not Voluntary Abandonment

A common misconception is that just because a person resides outside the United States and their green card has expired, that this is a form of expatriation.

It is not, and until a voluntary abandonment takes place, the person is still subject to US tax on their worldwide income and foreign asset reporting.

8 of the Last 15-Years

The tax code does not require a U.S. person Green Card Holder to be a permanent resident for eight full years.

Rather, the way the code is written presumes that as long as the person has had their permanent resident status in eight of the last 15 years (not for 8 of the last 15 years) they are considered to be a long-term resident and possibly a covered exposure.

Therefore, it Is important to properly plan before you reach your 8th year.

IRS Form 8833 Tax Trap

Form 8833 is used to take a tax treaty position.

If a person files a form 8833 to take a tax treaty position to be treated as a foreign resident, it may be considered an act of expatriation.

Thus, if a permanent resident was unaware of the fact that they were considered a Long-Term Resident, filing Form 8833 may be considered an act of expatriation.

But, since it was done inadvertently, the person would not have had an opportunity to properly plan.

Therefore, be sure to speak with an experienced offshore attorney before taking an 8833 position if you are unsure of your Long-Term Resident status.

5-Years Prior Tax Compliance

In order to not be a covered expatriate, it is important that you are in compliance for the last five years with all of your tax filings. 

Even if you do not meet the net worth or net income tax liability test, you will still be considered a covered expatriate if you cannot show that you’re five years compliant with your previous tax filings.

It is important to be in compliance before filing form 8854.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure

We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.

Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.

*Please beware of copycat tax and law firms misleading the public about their credentials and experience.

Less than 1% of Tax Attorneys Nationwide Are Certified Specialists

Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.

Recent Golding & Golding Case Highlights

  • We represented a client in an 8-figure disclosure that spanned 7 countries.
  • We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
  • We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
  • We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
  • We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.

How to Hire Experienced FBAR Counsel?

Generally, experienced attorneys in this field will have the following credentials/experience:

  • 20-years experience as a practicing attorney
  • Extensive litigation, high-stakes audit and trial experience
  • Board Certified Tax Law Specialist credential
  • Master’s of Tax Law (LL.M.)
  • Dually Licensed as an EA (Enrolled Agent) or CPA

Interested in Learning More about Golding & Golding?

No matter where in the world you reside, our international tax team can get you IRS offshore compliant. 

Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.