Many of our clients are Legal Permanent Resident/Green Card Holders who until recently were unaware of their US tax and reporting obligations and requirements, including what they must report and pay U.S. tax on when it involves:
- Foreign Income
- Foreign Assets
- Foreign Property
- Foreign Accounts
- Foreign Investments
International Tax is Hard
It is somewhat counterintuitive for a foreign person to think that when it is time to file U.S. taxes, they must report their foreign money in the U.S., when they are not even US citizens yet – if ever. Much of the money was earned before they became Green Card holders, and oftentimes, the money never touches U.S. soil.
Nevertheless, under most circumstances, a Green Card Holder is subject to nearly all the same tax rules and laws that a US citizen is subject to.
Over the many years that we have been handling international tax law, we have found that there are five (5) common issues that many of our green card holder clients face, and we want to provide you brief summary in order to assist you in understanding your tax liability and consequences going forward.
U.S. Taxes on Worldwide Income
The United States follows a worldwide income tax model. In other words, if you are considered a US person, and green card holders are considered us persons for tax purposes then you are required to include your worldwide income when you file your U.S. taxes each year.
It does not matter whether the money was earned while you resided in United States or outside of United States, and it does not matter if the money has already been taxed by a foreign jurisdiction. Moreover, it does not matter if the income is tax exempt in the other jurisdiction. Rather, if you are a U.S. person then you have to report your worldwide Income.
*They may be a bilateral tax treaty in place with the U.S., and/or other specific IRS rules that may exclude, exempt, or limit the application of U.S. tax, but from a baseline perspective — it should be included on your tax return.
Foreign Tax Credits May be Available
If you earned income in a foreign country and you already paid tax in a foreign country on the income, you may be able to receive foreign tax credit by the IRS for foreign taxes already paid. With a foreign tax credit, the IRS credits you for some of the taxes you already paid overseas. It is not always a dollar-for-dollar credit, because it depends on what portion of your income was earned in the US versus abroad, along with whether or not you were in a high tax jurisdiction, but it is usually applicable at least in part and effective in reducing your U.S. tax liability.
Also, you can typically carry the credits forward into future years if you have excess credits that you cannot use in the current (and carry it back a few years as well)
Do You Reside Overseas?
If you reside overseas for a majority of the year, you may have the opportunity to exclude upwards of $102,000 of your income, along with a portion of your housing. The method for excluding income is with the Foreign Earned Income Exclusion. In order to qualify for the exclusion, you must meet one of two tests – either the Bona-Fide Residence test (BFR) or the Physical Presence Test (PPT).
It is important to note that you only have to meet one of these tests, but you can’t flip-flop each year — so once you pick a test/analysis, you are pretty much stuck with it for at least 60 months.
Also, the IRS has made it a habit of auditing individuals who claim the exclusion. This is because – as you can imagine – many people try to claim the exclusion when they do not otherwise qualify for it.
Nevertheless, it is a great legal way to avoid taxation on certain foreign income
Foreign Account Reporting
If you have foreign bank accounts, investments, assets, or other money abroad, there is a high likelihood that you will meet the threshold requirement(s) to disclose this information to the IRS. There are many different forms that you may have to file depending on what type of assets or accounts you have, the value of the assets and accounts, and whether or not you acquired certain assets in the current year.
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 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 Offshore 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 IRS Voluntary Disclosure?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in IRS Offshore and Voluntary Disclosure. Contact our firm today for assistance with getting compliant.