Legal Resident, Tax Resident or Both: Foreign Nationals & IRS

Legal Resident, Tax Resident or Both: Foreign Nationals & IRS

Legal Resident & US Income Tax

Legal Residents: Unfortunately, there are several misconceptions when it comes to U.S. Tax and Legal Resident Status in the eyes of the IRS. Namely, that unless a person is a U.S. Citizen or Legal Permanent Resident, they are not subject to U.S. Tax on worldwide income — but that is incorrect.

In fact, there are three main categories of individuals who are considered Legal Residents for US Tax, aka “U.S. Person.”

Legal Resident vs. Tax Resident

In order to understand how U.S. tax residence rules work, it is important to understand the process of how a person may be considered a resident for tax purposes.

A resident for “Tax” purposes is not the same as a resident for “Legal” purposes.

In other words, even if you are in the U.S. illegally, you may still be considered a Tax Resident.

Who is a Tax Resident?

A tax resident generally means that an individual meets one of the three (3) different categories:

  1. U.S. Citizen
  2. Legal Permanent Resident (aka Green Card Holder)
  3. Substantial Presence Test (SPT)

*Even if a person is in the U.S. illegally, they may still meet the Substantial Presence Test.

Worldwide Income Tax Due

Tax Residents get taxed on their worldwide income. This includes income generated in the U.S. or income generated abroad.

Illegal U.S. Residents & the IRS

The IRS wants their tax money. Even if you are residing in the U.S. illegally, the IRS can still come after the money you earned. As a Tax Resident, you may also be held responsible for offshore reporting requirements.

This may include FBAR, Form 8938, Form 5471 and more.

How to Avoid Offshore Fines and Penalties?

It is human nature to want to avoid making a proactive submission to a government agency such as the IRS before the IRS ever discovers the non-compliance. But, typically that is best path forward.

Moreover, if you realize you are out of compliance and begin researching online, you may begin to feel as though it is hopeless.  Some of these attorneys and CPAs make it appear that everyone with unreported assets or income is going to be severely penalized and shipped off to prison.

That is simply not the case.

You have options, and depending on the facts and circumstances of your situation, your options may include the streamlined program, reasonable cause, or the delinquency procedures – which may result in significantly reduced fines and penalties (and may even receive a penalty waiver).

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 Offshore Counsel?

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

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

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