- 1 Should You Abandon Your Green Card?
- 2 Immigration Implication of Voluntary Green Card Abandonment
- 3 Tax Implications, Final Return, and 8854
- 4 Pre-Immigration Tax Planning
- 5 Late Filing Penalties May be Reduced or Avoided
- 6 Current Year vs Prior Year Non-Compliance
- 7 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 8 Need Help Finding an Experienced Offshore Tax Attorney?
- 9 Golding & Golding: About Our International Tax Law Firm
Should You Abandon Your Green Card?
When it comes to being a U.S. person for tax purposes such as a green card holder, oftentimes at some point the taxpayer must determine whether they want to become a U.S. citizen or voluntarily abandon their green card to not be considered a US person for tax purposes. When a person abandons their green card, there are two main issues that the US person has to contend with. There is the immigration aspect of abandoning the green card and the tax implication of abandoning the green card. Let’s take a brief look at the immigration and tax aspects of abandoning a green card.
Immigration Implication of Voluntary Green Card Abandonment
From an immigration perspective, when a person abandons their green card then they are no longer considered a US person at that time. For taxpayers who are not sure if they are ready to abandon their green card, but for example, may not be able to reside in the United States for a sufficient time as required by the green card in a given year or two, they may consider applying for a re-entry permit which allows them to live outside of the united states for up to two years at a time without meeting the residence requirement of having a green card. To voluntarily abandon a green card, the path of least resistance tends to be filing a form I407. Taxpayers can mail Form I-407 to the U.S. Government (previously, they could walk it directly into the office by hand, but the US consulate/embassies are no longer required to accept it by hand anymore although some locations still do.
Tax Implications, Final Return, and 8854
While the immigration implication is relatively straightforward, the tax implication could be much more complicated. First, taxpayers must determine whether they are considered a Long-Term Lawful Permanent Resident (LTR). If they are not considered to be an LTR, then once they abandon their green card they typically file a dual-status return in their final year and they are not subject to any exit tax. For taxpayers who are considered to be LTRs, they must determine whether or not they are considered a covered expatriate because if they are considered a covered expatriate, then they may also be required to pay an exit tax as well as file an initial (and possibly annual) expatriation Form 8854.
Pre-Immigration Tax Planning
For taxpayers who will be obtaining permanent residency status, oftentimes will benefit them greatly to prepare a tax plan before becoming a green card holder. That is because there are key distinctions in being a green card holder vs. a visa holder — and for some taxpayers it may benefit them to remain a visa holder (from a tax perspective) even though from a travel perspective it may be easier to become a permanent resident. Likewise, depending on whether they intend to become a US citizen or terminate their green card at a later date will also impact which option may work best for them. By the time a person’s ready to terminate their green card, they may have already accumulated more than eight years on that residency status and/or may have problems circumventing the exit tax – which may have been prevented with proper planning.
Late Filing Penalties May be Reduced or Avoided
For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.
Current Year vs Prior Year Non-Compliance
Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Need Help Finding an Experienced Offshore Tax Attorney?
When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.