Surrender Your Green Card, Naturalize, Re-Entry Permit, Expire

Surrender Your Green Card, Naturalize, Re-Entry Permit, Expire

Options for Your Green Card Status

Even though when a U.S. person has a green card, they are considered a ‘permanent’ resident of the United States (and a tax resident), the fact of the matter is that a taxpayer who is a U.S. person for tax purposes only because they have a green card can technically give up the green card whenever they want to. To do so, the taxpayer files USCIS Form I-407 to give back their green card and terminate their lawful permanent resident status. While for some taxpayers giving up the green card is not a big deal, for other taxpayers giving up the green card can have a significant tax implication if they are covered expatriates and they have an exit tax implication. In general, taxpayers have four (4) main options to consider when they want to consider giving up their Green Card or not.

Surrender the Green Card

The majority of the time, when a person wants to give up their green card they will go through the formal termination process. While there are various methods taxpayers can use to give up their green card, the easiest path is typically just to file the form I-407. The  Form I-407 is an immigration form and not a tax form. The form is relatively straightforward and simply asks the taxpayer why they want to go up their green card and other relatively innocuous questions. Previously, taxpayers could go into the consulate to submit the I-407 but they no longer must accept it by hand– although some consulates in various countries may still accept it in person.

Before surrendering the green card, the taxpayer should consider whether they are considered a long-term resident and if so if they are considered a covered expatriate and whether they will have any exit tax at the time they surrender the green card. Surrendering the green card is a very crucial piece in the expatriation puzzle, so taxpayers should be cautious before surrendering the green card.

Become a U.S. Citizen

Alternatively, some taxpayers may decide they would rather naturalize than give up their green card. And, while they may have a distaste in their mouth about their U.S. tax implications, they do enjoy traveling to the United States and do so often; thus their various Visa options such as the B1/B2 tourist visa or even the 90-day ESTA are not sufficient.  Before naturalizing, Taxpayers should assess whether or not they are already long-term residents and, if so what the tax implication will be down the line if they become U.S. citizens and then want to give up their US citizenship — and all the tax nuances in between.

Re-Entry Permit

Sometimes, a taxpayer may want to leave the United States temporarily and not give up the green card, but they are concerned that they will not be able to meet the residency requirements required for green card holders and thus will not be able to reenter the United States. To avoid this issue at the port of entry, some taxpayers may qualify for a reentry permit so that they can remain out of the United States for two years at a time without having to worry about giving up their green card and/or having to worry about being able to re-enter. 

Let it Expire and/or Do Nothing

Some taxpayers will simply leave the United States and not do anything with their green card. The main issue with this strategy is that from a technical standpoint, the taxpayer is still considered a U.S. person for tax purposes and tax on their worldwide income– which is the case even if the card expires. Therefore, taxpayers who are concerned about the U.S. person’s tax status in the future may want to take some affirmative steps to terminate their green card instead of just letting it expire or doing nothing that can unwittingly keep them in the United States tax system.

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.