Here is the scenario that this post is addressing:
An individual becomes a permanent resident of the United States (meaning that he has a Green Card). He lives in the United States for any number of years. He then moves away from the United States and returns to live in his home country. He is NOT aware that he must complete any specific steps (from either an immigration or tax perspective) to sever his ties with the United States.
He simply moves from the United States with the intention of no longer living permanently in the United States and:
1. Stops filing U.S. tax returns;
2. Fails to notify the State Department that he is abandoning his U.S. permanent residence.
While a resident of the United States he acquired significant pensions and IRAs.
Years later he reads an article in a newspaper that suggests that the United States still considers him to be subject to the full force of U.S. tax laws. Accessing the pensions will force him to file U.S. tax returns. He (as might be expected) is panic stricken and wonders what to do.
This is a very common scenario – what should he do?
The short answer is: it is completely dependent on the facts. This is one of the most difficult areas to advise in. The problem is that the person is likely to continue to be a tax resident of the United States and subject to all of the requirements of the Internal Revenue Code. The most appropriate response to this will depend on the interaction of a number of factors specific to the individual.
If you are in this situation, I suggest that you seek competent assistance sooner rather than later.
John Richardson – Follow me on Twitter @ExpatriationLaw
Tag Archives: Green Card abandonment
Thinking about getting a #Greencard? The first question is: Do you want @PermResidentUSA status?
A move to another country is a very significant life decision. A “Green Card” is actually a “permanent resident” immigrant visa. A U.S. “permanent resident” visa comes with significant opportunities and significant responsibilities.
Permanent resident visa for immigration purposes: The visa is valid for immigration purposes only as long as the person retains the subjective intent to live permanently in the United States.
Permanent resident visa for tax purposes: Under United States law, one’s status for immigration purposes is different from one’s status for tax purposes. Generally the rules for “tax residence” are found in Internal Revenue Code Sec. 7701(b).
What follows is my answer on Quora that considers the “benefits and burdens” of the Green Card. I suggest that you read all answers to this question.
But, wait! There’s more. If you have the Green Card for 8 years or more, you can’t leave the United States without being subject to the S. 877A Exit Taxes.
What's a #GreenCard anyway? It's NOT what you don't know. It's what you know that isn't true!
Introduction – It’s about the right to live permanently in the United States
There are tens of thousands of people who have “Green Cards” who live outside the United States. Some of them want to maintain their Green Cards which they understand to mean maintaining their right to live permanently in the United States. Otherwise do NOT want to maintain their Green Cards meaning they do NOT want to maintain their right to live permanently in the United States.
The “Green Card” itself, is different from the “right to live permanently in the United States”.
Continue reading
The teaching of Topsnik 2 – 2016: #Greencard expatriation and the S. 877A "Exit Tax"
What! You want to abandon your Green Card and leave the USA!
Reverse Immigration: How IRS Taxes Giving Up Green Cards via @forbes https://t.co/SXFh2uUivs – Leaving the USA? The USA wants YOUR ASSETS!
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) May 22, 2017
Introduction – Introducing Gerd Topsnik – The World According to Facebook
Discussion on Topsnik, tax treaties and the S. 877A Exit Tax. Can tax treaties be used to avoid paying tax anywhere? https://t.co/OowVORbJHq
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) May 22, 2017
“This case will be seen as the first of an (eventual) series of cases that determine how the definition of “long term resident” applies to Green Card holders. The case makes clear that if one does NOT meet the treaty definition of “resident” in the second country, that one cannot use that treaty to defeat the “long term resident” test. A subsequent case is sure to expand on this issue. Otherwise, the case confirms that the S. 877A Exit Tax rules are “alive and well” and that the “5 year certification” test must be met to avoid “non-covered status”
Topsnik may or may not be a “bad guy”. But even “bad guys” are entitled to have the law properly applied to their facts. It would be very interesting to know how the court would have responded if Topsnik had been paying tax (a nice taxpayer) in Germany as a German resident.”
A nice summary of Topnik 1 and Topsnik 2
'Topsnik:' Retroactive Expatriation Under §877A(?) https://t.co/y0YKclOMxh via @bloombergbna – No just tax applied to current property
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) December 14, 2016
This is part of a series of posts on: (1) “tax residency“, (2) the use of “treaty tiebreakers” when an individual is a “tax resident” of more than one jurisdiction and (3) how to use “treaty tiebreakers” to end “tax residency” in an undesirable tax jurisdiction.
This is the second of the two Topsnik posts.
Topsnik 1 focused on the “tax residence” of Green Card Holders. The decision in Topsnik 1 is here:
The US "expatriation tax" and the the incentive to apply for a Green Card and/or remain in the USA
America doesn’t really need skilled immigrants, or does it?
Staple a "Green Card" to every PhD – Don't fall for this! Don't immigrate to the U.S. https://t.co/hHefrflU2v via @USCitizenAbroad
— Citizenship Lawyer (@ExpatriationLaw) September 24, 2016
The above tweet references a post that references a comment by Victoria Ferauge:
Continue reading
Are Green Card holders resident outside the USA "US persons" under the #FATCA IGA?
Introduction …
Circa 2014: Are Green Card Holders who r resident in Canada "US Persons" within the meaning of Canada US FATCA IGA? https://t.co/txcOlpNMfJ
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) April 3, 2016
The above tweet references a comment that was left on Olivier Wagner’s Tax Samurai blog. Olivier is discussing an earlier post of mine called “When It Comes To FATCA, There Are Four Kinds Of Americans Abroad“.
I highly recommend his “post about my post”.
The comments discuss the question of:
Is a Green Card Holder resident in Canada a “U.S. Person” for the purposes of FATCA?
The last comment notes that the Canada Revenue Agency is advising U.S. Green Card Holders who are resident in Canada that they should NOT identify as “U.S. Persons” under the FATCA IGA.
The exact text of the comment reads:
Green Card holders in Canada are interpreting the following statement from the Government of Canada to mean that FATCA does NOT apply to them:
http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/ndvdls-eng.html
“I hold a U.S. green card. How does this affect my tax residency?
If you are a green card holder (that is, a lawful permanent resident of the U.S.), the U.S. considers you to be a U.S. resident.
However, if you are a resident of Canada for tax purposes and do not hold U.S. citizenship, you should not identify yourself as a U.S. person to your Canadian financial institution.”
The actual IGA is here.
The definition section includes “U.S. residents” which presumably means tax residents (which in the case of Green Card Holders may be affected by a Treaty election).
The plain reading of the statement on the CRA site will mean that Green Card holders resident in Canada will NOT identify as being U.S. tax subjects.
Note: I tried to leave a similar comment a moment ago, but it didn’t seem to show up. This is a duplicate. Feel free to pick one comment or the other.
– See more at: http://www.taxsamurai.com/index.php/2014/09/06/four-kinds-americans-abroad-response/#comment-7
The purpose of this post is to expand this discussion …
Taxability Freedom Day: On what day does a "U.S. person" cease to be a "U.S. taxpayer"?
Update: October 9, 2015
This post focuses largely on the role of form 8854 in relinquishing U.S. citizenship for tax purposes. See also my more recent post which discusses the role of the Certificate of Loss of Nationality in relinquishing U.S. citizenship.
Taxability Freedom Day: On what day does a “U.S. person” cease to be a “U.S. taxpayer”? http://t.co/bRyIZZgDrU
— Citizenship Lawyer (@ExpatriationLaw) September 6, 2015
Introduction …
There is a difference between:
- What is your tax liability IF you are a “U.S. person” for tax purposes”;and
- Whether you are a U.S. person for tax purposes at all.
I find that many of the blog posts and articles confuse these two issues.
Remember that “U.S. person” for tax purposes INCLUDES (but is not limited to) U.S. citizens and Green Card Holders.
What this post is NOT …
This post is NOT to discuss your specific U.S. tax liability – the AMOUNT of U.S. taxes owing in general. It is NOT to discuss how U.S. taxes are calculated in general. It is NOT to discuss the “taxes that may be triggered” by expatriation. Only those who are “U.S. persons” are subject to U.S. taxation. Therefore, in order to end the “jurisdiction of the United States to impose taxes on you (your “taxability”):
You must terminate your status as a “U.S. person” for tax purposes. This means that you must either “relinquish your U.S. citizenship” under ALL applicable legislation or terminate your Green Card.
What this post IS …
This post is to explain the date that you cease to be a “U.S. person” for tax purposes. At what point, can you say with confidence:
“I’m free. The U.S. no longer has the right to treat me as a “U.S. person” for tax purposes. Nothing that I do from this point on will generate “U.S. tax liability”.
Continue reading