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Roth IRA vs. traditional IRA: Which retirement account is right for you?

14 Nov 2024

IRS announces inflation-adjusted tax penalties for 2025

12 Nov 2024

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Form 1040 federal tax return package
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For those with additional income sources beyond the core package.
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For those who have not filed and want to become compliant with amnesty from penalties.

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Green card holders

Every year almost half a million people obtain Green Cards. When you become a Green Card holder, you are under the same obligations to file US tax returns as US citizens (ie see www.taxesforexpats.com/expat-tax-advice/why-file.html). We help hundreds of clients who are Green card holders and continue to live outside the US.

Еven if the USCIS no longer considers a Green Card to be valid (for immigration purposes), the tax-related obligations that come with it will continue to apply - until an official written statement from the USCIS confirms that the Green Card has been revoked or relinquished.

Only then will the tax-related obligations come to an end. Noncompliance with tax obligations may give rise to high penalties - the same as for US citizens.

Frequently asked questions:

1. Who is a US Person in the eyes of the IRS?

A U.S. person for tax purpose includes any of the following: (see the IRS website):

A U.S. Citizen, which is anyone with a U.S. passport,
A green card holder (see: http://www.irs.gov/Individuals/International-Taxpayers/Alien-Residency—Green-Card-Test), or
A U.S. resident for tax purposes – most commonly defined as someone who spends more than 183 days in the US under the Substantial Presence Test. A U.S. resident for tax purposes is commonly referred to as a resident alien.

2. I have a green card but have not yet moved to the US or applied for a Social Security number. How do I go about filling in my tax return?

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Step 1: Apply for the Social Security number. See https://help.taxesforexpats.com/#33

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Step 2: File your first U.S. tax return in the following calendar year after obtaining the green card, regardless of whether you have moved to the U.S. or not.

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For example - you get Green Card on Nov-10-2014. You should file your US tax return by June-15-2015.

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3. I have had a green card that has since expired. I have not, however, officially renounced it. Do I have to file US tax return?

Unfortunately - yes.

You are considered a US Permanent Resident until you officially renounce your green card - and hence required to file an annual US tax return. Please see https://www.uscis.gov/i-407 for details on how you have to renounce the GC.

4. I moved from abroad to the U.S. mid-year and had the Green Card from the day that I arrived. Do I report full year foreign income, or only for the months when I was in the US / was in possession of the Green Card?

Please report foreign income for the entire year. Separately (on the text entry tab) explain how income was allocated before and after the green card was issued or before and after the day when you moved to the U.S, whichever comes first.

Which filing option is best - filing as U.S. resident for entire year or part year?

Filing for entire year (especially if file jointly with spouse) enables a lower tax rate and higher deductions
But - filing for part year (from date of GC receipt onwards) is beneficial if you had a lump sum foreign pension or bonus at the beginning of the year that you can exclude from U.S. income by doing part year filing.

5. I was a student or had no income so didn't have to file US taxes. I am applying for a Green Card for my non-resident spouse - what do I do?

The green card application generally requires 3 years of tax returns from the sponsoring US spouse.

What would it cost to do with you?

The cost of filing 3 years of tax returns with little income is $840 (3 years at $350 minus 20% discount)

6. Are Green Card holders working for supranational organizations outside the US liable to pay US income tax?

In general US citizens and GC holders are subject to US federal income tax taxation, whether or not they actually live in the US.

However - there are two organizations in the world that provide an exemption to this rule for Green Card holders working outside the US: IMF and the World Bank:

Your work for an international organization and the international organization agreement creating the international organization provides that alien employees are exempt from U.S. income tax. Two international organizations that have such a provision are the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank).