Surrendering Green Card & IRS Tax Implications
Surrendering Green Card Tax Implications: When a U.S. Person gives up their green card and no longer wants to have any U.S. status, it is important to be sure that they engage in proper planning before giving up the green card. That is because in many circumstances, legal permanent residents who do not properly give up their green card aka (expatriate) may find themselves subject to unforeseen IRS reporting and U.S. tax consequences — even after relinquishing or abandoning legal permanent residence.
Here are a few different tax considerations to consider when Surrendering Your Green Card:
Green Card Lapse vs. Voluntary Abandonment
The Green Card is representation of legal permanent resident status.
In other words, unless the actual legal permanent resident status is formally abandoned, the mere fact that a green card may have expired does not mean the U.S. tax responsibilities are over and done.
If a person does not formally abandon their Legal Permanent Resident status (commonly performed by filing a USCIS form I-407) to relinquish their legal permanent resident status, then merely letting their green card expire does not terminate U.S. Person status for U.S. Tax.
Thus, if the legal permanent resident does not properly give up their green card, they will still become subject to tax even if after their card lapsed.
Moreover, if it turns out that they did not formally abandon their green card and have been a legal permanent resident for eight of the last 15 years they may end up being considered a covered expatriate.
8 Full-Years is not Required for Long-Term Residence
When a person is a covered expatriate, it means they may be subject to exit tax — depending on what their mark-to-market and deemed distribution computation results in.
But, not all permanent residents can even be considered a covered expatriate.
Rather, only U.S. citizens or Legal Permanent Residents who are Long-Term Residents (LTR) can be considered a covered expatriate.
An LTR is someone who has been a Legal Permanent Resident for eight of the last 15 years. If a person did not properly expatriate, the clock continues ticking…
More importantly, it does not require eight full years.
We have prepared a detailed summary explaining the analysis.
Be Careful of Form 8833 Treaty Positions
Depending on what type of Treaty position a Legal Permanent Resident takes, they may inadvertently make an expatriation representation to the US government.
If this is done after the legal permanent resident is already considered a long-term resident, it could have a catastrophic financial impact since it will eliminate the ability to engage in any pre-exit tax planning.
Interested in Expatriation from the U.S.?
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Recent 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.
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How to Hire Experienced Offshore Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- 20-years experience as a practicing attorney
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- Dually Licensed as an EA (Enrolled Agent) or CPA
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