Proper Abandonment of US Green Card 

Proper Abandonment of US Green Card

Proper Abandonment of US Green Card 

Proper Abandonment of US Green Card: One of the most unfair aspects about becoming a Lawful Permanent Resident who has retained their LPR status for several years, is that they may become a Long-Term Lawful Permanent Resident (LTR)– and then become subject to the exit tax — if they are deemed a covered expatriate. A common incorrect assumption is that just because a Lawful Permanent Resident resides outside of the United States and does not meet the presence requirement under the Green Card Rules — that this alone will qualify them as a Foreign Resident — and avoid LTR status. In fact, even if the LPR resides outside of the United States in a treaty country — they will almost always have to take proactive steps and file the Form 8833 for each year they claim foreign resident status. If they do not take proactive steps, the IRS can claim without the Form 8833 being filed, that just residing outside of the US in a Treaty Country is not sufficient to be considered a nonresident under the eight-year (8) Long-Term Resident Rule. The key document for LTRs and U.S. Citizens is Internal Revenue Service Form 8854. Let’s work through the specifics of Abandonment of US Green Card and who is a Lawful Long-Term Lawful Permanent Resident —

What is a Lawful Permanent Resident?

We will reproduce the paragraph provided in the Form 8854 instructions — along with a breakdown summary in layman’s terms.

      • “You are a lawful permanent resident of the United States if you have been given the privilege, according to U.S. immigration laws, of residing permanently in the United States as an immigrant.

      • You generally have this status if you have been issued an alien registration card, also known as a “green card,” and your green card hasn’t been revoked or judicially or administratively determined to have been abandoned, and you haven’t

          • 1) commenced to be treated as a resident of a foreign country under the provisions of a tax treaty ,

          • 2) waived the benefits of such treaty, and

          • 3) notified the IRS of such a position on a Form 8833 attached to an income tax return.

      • If you were already an LTR at the time you cease to be treated as a lawful permanent resident, then you will be treated as having expatriated as of that date.”

Let’s go through each element of the Abandonment of US Green Card status:

Green Card Status

You have been given the privilege, according to U.S. immigration laws, Residing permanently in the United States as an immigrant.

As provided by the IRS, you generally have this status if you have been issued an alien registration card, also known as a “green card,”

What does this Mean?

It means that for all intents and purposes, a person is considered a Lawful Permanent Resident when they have been given the privilege of residing in the United states with a Green Card. Notice, it does not require the taxpayer to actually reside in the United States — but rather just being granted the privilege to do so.

Not Revoked or Abandoned

Your green card hasn’t been revoked or judicially or administratively determined to have been abandoned, and

A person is still considered to have the privilege of residing in the United States permanently until their Green Card has been revoked or judicially or administratively abandoned.

Important to note is that merely having the green card expire is not sufficient.

Why?

Just because the Green Card expires does not prevent the Taxpayer from going back and trying to re-up the Green Card after it expired. In other words, to prove abandonment a person has to take an affirmative step — and the path of least resistance for most LTRs will be to file Form I-407.

Waived Foreign Treaty Benefits & 8833

      • 1) commenced to be treated as a resident of a foreign country under the provisions of a tax treaty

      • 2) waived the benefits of such treaty, and

      • 3) notified the IRS of such a position on a Form 8833 attached to an income tax return.

These three elements — when taken together — provide that as long as the Taxpayer still has the Green Card and it has not been judicially or otherwise properly revoked or abandoned, then they will still be considered to be a Lawful Permanent Resident — with those years counting toward Long-Term Resident status — unless they proactively:

  • commence to be treated as a foreign resident
  • under a tax treaty
  • Waived benefits of the treaty; AND
  • Notified the IRS on Form 8833

8833 Tax Trap with Abandonment of US Green Card

      • “If you were already an LTR at the time you cease to be treated as a lawful permanent resident, then you will be treated as having expatriated as of that date.”

This is very important language because it warns the taxpayer that if they already meet the eight out of 15 years requirement and then they go ahead and file the form 8833 — then that act will be considered the expatriating act, which cannot be unwound.

The reason it is crucial is because it would not leave the taxpayer with any ability to plan for the exit tax before performing the expatriating act.

Can I Just Reside in a Treaty Country?

Generally, the answer is No. Just residing in a treaty country is not sufficient to avoid green card status under the IRS requirements. In other words, in order for the Taxpayer to avoid being treated as a US person in any one of the eight (8) of the last 15 years, they can’t just live in a Treaty Country. Instead, they would take the position under the Treaty that they are a Foreign Resident and file form 8833 — which the IRS requires to be submitted to show reliance on the treaty.

Can Residing in A Treaty Country Ever be Sufficient?

If a taxpayer has resided overseas for many years, their Green Card expired — and they have not ever returned to the United States or have any communications, investments, etc with the United States, then they can try to take the position that they are by default a non-resident — but it will presumably require litigating against the IRS. Thus, the taxpayer will be in for a long and costly dogfight with the IRS — along with having to carefully evaluate the 8854 — which is signed under Penalty of Perjury. 

Thus, it is better when possible to try to plan from the outset to avoid these unnecessary costs. Otherwise, it will put the taxpayer into a precarious tax position – which could result in hundreds of thousands and even millions of dollars of exit tax.

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