N400 and International Monetary Fund, Exempt from Income Tax

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Al Southner

Registered Users (C)
Guys,


Would appreciate if anyone of your or someone on the board has had some experience with this situation.

Just a quick question. I have a friend who works for the International Monetary Fund (IMF), and is a greencard holder which was issued though his wife. He's eligible to file for N400 as of September 1st, 2010 under the 3 years rule, marriage to USC. Here is an issue that he's a little bit concerned about, both he and the wife.

Since employees of the IMF or World Bank Group are exempt from US income tax, throughout their 4 years of marriage, the filing of taxes was done jointly. His income was reported as zero (0) because IMF doesn't issue W2 because he's not a US citizen. He successfully filed for removal of conditions on his greencard last year, provided tax returns which showed 0 income. However, they are concerned that the Immigration officer might question why he doesn't pay income taxes even though he's a greencard holder because N400 usually tend to have higher scrutiny.

Do they have to be concerned about this issue? My advise to them was, if USCIS didn't raise hell about this issue during i-751, why would they want to raise hell now? However, i might be wrong and would appreciate some input on a way forward. He doesn't mind waiting another 2 years to file under 5 years, but he still won't be paying income tax, because it is not illegal to do so while employed by international organization such as World Bank, UN or IMF.

http://www.irs.gov/businesses/small/international/article/0,,id=97284,00.html
 
Al Southner said:
Since employees of the IMF or World Bank Group are exempt from US income tax, throughout their 4 years of marriage, the filing of taxes was done jointly. His income was reported as zero (0) because IMF doesn't issue W2 because he's not a US citizen.
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Did he consult with a tax professional before doing that? There are a few potential issues if he didn't:

1) I think he was supposed to list his income then subtract the relevant exemptions, rather than just writing zero. And my understanding is that he is supposed to pay Social Security and Medicare taxes (by submitting them on his own), and the IMF would either reimburse him for that or "gross up" his income to compensate.

2) I hope he didn't put his wife's non-IMF income as zero on the joint return.

3) Income from other sources such as interest and dividends is not exempt.

4) Be aware that permanent residents working for the IMF in the US don't necessarily get their income exempt from US taxes. It depends on the specific positions and the details of the IMF agreement. Many noncitizens who work for the IMF and other such organizations find that their income goes from being tax-exempt to taxable as a result of obtaining permanent resident status.

My advise to them was, if USCIS didn't raise hell about this issue during i-751, why would they want to raise hell now?
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Citizenship applications get tougher scrutiny because citizenship is much more difficult to revoke after a wrongful approval than it is to revoke a green card.
 
Jack,

I am familiar with the World Bank Group since I work there, and IMF is a sister organization. Foreign citizens working for IMF but also hold a GC don't pay social security N medicare. The law states that international organization such as the World Bank/IMF can only reimburse for tax purpose, social security N medicare to American citizens. LPR don't get any tax allowance like Americans, because when a staf member was hired by the institution, they only produced their nationality's passport, NOT a US passport.

The wife is only employed by IMF, she is well compensated and no need for extra income. However, they report interest earned on their bank accounts. Yes, income from all US sources like a part-time at Macys' is subject to taxation.


This portion is from the link below:

Aliens who keep immigrant status. If you file the waiver provided by section 247(b) of the Immigration and Nationality Act to keep your immigrant status, you no longer qualify for the exemption from U.S. tax under U.S. tax law from the date of filing the waiver with the Attorney General.
However, you do not lose the exemption if you file the waiver and meet either of the following conditions.
You are exempt from U.S. tax by an income tax treaty, consular agreement, or international agreement between the United States and your country.

You work for an international organization and the international 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).

http://www.unclefed.com/TaxHelpArchives/2005/HTML/p519/ch10.html
 
Dear Al Southner,

Although your post is pretty old, could you share how your friend's N400 came out? Did the zero tax become a problem?

Thanks!
 
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