Tax rules while abroad, impact to naturalization

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co1hz

Registered Users (C)
Hi,

I just came back from 2-year oversea assignment in China, sent by the same US company as I'm working now. I supposed that I should continue to file tax-return as US-resident even I worked overseas, to preserve my resident status.

Today my accountant from PWC told me that I have $8000 refund for my first year in China. That came as a surprise since my regular tax return would not get that much refund. He mentioned there is some sort of tax exclusion for international assignees etc, and told me not to worry.

Does anyone know any specific tax regulations for International assignees to save some tax, but still no impact to the resident status, therefore no trouble for naturalization? I like the extra cash, but I don't want it to japordize my chance to become a US citizen. Please advise! Thanks!
 
You are allowed to take full advantage of overseas tax breaks given to US citizens and residents without jeopardizing your residency status. The only thing that the USCIS cares about is that you did file a return for each year you were away. They assume the IRS knows what they are doing. I hope this answers your question.
 
Yes, but make sure that you don't sign anything that declares you to be a "non-resident". Don't file taxes as a non-resident. Don't sign any form that your account says "sign this, you'll save XXX" if it somehow says or implies that you are no longer a US resident.
 
I have 2 issues:

The question is whether a person can exclude 80K based on physical presence - that is the form 2555. Generally you can only exclude using form 2555. There was a good link somewhere that this form is a big alert to INS on Natz interview even if you just exclude income based on physical presence. Then on the other hand INS only requests transcripts - so how would they find out? But even if they find out in the future - can they denaturalize you based on this?

I am not sure - but for natz you have to satisfy continuous residence requirements. It used to be the case that if you did trips less than 6 months - you would be okay. I am getting a feeling this is no longer the case. Continuous residence is really what it means - you have to be living here all the time.

So say you get an overseas assignment in China, get reentry, maybe keep some stuff here in the US, file taxes, and come back every 6 months - it might be that you will be deemed to have broken continuous residence requirement still. Correct me if I am wrong? Also - if you break continuous residence it seems you do not necessarily loose GC - so they don't automatically deny N-400 + start deportation proceedings against you.

Disclaimer:
I am not a lawyer and this is not reliable advice.
 
make sure that your accountant does not use "Bona Fide Resident" on your form 2555 to claim foreign earn income. If you go that route, you will need to check "yes" to the question C on part 10. "Have you ever called yourself a "nonresident" on a Federal, state or local tax return?"

there were one earlier thread discussing that officer may deny n-400 application, if applicant claimed "bona fide resident".

fyi.
 
Thanks for all the replies! You guys are way ahead of me.

While I was in China, my salary remained the same and was still paid by my US employer and into my US bank. I do not have any other source of income in China, and I did not sell my house in US. In this case, do I still need to file 2555? If not, is there any tax-deduction rules which would allow me to save some tax $$$ but still maintain my LPR status & naturalization eligibility?

Please point a direction so I can do some research, instead of leaving everything into accountant's hand.

Hopefully this info will be useful to other newcomers who have and is considering to take an extended oversea assignment. Thanks!
 
Sounds like you should get your employer to spring for some legal/accounting advice (from real lawyers and accountants). Make sure that everyone understands your intent to remain a resident and eventually become a citizen.

<I am not a lawyer>
It sounds like it is important to establish your intent. Anything you can do to show that your intent was to remain a resident and eventually become a citizen seems like it can be useful in the long run
 
I just talked to my accounnt in PWC...

Yes you guys are right. They used the form 2555 to my return, but skip the Part II (Bona Fide Resident), and only used "Physical Residence" to qualify for so-called foreign earned income, although my salary was still paid in the same as before I left. This should not cause problem as long as I got my N470 approved, which is still pending in Boston office.

A slightly disappointing news is that I have to return all my tax refund of $8k back to my company due to tax equalization agreement. This is what my accoutant in PWC said. Anyone else is in the same situation with tax equalization? Please share - thanks!
 
Hi Co1hz,

2 follow up questions:

1. What form did you file for CA state tax (or your local state, if not CA)? 540 or form 540-NR ??

2. What your answer to the question will be? "Have you ever called yourself a "nonresident" on Federal, state or local tax return?" Yes or no?

I am confused by this questions and the logic behind it, actually.

I don't think I ever called myself "nonresident", even that I claimed Bona fide residence" on form 2555. By cliaming bona fide residence, I assert that I acquired a bona fide residence in another country, but does that means I claimed to be a "nonresident" in US? If I see myself as "nonresident", i would not have filed 1040 and will file 1040NR instead. Does this make sense?

co1hz said:
I just talked to my accounnt in PWC...

Yes you guys are right. They used the form 2555 to my return, but skip the Part II (Bona Fide Resident), and only used "Physical Residence" to qualify for so-called foreign earned income, although my salary was still paid in the same as before I left. This should not cause problem as long as I got my N470 approved, which is still pending in Boston office.

A slightly disappointing news is that I have to return all my tax refund of $8k back to my company due to tax equalization agreement. This is what my accoutant in PWC said. Anyone else is in the same situation with tax equalization? Please share - thanks!
Click to expand...
 
Sheng101,
I live in MA. Just checked my tax return, they used 1040 (not 1040NR) for my federal and "MA Form 1" for my state tax. Not sure what is 540??

According to my accountant, who immigrated from London England by himself, you should skip Bona Fide Residency (BFR) part, ie. Part II on 2555. You have to qualify via "Physical Presence" in order to use 2555, as one other poster suggested earlier.

I'll certainly answer "No" for the question 9 (filed tax as NR), or question 10 (claimed BFR in another country).
 
After reading this thread for a while, I went home and looked at my now 1+ year old N-400 (my interview is in mid/late October). I answered "no" to question 9 when I filled out the form.

However, I used to live in Rhode Island (before and after my green card). While there, I worked in Massachusetts. As a result, I'd file a resident federal 1040, a resident RI state 1040, and a non-resident Massachusetts Form 1-NR.

The N-400 question is "Have you ever called yourself "nonresident" on a Federal, state or local tax return?" When I filled out my N-400, it never struck me that I had "called" myself a non-resident on a tax form -- even though I used to fill out the NR form.

Now I'm not too sure if I should bring it up during the interview. Anyone care to comment?
 
I don't think that's the purpose of the question -- I think it is whether you called yourself a non-resident as in "non-resident alien".

I had the same situation -- where I filed non-resident in one state and resident in another state, while filing 1040 federally. That is completely acceptable.
 
Flydog,
My understanding is that the so-called "Non-Resident" is only relevent to US as a country vs other countries. So you should be fine, and don't stir it up.

I hope you did not answer yes for question #10 on "bona fide resident". If so, you are a dead meat on the choping board! :-)
 
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