Worldwide Income Tax implications of being a US Greencard holder or US Citizen

[OnTheGo]

Hi, I know this has nothing to do with OBTAINING a green card (via the DV lottery) ... but today I came across a topic that I feel is very important for anyone considering taking up residence in the US or considering to live abroad later (even if only for a while). It will affect your income generated outside of the US - generally speaking, US residents are required to declare their worldwide income on their tax return - which is the same in most countries.

However, if you are deemed a 'long term resident' or are a citizen and actually live OUTSIDE of the USA, you are *still* required to declare and pay income tax on your income generated and already taxed in the country of residence (i.e. where you live). There are double tax treaties and exemptions and all, but to be taxed by the IRS on income generated outside of the US while permanently living outside of the US, is pretty unique as taxation is based on citizenship (or permanent resident status) rather than place of actual residence (inside of US or offshore). Most other countries do NOT tax their citizens or permanent residents on income generated offshore IF and WHEN they live offshore for more than 6 months of the year. (so this might also apply if you intend to temporarily live in your original home country in the future after having obtained the green card)

Also, if you ever decide in the future to give up on your Green card or citizenship, there is an "EXIT tax" to pay (with exemptions), which in a worst case scenario can translate to having a fictional tax of 15% applied to the 'market price' of all your assets worldwide at that time. (sounds like a penalty)

Not trying to scare anyone off, but depending on each one's intentions...I think it is very important to know upfront.

Here is some recent links:

http://www.forbes.com/sites/robertwood/2013/05/09/trending-now-giving-up-u-s-citizenship/

http://www.forbes.com/sites/robertwood/2013/07/12/u-s-tax-system-ranks-94th-out-of-100-right-below-zimbabwe/

http://finance.fortune.cnn.com/2013/05/08/citizenship-taxes-irs/

http://www.forbes.com/sites/robertwood/2012/12/01/high-cost-to-go-green-giving-up-a-green-card/

 

[Momo1980]

I am planning to meet with a tax consultant/accountant once I make it to the US to declare my foreign income so as to avoid any unnecessary headaches with the IRS.



Case No - DV2013AF0007XXXX (applied the first time and got it the first time - lucky me!)
Entry Checked - 1st May 2012
Forms Sent To KCC - 10th May 2012
Received By KCC - 12th May 2012
Confirmation From KCC - 25th May 2012 after I sent them an email
2nd NL - 14th June 2013
Police Clearance (TZ) - 13th June 2013
Police Clearance (UK) - 21st June 2013
Medicals - Completed 24th June 2013
Interview - Wednesday, August 7th 2013 @ 8am - US Embassy Tanzania
Visa Pick up - Hopefully August 11th 2013
Departure Date - August 17th 2013
Port of Entry - Washington Dulles

 

[OnTheGo]

I am planning to meet with a tax consultant/accountant once I make it to the US to declare my foreign income so as to avoid any unnecessary headaches with the IRS.

Sound plan! And good luck with the interview next month!

 

[SusieQQQ]

Yeah. Just discovered the other day - for our situation where we will land in Dec to activate and go back home for a while - we will need to file a return under the "green card test" for 2013 even though only there for 5 days! If as a green card holder you spend one day in the US in a particular year you must file for that year so even if we landed on 31 December we would have to file for 2013.. They do say the first year is "dual status" and you don't need to pay tax on what you earned while you were non-resident but state you need a tax consultant or someone from the IRS to help you fill in the forms for this first year. Bit of a headache as we will also have earnings outside the US for part of 2014 but because the year after landing cannot use dual status anymore and have to go the exemptions route...ah well, I guess we will just have to find a tax consultant for both filings!

Incidentally advice from another forum on tax consultants: for this kind of situation be careful about using "common" ones like H&R Block, apparently they are mostly just trained in normal tax stuff and are often unaware of all the details about how to file for new immigrants, so make sure your consultants have the right experience.