Green card holders must report worldwide income and comply with US tax laws, even if living abroad or with an expired card. Relinquishing a green card requires filing Form I-407 to avoid continued tax obligations. Americans Overseas offers expert help for compliance and expatriation tax issues.
Once you obtain a Green Card, you automatically become a US tax resident. This status requires you to declare your worldwide income to the US government, regardless of where you live or how long you stay outside the United States.
Some believe the number of days spent in the US affects tax residency, but this applies only to those with non-immigrant visas—not green card holders. Even if you live abroad for an entire year, you must still report your global income.
Any US citizen or green card holder is required to file US tax returns and pay taxes on their worldwide income, including income earned outside the United States. This rule applies even if the green card has expired or you have not returned to the US in years. Non-compliance with US tax laws can trigger severe penalties under the expatriation tax rules. Proper tax advice should always be sought.
Green card holders face the same tax obligations as US citizens, which include reporting global income and filing forms such as FBAR (Foreign Bank Account Report). Failing to file correctly can lead to harsh penalties. Additionally, professional tax advice and preparation costs can be significant due to the complexity of international tax issues. The cost of professional tax advice and tax return preparation can be very high when international tax issues are involved, as is often the case with green card holders.
Even if you are not fulfilling the residency requirements for your green card under US immigration law, holding the card still counts for US tax purposes. According to US tax law, you remain a “resident alien” subject to worldwide taxation unless the green card is formally relinquished.
To stop being a US tax resident, you must follow specific procedures:
2 . Surrender your green card to the US consulate or embassy, retaining proof of relinquishment.
Even if the individual is not complying with the terms of maintaining the green card for purposes of the US immigration laws, continuing to hold the card still counts for US tax law purposes.
Under the US income tax rules about green card holders, a foreign individual is considered a “resident alien” (thus subject to worldwide income tax) for any calendar year if the individual is a lawful permanent resident at any time during that calendar year. A lawful permanent resident is defined as an individual who has been lawfully granted the privilege of residing permanently in the United States as an immigrant following the immigration laws.
Many clients are under the mistaken belief that simply because their green cards have “expired” they are no longer US tax subjects. This is incorrect. The tax law is very precise on this topic. Under the US tax rules, once lawful permanent resident status is acquired, it is deemed to continue unless it is rescinded or administratively or judicially determined to have been abandoned.
A “rescission” of resident status generally occurs when there is a final administrative or judicial order of exclusion or deportation. An administrative or judicial determination of “abandonment” of resident status may be initiated by the foreign person, the US Immigration authorities, or a US consular officer. In most cases, the individual initiates the abandonment of the card.
Under the US tax rules, resident status is considered to be abandoned when the individual’s application for abandonment (INS Form I–407 “Abandonment of Lawful Permanent Resident Status”) or a letter stating the alien’s intent to abandon his or her resident status, along with the green card enclosed, is filed with the US Immigration authorities or a consular officer. Most people go to the nearest US consulate or embassy with the required documents and turn them over to the US consular officer. A stamped copy of the I-407 is given to the individual by the consular officer and must be retained as proof that the card was formally and properly abandoned.
It is always recommended that the individual personally visit the US consulate or embassy to formally relinquish the green card since by doing so, he is present for every step of the process and can ensure that he receives proper proof of relinquishment. If this is not possible, however, another method is available. If filing a letter of intention to abandon US resident status, with the green card enclosed is the method chosen, it must be sent by certified mail, return receipt requested (or a foreign country’s equivalent thereof). A copy of the letter and the green card, along with proof that the letter was mailed and received, should be retained.
•Expatriation tax: Holding a green card for an extended period may result in exit taxliability when relinquishing it. Filing forms like Form 8854 and ensuring compliance with final tax obligations is critical.
•Relinquishing a green card is irrevocable, meaning you will need to reapply for a visa if you wish to return to the US.
•Consult a tax professional to understand the tax implications and to plan accordingly.
• Persons planning to relinquish their green cards should thoroughly understand the rules regarding “expatriation”. Holding a green card for an extended number of years can make relinquishing the card more complicated from a US tax perspective and, depending on the facts of the case, can result in the imposition of so-called “Exit Tax” liability as well as other US tax consequences.
• Look carefully at the rules for tax filings that are required (for example, Form 8854 and the final income tax returns reflecting dual-status tax years). These issues, as well as possible tax planning, should be discussed with a tax professional before the green card is abandoned.
• Abandoning one’s green card is irrevocable. Unless the individual holds a passport entitling him to the benefits of the US 90-day visa waiver program, the individual will be required to apply for an immigrant visa in order to enter the US in the future.
The founders of Americans Overseas, we were born in the Netherlands and received our American citizenship through our (American) mother. When we first heard about this around 2013, we felt disbelief (this can’t be true), anger (why can they just do this), fear (will I get fines or problems now), and panic (what should I do). It is (unfortunately) true that there is a U.S. tax liability. There was no information for us from the local government, the consulate referred us to the IRS, and the IRS was impenetrable.
We therefore started this initiative to help people with good information about the tax system America , prevent unnecessary panic, and offer no obligation and free help if desired and needed we have a network of affordable professionals (accountants), who can help you further with your obligations.
Americans Overseas specializes in helping green card holders navigate complex US tax rules, including expatriation tax issues and worldwide income taxation. Our network of US tax accountants and financial planners offers affordable, obligation-free assistance tailored to your unique situation.
If you have questions about FATCA, US tax obligations, or relinquishing your green card, contact Americans Overseas for expert advice.