I have an (expired) Green Card

I Have an (Expired) Green Card – What Are My U.S. Tax Obligations?

Many Green Card holders assume that once their Green Card expires, they are no longer considered U.S. tax residents. However, this is not necessarily the case. The U.S. tax system has specific rules regarding taxation for Green Card holders—even if they live abroad or no longer use their Green Card. This may put a huge burden on people living abroad. They can face additional tax filing requirements, costs, considerations, and administrative burdens.

The U.S. taxes its citizens and U.S. tax residents on their worldwide income. Green Card holders generally qualify as U.S. tax residents under the Green Card Test, even when they live outside the United States.

Whether filing will result in you paying actual taxes in the U.S. depends on your personal circumstances, foreign tax credits and applicable tax treaties. Having a U.S. filing obligation does not automatically mean that you will owe U.S. tax.

An expired Green Card is not the same as an abandoned Green Card. The expiration date printed on the physical card does not, by itself, terminate your lawful permanent resident status or your U.S. tax residency.

Am I Still Considered a U.S. Tax Resident if My Green Card Has Expired?

In many cases, yes. Under U.S. tax law, simply allowing the physical Green Card to expire does not end your status as a U.S. tax resident.

• The IRS generally considers Green Card holders U.S. tax residents until their lawful permanent resident status is formally abandoned, revoked or otherwise terminated.
• Simply letting your Green Card expire does not relieve you of your U.S. tax obligations.
• Form I-407 can be used to formally abandon lawful permanent resident status.
• Ending your immigration status and completing your U.S. tax obligations are related but separate matters.

Your Green Card is evidence of your lawful permanent resident status. Its expiration does not necessarily mean that the underlying status has ended.

This distinction is particularly important if you moved abroad many years ago and assumed that allowing your Green Card to expire automatically ended your relationship with the U.S. tax system.

• When are you considered a taxable Green Card holder (even if you left)?

Am I a US Person for tax purposes?

Find out in 2 minutes whether the IRS considers you a “US Person” and whether you may be required to file a US tax return — even if you live outside the United States.

What Are My Tax Obligations as a Green Card Holder Living Abroad?

As a Green Card holder—whether residing in the U.S. or abroad—you may have to:

1. File an annual U.S. tax return (Form 1040) if you meet the applicable filing requirements.
2. Report your worldwide income, including salaries, investments, rental income and pensions.
3. Disclose foreign financial accounts if the aggregate value of your foreign financial accounts exceeds $10,000 at any point during the calendar year via FBAR – Foreign Bank Account Report.
4. Report certain foreign financial assets if their value exceeds the applicable IRS thresholds via Form 8938 – FATCA Reporting.

Living outside the United States does not in itself end these obligations.

At the same time, being required to file a U.S. tax return does not necessarily mean paying tax twice. Foreign tax credits and applicable tax treaties may reduce or eliminate double taxation.

Does an Expired Green Card Exempt Me from U.S. Tax Obligations?

No. The fact that the physical Green Card has expired, been lost or is no longer used does not by itself end your U.S. tax residency.

The key question is whether your lawful permanent resident status has actually been terminated for U.S. tax purposes.

If you have moved abroad but never formally dealt with your Green Card status, you should therefore not assume that your U.S. tax obligations have automatically disappeared.

If you fail to file a return, FBAR, or meet other applicable reporting requirements, penalties and interest may apply. Different rules apply to different tax and information returns, and the consequences depend on your individual circumstances.

It is therefore important to establish your actual status and understand your US tax obligations, even if your Green Card expired years ago.

If you do not officially terminate your tax residency, the IRS may still require you to file U.S. tax returns and, depending on your circumstances, pay U.S. taxes.

What Is the Difference Between an Expired and an Abandoned Green Card?

An expired Green Card and an abandoned Green Card are not the same thing.

An expired Green Card means that the physical document has reached its expiration date. This does not automatically mean that your lawful permanent resident status has ended.

Abandoning your Green Card means formally giving up your lawful permanent resident status. Form I-407, Record of Abandonment of Lawful Permanent Resident Status, is commonly used for this purpose.

This distinction can have important U.S. tax consequences. Someone who moved abroad years ago and simply stopped renewing the physical Green Card may still need to determine whether they remain a U.S. tax resident and whether U.S. tax returns should have been filed.

What Are the Consequences of Not Filing U.S. Tax Returns as a Green Card Holder?

If you are considered a U.S. tax resident but fail to meet your U.S. tax and information-reporting obligations, penalties and interest may apply.

Different rules and penalty regimes apply to:

• U.S. income tax returns;
• FBARs;
• FATCA and other international information returns;
• unpaid U.S. taxes.

The consequences depend on the circumstances, including the type of filing that was missed, whether any tax was actually due and, for certain penalties, whether the failure was willful.

If you have not filed U.S. tax returns for several years because you believed your expired Green Card had ended your U.S. tax residency, it is important to establish your current status before deciding how to become compliant.

How Can I Officially End My U.S. Tax Residency as a Green Card Holder?

Ending your U.S. tax residency can involve both immigration and tax considerations.

Depending on your circumstances, the process may include:

1. Formally abandoning your Green Card – Form I-407 is used to voluntarily relinquish lawful permanent resident status.
2. Filing the appropriate U.S. tax return for the year your residency ends – Depending on your circumstances and the date your residency terminates, special dual-status rules and Form 1040-NR may apply.
3. Determining whether you are a long-term resident – This is particularly important because long-term residents can fall within the U.S. expatriation tax rules.
4. Checking whether Form 8854 is required – Certain long-term residents must file this form when their U.S. tax residency ends.
5. Checking whether the Exit Tax rules apply – Being subject to the expatriation rules does not automatically mean that you will actually owe an Exit Tax.
6. Keeping documentation – Maintain records showing the termination of your Green Card status and your U.S. tax compliance.

Because immigration status and tax residency are related but not identical concepts, it can be useful to obtain specialist advice before formally giving up a Green Card.

Have I Been a Green Card Holder Long Enough for the Exit Tax Rules to Apply?

An important distinction applies to long-term Green Card holders.

For U.S. expatriation tax purposes, you are generally considered a long-term resident if you were a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year your residency terminates.

Special rules apply when determining which years count, including in certain situations where an individual was treated as a resident of another country under a tax treaty.

If you are a long-term resident and terminate your U.S. residency, you may have additional U.S. tax filing requirements.

This does not automatically mean that you have to pay an Exit Tax.

For more background, see When are you considered a taxable Green Card holder (even if you left)?.

Do I Have to Pay Exit Tax When I Give Up My Green Card?

Not necessarily.

The U.S. expatriation tax rules can apply to long-term residents who terminate their U.S. residency. Whether you become a covered expatriate depends on several tests.

These include:

• your net worth;
• your average annual U.S. income tax liability for the relevant preceding years; and
• whether you can certify that you complied with your U.S. federal tax obligations for the five tax years preceding expatriation.

One important threshold is a net worth of $2 million or more on the date of expatriation. However, net worth is not the only test.

Even if the expatriation rules apply to you, this does not necessarily mean that you will actually owe Exit Tax. Your assets, tax history and individual circumstances need to be considered.

Do I Need to File Form 8854 After Giving Up My Green Card?

Possibly.

Form 8854, Initial and Annual Expatriation Statement, is relevant to long-term residents who terminate their U.S. residency and fall within the U.S. expatriation rules.

Among other things, the form is used to provide information relevant to your expatriation status and to certify compliance with U.S. federal tax obligations for the five tax years preceding expatriation.

Not every former Green Card holder needs to file Form 8854.

The first important question is therefore whether you qualify as a long-term resident under the 8-out-of-15-year rule.

Example: My Green Card Expired Years Ago and I Live Abroad

Suppose you moved from the United States to Europe several years ago. Your physical Green Card has since expired, and because you no longer live in the United States, you assumed that you were no longer a U.S. tax resident.

However, you never formally abandoned your lawful permanent resident status.

The expiration of the physical card alone does not necessarily end your U.S. tax residency. Before taking further action, it is important to establish:

• whether you are still considered a lawful permanent resident for U.S. tax purposes;
• how many years you held Green Card status;
• whether you have outstanding U.S. filing obligations;
• whether you qualify as a long-term resident; and
• whether formally ending your status could trigger additional reporting requirements.

Only after establishing these points can you determine the appropriate next steps.

Need more information on your (expired) Green Card and your US tax obligation?

We, the founders of Americans Overseas, were born in the Netherlands and obtained our American nationality through our (American) mother. When we heard about this for the first time around 2013, we were in total disbelief (it can’t be true!), anger (how can they do this?), fear (am I going to get fined or pick up other problems?), and panic (what should I do?).

It is (unfortunately) true that there is an additional American tax levy. But there’s no information from the local government, and when approached, the consulate referred us to the IRS, and the IRS was impenetrable.

That’s why we started this initiative to help people from all over the world by providing proper information to avoid unnecessary panic and offering help free of obligation and free of charge. If needed, we have a network of affordable professionals (accountants) who can help you with your tax obligations. If you have more questions about your Green Card and the US tax obligation you can contact us at Americans Overseas.

Contact us for more information