Before a “Green Card” holder uses the “Treaty Tiebreaker” provision of a U.S. Tax Treaty, he/she must consider what is the effect of using the “Treaty Tiebreaker” on:
A. His/her immigration status under Title 8 (will he/she risk losing the Green Card?)
B. His/her status under Title 26 (will he expatriate himself under Internal Revenue Code S. 7701(b)) and subject himself to the S. 877A “Exit Tax” provisions?
Now, on to the post
Tracking Storm Linus on the weather websites, watching the storm blow around the white stuff all day long, snow piling up 16 inches and more on it’s way, sneaking peeks at the Super Bowl while trying to write up this post- I realized how far we have come–long, long ways from being Green Card holders.
But I do remember that the transition to Green Card holder from a visa holder can be a somewhat exhilarating, somewhat frustrating journey. This process can take a long time and comes with a lot of trials and tribulations.
The tax rules for a green card holder remain fairly the same as a US citizen or a long time US resident for most purposes. The complications come into play when the Green Card Read More
Once a non-US individual is classified for income tax purposes as a “resident” he is subject to income tax in the same manner as a US citizen: i.e., taxed on his worldwide income (meaning income from all sources whether from within or outside the US) at a maximum rate of 39.%. This worldwide income tax covers the period from commencement of the residency period until its conclusion (determination of which is also tricky under the tax laws). Income that is taxed includes but is not limited to wages, interest, dividends, rents, capital gains, royalties, gambling winnings etc. regardless of whether these items arose from outside the US.
The person also becomes responsible for filing tax returns and various information returns (such as “FBAR”). Often, foreigners do not understand these rules and do not realize they have a duty to file even if they are only earning wages from an employer in a foreign country. Filing is required even if the salary and / or housing allowance is below the foreign earned income (and / or housing) exclusion amount thresholds permitted for US taxpayers working overseas. Failure to file could result in loss of the ability to claim these exclusions. Read More
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