When You Are Issued A Visa For Permanent Residence In The United States, The IRS Considers You A Taxable Resident

John Richardson - When You Are Issued A Visa For Permanent Resident, The IRS Classifies You As Taxable

The Internal Revenue Code of the United States imposes worldwide income taxation on ALL individuals who are U.S. citizens or who are otherwise defined as “residents” under the Internal Revenue Code. “Residents” includes those who have a visa for “permanent residence” (commonly referred to as a Green Card). A visa for “permanent residence” is a visa for immigration purposes. Once an individual receives a visa for “permanent residence” they will be considered to be a “resident” under the Internal Revenue Code. Their status as a “resident” for tax purposes continues until they fulfill specific conditions to sever their “tax residency” with the United States. The conditions required to sever “tax residency” with the United States are found in S. 7701 of the Internal Revenue Code. (Basically a Green Card holder can’t simply move from the United States and sever tax residency.)

In the same way that U.S. citizens are subject to taxation on their worldwide income even if they don’t reside in the United States, “permanent residents” will continue to be subject to taxation on their worldwide income until they take specific steps to sever tax residency in the United States. In certain circumstances Green Card holders living outside the United States can avoid filing some of the “forms” that are required of U.S. citizens living abroad.

The steps to sever tax residency are found in S. 7701(b) of the Internal Revenue Code. Those wishing to explore this further are invited to read my earlier posts about Gerd Topsnik: Topsnik 1 and Topsnik 2. Those “permanent residents” who qualify as “long term residents” will be subject to the S. 877A Exit Tax rules if they try to sever tax residency with the United States. It’s probably easier to secure a “permanent residence visa” for immigration purposes, than it is to sever tax residency for income tax purposes.

On September 5, 2017 I had the opportunity to participate in a conversation with Mr. Gary Clueit who has been a permanent resident of the United States for 34 years. Anybody considering moving to the United States as a “permanent resident” should listen to this podcast.

 

The Reality of U.S. Citizenship Abroad

My name is John Richardson. I am a Toronto based lawyer – member of the Bar of Ontario. This means that, any counselling session you have with me will be governed by the rules of “lawyer client” privilege. This means that:

“What’s said in my office, stays in my office.”

The U.S. imposes complex rules and life restrictions on its citizens wherever they live. These restrictions are becoming more and more difficult for those U.S. citizens who choose to live outside the United States.

FATCA is the mechanism to enforce those “complex rules and life restrictions” on Americans abroad. As a result, many U.S. citizens abroad are renouncing their U.S. citizenship. Although this is very sad. It is also the reality.

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