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Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 10110
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Could you please explain US tax requirements year under the

Customer Question

Could you please explain US tax requirements for next year under the following conditions: 1. Received green card in May of 2015. 2. Permanently living and working in Canada and will be for the next year. 3. Planning to move to Massachusetts in Jul 2016.
Submitted: 1 year ago.
Category: Finance
Customer: replied 1 year ago.
We are a family of 4, two kids under 6, all Canadian Citizens.
Customer: replied 1 year ago.
Could you please explain exemptions that exist, and possible penalties. How will this affect our PR status?
Expert:  Lane replied 1 year ago.

An alien’s period of residency in the United States must have an official starting date and ending date. The rules for determining these dates are as follows.

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Residency Starting Date under the Green Card Test

If you meet the green card test at any time during a calendar year, but do not meet the substantial presence test for that year, your residency starting date is the first day in the calendar year on which you are present in the United States as a lawful permanent resident (the date on which the United States Citizenship and Immigration Services (USCIS) has officially approved your petition to become an Immigrant).

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If you receive your green card abroad, then the residency starting date is your first day of physical presence in the United States after you receive your green card. Section 7701(b)(1)(A)(i) of the Internal Revenue Code allows you to be treated as a resident alien for the entire calendar year if you were a Lawful Permanent Resident of the United States at any time during the calendar year, if you have been present in the United States for at least one day during the calendar year.

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SO, if you are not present in the US at all for 2015, you will not be considered a tax resident, and will not need to file a 2015 return by April of 2016

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But as you can see, under § 7701(b)(1)(A)(i), you will be considered a resident for 2016.

Customer: replied 1 year ago.
Hi, sorry I should clarify, we did enter US in May 2015, so since then we got our PRs in the mail. Could you please re answer all the questions I asked considering this. thank you,
Expert:  Lane replied 1 year ago.

Note the first sentence of the second paragraph above (I'll underline the pertinent part)

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If you receive your green card abroad, then the residency starting date is your first day of physical presence in the United States after you receive your green card

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SO if the presence was AFTER the receipt of the green card then you are residentts for 2015 tax year ... I you did not (and will not) enter diring 2015 AFTER greencard effective date, then it will be your move in 2016 that makes you permanent resident.

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Customer: replied 1 year ago.
Hi, we did enter after we received PR in the mail, we spent a week in Boston in July.
What do we need to do in order to comply with US tax laws and when, given that we will stay in Canada until June next year. Thank you.
Expert:  Lane replied 1 year ago.

File a US return.

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As a green card holder, (again, having soent at least one day) you must file a U.S. tax return Form 1040 each year.

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To avoid double taxation, tax residents may claim a foreign tax credit for income tax paid or owed to a foreign country on foreign source income. To claim the credit, you must file Form 1116, Foreign Tax Credit (Individual, Estate, or Trust), with your Form 1040.

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This will provide a tax credit for the income tax paid to Canada.

Customer: replied 1 year ago.
Will we get the whole credit for the tax paid in Canada? Will we have to pay extra?Another question... what if we apply for non resident status in September 2015 (with the immigration) will this affect anything tax related?Thank you,
Expert:  Lane replied 1 year ago.

As a tax resident, US will tax, and your standard deduction and personal and dependency exemption will generate whatever tax it does (far too specific and detailed for this venue) ... but as a tax resident (which the green card AUTOMATICALLY makes you, given a day in the country) you owe that tax on ALL worldwide income, just as any other US citizen or tax resident does.

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But again, there IS a credit for any tax paid to Canada. BUT the US cannot credit more than the U.S. tax that you owe.

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SO the net effect is that you will only pay tax once on all income, but at the higher rate of the two.

Customer: replied 1 year ago.
Thank you!!! Makes sense now!!!
Expert:  Lane replied 1 year ago.

You're very welcome.

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Your positive rating … (by clicking or touching the stars or smileys on your screen) … is thanks enough!That’s how we’re credited for the work here

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Lane

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