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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22642
Experience:  Taxes, Immigration, Labor Relations
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Background I am a Canadian National in H-1B status. My employer

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Background: I am a Canadian National in H-1B status. My employer has commenced the green card process on my behalf (recruitment stage of an EB-2 PERM). Based on the current visa bulletin and historical trends, I will be eligible to file an I-140 and I-485 concurrently on behalf of myself and my spouse by the end of the year. Question: will my foreign income be taxable by the U.S. government if I become a green card holder, or does lifetime taxation of foreign assets by the U.S. government commence if I become a naturalized citizen? I will likely inherit a considerable amount of money in the next 20 years. Generally, what are the tax obligations of green card holders?




What are the implications if we are green card holders working/residing in the U.S. vs. green card holders working/residing in Canada?



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State/Country relating to question: California
Submitted: 3 years ago.
Category: Tax
Expert:  Lev replied 3 years ago.

LEV :

Hi and welcome to Just Answer!
Question: will my foreign income be taxable by the U.S. government if I become a green card holder, or does lifetime taxation of foreign assets by the U.S. government commence if I become a naturalized citizen?
Green card holders are taxed the same way as US citizens - on all worldwide income.
Assets are not taxable - only income that realized from these assets will be taxable.
I will likely inherit a considerable amount of money in the next 20 years. Generally, what are the tax obligations of green card holders?
Inheritance is not taxable income in the US and is not reported on the tax return.
Also there is no inheritance tax neither on federal level nor in California.
There are estate taxes applied to estates with value above $5,000,000, but if the decedent is not a US citizen, not a US resident and no part of the estate located in the US - the US estate tax law will not be applied.
What are the implications if we are green card holders working/residing in the U.S. vs. green card holders working/residing in Canada?
If you will be green card holders - all worldwide income is taxable regarding on your residency.
If you will be living abroad - you may claim foreign earned income exclusion - $91500 for 2010.
If the same income is taxed in the US and in Canada - you claim a credit for foreign tax paid - thus effectively will avoid double taxation.


Also see Publication 597, Information on the United States–Canada Income Tax Treaty - http://www.irs.gov/pub/irs-pdf/p597.pdf .
Let me know if you need any help or clarification.

Customer:

Hi Again,

Customer:

Can we renounce a green card? How might we lose permanent resident status? Is there a limitation on how many years you can spend outside of the US?

Expert:  Lev replied 3 years ago.
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Expert:  Lev replied 3 years ago.
See for reference - http://www.irs.gov/businesses/small/international/article/0,,id=96314,00.html
You are a resident, for tax purposes, if you are a Lawful Permanent Resident of the United States at any time during the calendar year. This is known as the "green card" test. You are a Lawful Permanent Resident of the United States, at any time, if you have been given the privilege, according to the immigration laws, of residing permanently in the United States as an immigrant.

From immigration purposes - you generally will loose your a Lawful Permanent Resident status after one year of absence. However, you may be outside the US for two years if you get a re-entry permit from immigration authorities before leaving the US.

For tax purposes - if you are either a resident or a nonresident alien departing the United States, you will usually have to show that you have complied with the U.S. income tax laws before departing from the United States. You do this by obtaining a tax clearance document, commonly called a "Departure Permit" or "Sailing Permit" from the IRS.

As a resident alien and if you did not have taxable income for the prior year and do not have taxable income for the tax year up to and including the date of departure, or you are a resident alien who is leaving only temporarily, use Form 2063 to apply for a departure permit. Resident aliens who have taxable income may still use Form 2063 to apply for a departure permit if the IRS is satisfied that your departure will not hinder the collection of tax. If you are a resident alien leaving the United States with no definite plans to return for the year, you will have to complete Form 1040-C , and pay your tax liability as shown on the Form 1040-C in order to get a departure permit. In certain cases, you may furnish a bond guaranteeing payment of tax, but you must pay your tax liability when your final income tax return is due. Any tax you pay counts as a payment on your final return that you must file after the end of your tax year.
In additional - depending on your circumstances - you might be a subject of the expatriation tax provisions - see more information in this IRS article - http://www.irs.gov/businesses/small/international/article/0,,id=97245,00.html
While it is your decision to give up your Lawful Permanent Resident status - I do not think that will provide you any tax saving. Even you are required to report all your worldwide income to the IRS - because tax rates in the US are generally lower - using the foreign tax credit will likely eliminate your US tax liability.
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22642
Experience: Taxes, Immigration, Labor Relations
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