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jgordosea
jgordosea, Enrolled Agent
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Experience:  I've prepared all types of taxes since 1987.
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Swiss citizen living and working in USA since 10 years (green

Resolved Question:

Swiss citizen living and working in USA since 10 years (green card, no us-citizenship). Returning to Switzerland this year to live and work permanently in Switzerland.
What are the US Tax implications for the future when living in Switzerland ?
Thanks for your help.
Richard
Submitted: 2 years ago.
Category: Tax
Expert:  jgordosea replied 2 years ago.

Greetings,

 

Basically once a green card is granted the person, as a resident, has the same obligation to report and pay tax on worldwide income as a citizen of the United States. The green card is permanent residency and comes with a permanent obligation to file and pay US income taxes.

There is the foreign earned income exclusion when a resident is not present for at least 300 days in a twelve month period (or when a bona fide residence is established elsewhere that allows on a filed tax return for earnings ( $95,100 for 2012) to not be subject to US income tax.

For more information see http://www.irs.gov/businesses/article/0,,id=182017,00.html

"Only a qualifying individual with qualifying income may elect to exclude foreign earned income and this exclusion applies only if a tax return is filed and the income is reported."

 

There is also a foreign tax credit designed to reduce the double taxation of income by two countries. For details see http://www.irs.gov/taxtopics/tc856.html

 

Between the exclusion and the credit in many cases little, if any at all, income tax is due for a permanent resident no longer in the United States; but the requirement to file does not change with a change in residence.

 

Please ask if you need clarification.

Thank you.

 

 

 

 

 

 

 

 

 

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Customer: replied 2 years ago.

In simple words.


 


I have to file an US tax form as well as a Swiss form., no matter what citizenship I have


 


If the US tax is higher than the Swiss I have to send the difference to Washington.


 


Regards


 


Richard

Expert:  jgordosea replied 2 years ago.

Hello again,

 

What you stated may very well be the case for some types of income; but the US tax code is not without exceptions to the rule.

As mentioned earned income may be excluded. Also, the tax treaty between the countries permits certain income to only be taxed by the state in which the person is resident (as in residing physically).

 

There is a technical explanation of that treaty at http://www.irs.gov/pub/irs-trty/swistech.pdf but it too states "

"For example, a U.S. citizen who pursuant to the "citizen/green card holder" rule is not considered to be a resident of the United States still is taxable on his worldwide income under the generally applicable rules of the Code."

Article 7 of the treaty does limit the other state from taxing business profit if there is not any permanent establishment in that other state. So a business operated completely outside the United States would not be subject to US income tax.

Likewise the explanation of Article 10 says " the Article prohibits a State from imposing a tax on dividends paid by a company resident in the other Contracting State that are neither paid to a resident of the first-mentioned State nor attributable to a permanent establishment in that State" so that dividends from a company not attributable to the other state will not be taxed.

Article 11 grants only the "the State of residence the exclusive right, subject to exceptions provided in paragraphs 3 and 6, to tax interest beneficially owned by its residents." So all interest earned while resident in Switzerland is not subject to US tax.

It may be well worth having an experienced practitioner assist with these exceptions and the exceptions to the exceptions when tax treaties are involved.

Hope that clarifies for you; but please ask if you need more help.

Thank you.

Please remember when you are asked to rate my service that you are rating me, personally, for the service and information that I have provided. You are not rating this website or the situation itself. A positive rating is the only way that I receive credit for my time and effort to assist you

Customer: replied 2 years ago.

An US -citizen living in Switzerland may return his US-citizenship and after some payment he is relieved of submitting and paying US-Taxes.


 


My green card expires after a certain time. Would it not be logical that I am also relieved of my duty to submit an US-income tax form ?


 


Regards


 


Richard

Expert:  jgordosea replied 2 years ago.

Hello again,

 

From the publication at http://www.irs.gov/pub/irs-pdf/p4588.pdf

 

"even if the U.S. Citizenship and Immigration Service (USCIS) no longer recognizes the validity of your green card because you have been absent from the United States for a certain period of time or the green card is more than ten years old, you must continue to file tax returns until there has been a final determination that is not subject to appeal that your green card has been revoked or abandoned."

 

Either due to surrender of the green card or after the final administrative or judicial determination that the green card has been revoked or abandoned can the obligation to file tax returns end.

Details of the process to surrender is beyond my scope of knowledge so an immigration attorney might be able to provide more information.

I hope this clarifies for you.

Thank you.

 

 

 

 

 

 

 

 

Please remember when you are asked to rate my service that you are rating me, personally, for the service and information that I have provided. You are not rating this website or the situation itself. A positive rating is the only way that I receive credit for my time and effort to assist you

jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3095
Experience: I've prepared all types of taxes since 1987.
jgordosea and 5 other Tax Specialists are ready to help you
Expert:  Robin D. replied 2 years ago.
Hello and thank you for using Just Answer,

Because you are a long-term resident of the United States, defined as an individual who is a U.S. lawful permanent resident in at least 8 of the prior 15 taxable years prior to the termination of permanent resident status, there are special rules to comply with. Your residency termination date will not occur until you file a completed Form 8854 with the IRS and notify the Department of Homeland Security of your termination of residency, notwithstanding that for the remainder of the taxable year your tax home is in a foreign country or you have a closer connection to a foreign country. Until you file Form 8854 with the IRS and notify the Department of Homeland Security of your termination of residency, your termination of your permanent resident status for immigration purposes will not relieve you of your obligation to file U.S. tax returns and report your worldwide income as a resident of the United States.
You can do the above in the consulate office in Switzerland.

You may have to file the 8854 form for the next 10 years, but it is based on the following:

 

  • Your average annual net income tax for the 5 years ending before the date of expatriation or termination of residency is more than a specified amount that is adjusted for inflation ($145,000 for 2009 and 2010, $147,000 for 2011, and $151,000 for 2012).
  • Your net worth is $2 million or more on the date of your expatriation or termination of residency.
  • You fail to certify on Form 8854 that you have complied with all U.S. federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency.
  •  

    In short you can sever your US tax obligation but you must surrender your green card, file form 8854. When you leave the US if you surrender you green card at that time and file your form 8854 you will be expected to pay tax on any property in the US that you still own. This will be done on a market value of the property on the date you declare to leave.
    If you get all this done before you leave the US it may be easier for you. Since 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 (PDF), and pay your tax liability as shown on the Form 1040-C in order to get a departure permit anyway. 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. That would make you a resident alien for the part of the year before you leave and Non resident alien after (you would have to file for that portion of the year if you had US source income).

     

    Your situation is complicated and you may find that a competent tax professional will be needed to work through all the paperwork to sever your ties to the US.

    I hope this additional information is helpful.

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    jgordosea
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