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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12648
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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If I am eligible for Foreign Earned Income Exclusion as per

Customer Question

If I am eligible for Foreign Earned Income Exclusion as per IRS Regulations under the Bonafide Residence Test and I claim it, will it have an impact on my Green Card? I am from India and Indo-US Tax Treaty allows Tie-Breaker. However my concern is the impact on the Green Card?
Submitted: 9 months ago.
Category: Tax
Expert:  Lane replied 9 months ago.

Hi. My name's Lane.

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No, it will not. No in of itself. There are many situations where a green-card holder can satisy the FEIE through working for an employer overseas, (especially if only for or two).

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What USCIS looks at and must establish through facts is INTENT. That you don't INTEND to make the US your permanent place of residency.

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Many people wrongly believe that to keep your green card all you need to do is enter the U.S. at least once a year. The fact is that if you ever leave the U.S. with the intention of making some other country your permanent home, you might be giving up your U.S. residency when you go.

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If you try coming back to the U.S., the border officials will look at your behavior for signals that your real place of residence has not been the United States.

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As a general rule, if you have a green card and leave the United States for more than one year, you may have difficulty reentering the country. That is because the U.S. government feels that an absence of longer than one year indicates a possible abandonment of U.S. residence.

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On the other hand, remaining outside the U.S. for more than one year does not mean you automatically lose your green card. If your absence was intended from the start to be only temporary -- for example, you left to take a several month work project, but you had to stay longer because of unforeseen holdups that were not your fault, causing oyu to stay MORE than a yea -- you may be able to argue to keep your permanent resident status.

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Now, if you have a re-entry permt, they will be more flexible - Reentry permits cannot be renewed and can be applied for only inside the United States. If you want to stay away for more than two years, you must return briefly and apply for another reentry permit.

Expert:  Lane replied 9 months ago.

Please let me know if you have ANY questions at all, before rating me

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Thanks,

Lane

I hold a law degree, with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

Customer: replied 9 months ago.
Please help to get the answer to the two (2) Questions as given below:I have Reentry Permit. My intention is clear that I return to US after my temporary assignment after 2 years. However I do visit my home frequently as and when possible 3-4 times a year in the US to manage chores and vaccation as well as have investments, insurance also.But my tax home is India.Infact I have been to the US for more than 30 days last year.. This makes me ineligible to claim FEIE by virtue of physical residence test. But under Bonafide Residence Test, I may get the benefit.However my concern is its impact on my Green Card Status.Question 1. If I file Form 1040R along with Form 2555 to claim FEIE under Bonafide Residence Test, will it impact my US Permanent Residency? I do not wish to file tax return as Non Resident viz. by filing Form 1040NR.Question 2. Secondly, if I follow as stated in Question 1, could I seek the US Tax Residency Certificate from the IRS? If yes, how to request the IRS for the same?
Expert:  Lane replied 9 months ago.

I understand. You can use the bona fide residence test to qualify for the foreign earned income andforeign housing exclusions and the foreign housing deduction only if you are either: A U.S. citizen, or, a U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect.

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YOu do NOT file form 1040NR - As long as you HAVE the green card you are a US tax resident for that purpose. As a product of this, form 2555 cannot be used with form 1040NR

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The Internal Revenue Service (IRS) procedure for requesting a certificate of residency (Form 6166) from the Philadelphia Accounts Management Center is the submission of Form 8802, Application for United States Residency Certification. Use of the Form 8802 is mandatory.

Customer: replied 9 months ago.
Please advise, if I file Form 1040R along with Form 2555 to claim FEIE under Bonafide Residence Test, will it impact my US Permanent Residency (Green Card)and/or my Continuous Stay for the purpose of Naturalization in any way? And whether I shall be eligible to seek US Tax Residency Certificate?
Customer: replied 9 months ago.
Additionally, please suggest if there is any Blog/article/Case Law to this effect.
Expert:  Lane replied 9 months ago.

As I said before 2555 does NOT apply to 1040NR.

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Only Tax residents (which all green card holders are) can file the 2555 ... and it's a schedule that belongs to the 1040 (not the 1040NR) for the same reason.

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Blogs are not trustworthy and certainly don't have authority of law. You'll find the Foreign Earned Income Exclusion at 26 U.S. Code § 911.

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Maybe it would help if you pulled up the instructions for form 1040 and the instructions form 1040NR.

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Doing a word search for 2555 in each results in zero for the 1040NR and results in 32 different mentions in form 1040.

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https://www.irs.gov/pub/irs-pdf/i1040nr.pdf <- Instructioins for 1040NR

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https://www.irs.gov/pub/irs-pdf/i1040gi.pdf <- Instructions for 1040

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There won't be any case or statute law here regarding form usage. This is all procedural, administration OF the law. In §911 you WILL see this: "The Secretary [meaning secretary of treasury, the parent dept of IRS] may issue regulations or other guidance," which is where the forms instructions come to play here.

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If you'll look at page 2 of the instructions you will see the following: "If you are not a citizen of the United States, specific rules apply to determine if you are a resident alien or a nonresident alien for tax purposes. Generally, you are considered a resident alien if you meet either the green card test or the substantial presence test." Resident Aliens file form 1040

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You will see later, on page 3, "... you are a lawful permanent resident if the U.S. Citizenship and Immigration Services (USCIS) (or its predecessor organization, INS) has issued you an alien registration card, also known as a green card. If you surrender your green card, your status as a resident for tax purposes will change as of the date you surrender your green card if all of the following are true. 1. You mail a letter to the USCIS stating your intent to surrender your green card. 2. You send this letter by certified mail, return receipt requested (or the foreign equivalent). 3. You have proof that the letter was received by the USCIS."

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You are confusing one of the tests for excluding the income from taxation "bona fide residence test" with U.S. tax residency status. Only non-rresidents file the 1040NR. You have a green card you are a tax resident.

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There are three ways to be a U.S. tax resident (being a U.S. citizen, OR holding a green-card, OR passing the substantial presence test.)

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U.S. tax residents are taxed on all worldwide income UNLESS an exclusion can be met (FEIE is one of them).

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But those that file 1040NR's are people who are NOT U.S. tax residents BUT have some sort of U.S. source income that is subject to taxation (U.S. has no jurisdiction to tax a non-resident alien on income that's not U.S. source income). - Effectively connected income, a business presence in the US (called Permanent establishment, such as a payroll, business assets of other wise doing business IN the US.).

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Said differently, you are askin a question that cannot be answered. U.S. tax residents don't file 1040NR's.

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I'll add one more thing. Should you insist on doing so (which would be wholly inappropriate - and again the 2555 would be kicked out automatically) YES, you would certainly put your permanent residency at risk.

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Filing a 1040NR is the equivalent of saying, " I am NOT a permanent resident" to USCIS.