US Green Card holders & IRS issues: Why they can be so tricky
by: Anthony Parent
US Expatriates have rights been garnering a tremendous amount of attention towards the ridiculously complicated tax compliance regime they are subjected to. We like to think we are somewhat responsible. But one group - US Green Card holders - officially known as US Permanent Residents, often have more difficult problems. And, because they aren’t US citizens and can not vote, have little recourse. This is not a good thing for the country as we explain.
One of our recent podcast guests, Gary Clueit, a US Green Card holder and business owner attests that he finds himself in quite a predicament. One one hand, if he expatriates he will have to sell off some of his business interested to pay for the exit tax due. This means that some of his long time employees, many who are in their 50s, and would have a difficult time finding new employment would be laid off should Gary decide to give up his Green Card.
Yet, if he gives up his Green Card and still has some of his assets in the US, his children will be getting much less. The property of non-US person is subject to an alternative estate tax regime most people are wholly ignorant of.
Why Green Card holders tend to have difficult tax issues
Not all Green Card holders have US tax complications. Yet, the reason why we see a large number with a substantially difficult issues starts to become obvious once you look at the employment/investment based criteria for obtaining a Green Card (bold emphasis added).
Are a first preference immigrant worker, meaning you:
Have extraordinary ability in the sciences, arts, education, business or athletics, or
Are an outstanding professor or researcher, or
Are a multinational manager or executive who meets certain criteria
Are a second preference immigrant worker, meaning you:
Are a member of a profession that requires an advanced degree, or
Have exceptional ability in the sciences, arts, or business, or
Are seeking a national interest waiver
Are a third preference immigrant worker, meaning you are:
A skilled worker (meaning your job requires a minimum of 2 years training or work experience), or
A professional (meaning your job requires at least a U.S. bachelor's degree or a foreign equivalent and you are a member of the profession), or
An unskilled worker (meaning you will perform unskilled labor requiring less than 2 years training or experience)
So we see to qualify for the first or second preference Green Card you must either be extraordinary or exceptional.
Extraordinary or exceptional likely have demonstrated some level of success. And success often translates into assets and income around the world prior to received a Green Card. And the continued success can also translate into more income an assets around the world.
The problem is that worldwide income has incredibly difficult tax compliance requirements.
To sum up, many US Green Card holders tend to have investments around the world prior to becoming a US person. And they continue these investments that carry with them a tremenous amount of tax complaince baggage. And these two reasons are why US Green Card holders tend to have a higher compliance burden than someone who is not, however no matter how large the burden, it can normally be addressed with the right tax team.