My_question_is: US-specific
Subject: surrender of green card
Expert: taxman at centa.com
Date: Thursday November 30, 2006
Time: 10:17 PM -0500
QUESTION:
How do I surrender my green card without jeopardising the ability
to travel to the USA for business and pleasure. I am a dual
British/Canadian citizen now retired and residing in BC Canada
after living and working in USA for 30 years.
===============================
david ingram replies:
There is no easy answer.
If you are giving up the green card to AVOID filing US tax
returns, then you could still be liable for 10 years of tax
returns and the paying of AMT AND banned from the US.
In my opinion, it is easier to just keep the card and keep on
filing the US returns and maybe hope that a US border person will
decide to take it away from you. At least, that way, you will
not have been seen to be giving up the green card to avoid US
taxes.
It may not apply to you but depending upon your net worth and
your earnings, giving up your green card after 8 years in the US
means that you have to file an expatriation return which is a
rather complicated form involving your last five years of US tax
returns, etc. Failure to file the return has a penalty of $10,000
each.
You can find form 8854 at
http://www.irs.gov/pub/irs-pdf/f8854.pdf
Detailed Instructions are to be found at
http://www.irs.gov/pub/irs-pdf/i8854.pdf
Some other basic instructions follow.
Expatriation After June 3, 2004
The alternative tax regime will apply to you for the 10
succeeding tax years following your action if any one of the
following apply.
Your average annual net income tax for the last 5 tax years
ending before the date of your action to relinquish your
citizenship or terminate your residency was more than $124,000
for 2004, and $127,000 for 2005 (as adjusted annually for
inflation).
Your net worth on the date of your action was $2,000,000 or more.
You fail to certify under penalties of perjury that all of your
U.S. federal tax obligations for the last 5 tax years ending
before the date of your action have been met.
Exception for dual citizens and certain minors. Dual citizens
and certain minors are not subject to the expatriation tax even
if they meet (1) or (2) above. However, they must provide the
certification required in (3) above. For the definitions of “dual
citizens” and “certain minors,” see Pub. 519.
Exception if in the United States for more than 30 days.
Generally, the alternative tax regime does not apply to any tax
year during the 10-year period if you are physically present in
the United States for more than 30 days during the calendar year
ending in that year. You must file Form 1040, 1040A, or 1040EZ,
and figure your tax as prescribed in the instructions for those
forms. For details, see Tax consequences of presence in the
United States under Expatriation After June 3, 2004, in Pub. 519.
Annual information statement. If the alternative tax regime
under the expatriation tax provisions applies to you, check the
“Yes” box in item P on Form 1040NR, page 5, and attach a
completed Form 8854 (Parts I and III of Schedules A and B) to
your tax return. You must attach the form for each of the 10 tax
years beginning with the year that includes your date of
expatriation, whether or not you owe U.S. tax. For more details
regarding the filing of Form 8854, see the Instructions for Form
8854.
Penalty. If you fail to file a required Form 8854 for any tax
year or fail to include all information required to be shown on
the form, you may have to pay a penalty in the amount of $10,000
for each required Form 8854. You will not have to pay the penalty
if you can show that the failure to file the completed form was
due to reasonable cause.
How To Figure Your Alternative Tax Under the Expatriation
Provisions
Note.
The following discussion applies to you whether you expatriated
before June 4, 2004, or after June 3, 2004.
If the alternative tax regime applies to you, you are subject to
tax on U.S. source gross income and gains on either (a) a net
basis at the graduated rates applicable to individuals (with
allowable deductions), or (b) a gross basis at a rate of 30% (or
lower treaty rate) under the rules of section 871(a). See page 27
for more details on the tax imposed under section 871(a).
If you have items of U.S. source income that are subject to tax
under section 871(a), you will be taxed at a rate of 30% (or
lower treaty rate) on your gross income only if this tax exceeds
the tax at the regular graduated rates on your net income. If the
30% (or lower treaty rate) tax on your gross income exceeds the
graduated tax on your net income, report those items on the
appropriate lines on page 4 of Form 1040NR. If the graduated tax
on your net income exceeds the 30% (or lower treaty rate) tax on
your gross income, report your income on the appropriate lines on
page 1 of Form 1040NR and attach a statement describing the items
and amounts of income that are subject to tax by reason of
section 877.
If you have other items of U.S. source income that are not
subject to tax under section 871(a), you will be taxed on a net
basis at the regular graduated rates applicable to individuals.
Report this income on the appropriate lines on page 1 of
Form 1040NR.
For purposes of figuring the tax due under section 877, the
following items of income are treated as U.S. source.
Gains on the sale or exchange of personal property located in the
United States.
Gains on the sale or exchange of stock issued by a domestic
corporation or debt obligations of the United States, U.S.
persons, a state or political subdivision thereof, and the
District of Columbia.
Income or gain derived from stock in a foreign corporation if you
owned, either directly or indirectly (through the rules of
sections 958(a) and 958(b)) more than 50% of the vote or value of
the stock of the corporation on the date of your renunciation of
citizenship or termination of residency or at any time during the
2 years preceding such date. Such income or gain is considered
U.S. source only to the extent of your share of the earnings and
profits earned or accumulated prior to the date of renunciation
of U.S. citizenship or termination of residency.
Any exchange of property is treated as a sale of the property at
its fair market value on the date of the exchange and any gain is
treated as U.S. source gross income in the tax year of the
exchange unless you enter into a gain recognition agreement under
Notice 97-19.
You may not claim that a tax treaty in effect on August 21, 1996,
prevents the imposition of tax by reason of section 877.
----------------------------------
David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa
Specialists
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My Home office is at:
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North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
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Calls welcomed from 10 AM to 10 PM 7 days a week Vancouver (LA)
time - (please do not fax or phone outside of those hours as
this is a home office)
email to taxman at centa.com
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without detailed
information or consultation and is to be regarded only as general
comment. Nothing in this message is or should be construed as
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duties are expressly denied. All readers should obtain formal
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