As a green card holder, you are a tax resident and are taxed on your worldwide income from the date you get your green card, under the same tax laws as US citizens. You must report all income, use all applicable deductions and credits, and meet federal and state tax obligations. Knowing these requirements is key to keeping your status and avoiding penalties. This article will cover the main tax filing requirements for green card holders. Additionally, maintaining relationships with a foreign country can be significant for tax benefits and residency qualifications.
WHAT ARE THE TAX FILING REQUIREMENTS FOR GREEN CARD HOLDERS?
FILING IRS FORM 1040 AS A US RESIDENT
Green card holders must file IRS Form 1040 as US residents. This form is used to report annual income and calculate the amount of federal income tax owed or refund due.
STANDARD FILING THRESHOLDS
The filing thresholds for green card holders depend on their filing status and age. For 2023:
Single: $13,850 (under 65), $15,700 (65 or older)
Married Filing Jointly: $27,700 (both under 65), $29,650 (one spouse 65 or older), $31,500 (both 65 or older)
Head of Household: $20,800 (under 65), $22,650 (65 or older)
Self-Employed: Must file if net earnings are $400 or more
Even if income is below these thresholds, green card holders must file if self-employed and earn $400 or more annually.
HOW DOES FILING STATUS AFFECT TAX FILING REQUIREMENTS FOR GREEN CARD HOLDERS?
For green card holders, selecting the correct filing status is crucial as it directly impacts your tax rates and filing requirements. Here’s a breakdown of the main filing statuses:
Single: This applies if you are unmarried or legally separated as of the last day of the tax year.
Impact: Generally faces the highest tax rates but is straightforward in terms of eligibility.
Married Filing Jointly: You are married, and both you and your spouse choose to file a joint return.
Impact: Often benefits from a lower tax rate compared to filing separately. It allows you to combine incomes and deductions, potentially qualifying for more tax credits.
Married Filing Separately: You are married but opt to file separately from your spouse.
Impact: Typically incurs a higher tax rate. Some tax credits and deductions may be reduced or unavailable.
Head of Household: This applies if you are unmarried (or considered unmarried), pay more than half the cost of maintaining a home for yourself and a qualifying person, and have a qualifying dependent living with you for more than half the year.
Impact: Usually offers a lower tax rate and a higher standard deduction than Single status.
Qualifying Widow(er) with Dependent Child: If your spouse died in the previous two years, you have not remarried, and you have a dependent child living with you, this status may apply.
Impact: Allows you to use the same tax rates as Married Filing Jointly, generally resulting in lower taxes, along with a higher standard deduction.
Choosing the correct filing status ensures that you comply with U.S. tax laws and can potentially maximize your tax benefits.
KEY FORMS AND DOCUMENTS
IRS Form 1040: Main tax return form.
Form 1116: To claim the Foreign Tax Credit if you have foreign-sourced income
FATCA Reporting: If you have foreign financial assets that exceed the filing threshold, you must file form 8938.
Foreign Bank Account Report (FBAR): If you have foreign financial accounts over $10,000.
Green card holders living abroad may qualify for the Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC) which can reduce or eliminate U.S. tax on foreign income.
WHAT ARE MY U.S. TAX OBLIGATIONS IF MY GREEN CARD EXPIRES?
If your green card expires you still have U.S. tax obligations unless you formally renounce your green card or have it revoked. You are a U.S. resident for tax purposes and must file taxes if you meet the substantial presence test.
Consult with a tax professional for your specific situation. Individuals who have been residents for a long time (specifically 8 out of the last 15 years) are subject to an exit tax when renouncing their green card.
WHAT IS A GREEN CARD HOLDER’S TAX RESIDENCY STATUS?
A green card holder, also known as a lawful permanent resident, is a U.S. tax resident. This means you are subject to U.S. tax laws and must file taxes like U.S. citizens.
U.S. Tax Residency Regardless of Physical Presence Green card holders are U.S. tax residents regardless of their physical presence in the U.S. They must report and pay taxes on their worldwide income.
Global Income Implications As U.S. tax residents, green card holders must report and pay taxes on income from all sources, inside and outside the U.S. You must file a U.S. tax return annually and disclose your global income.
WHAT IF I DON’T FILE MY TAXES AS A GREEN CARD HOLDER?
Not filing your taxes as a green card holder can result in:
Financial Penalties
Late Filing and Payment Penalties: The IRS enforces penalties for late filing of tax returns and late payment of taxes due. Additionally, interest accumulates on any outstanding tax amounts.
Form 8938 Penalties: Failing to report specified foreign financial assets using Form 8938 can result in a $10,000 penalty. This can increase by $10,000 for every 30 days of non-filing after receiving an IRS notice, up to a maximum of $60,000.
FBAR Penalties: Neglecting to file the Report of Foreign Bank and Financial Accounts (FBAR) can incur penalties of up to $10,000 per non-willful violation, with significantly higher fines for willful violations.
Legal and Immigration Consequences
Legal Action by the IRS: The IRS has the power to take legal measures such as levying bank accounts, garnishing wages, or placing a federal tax lien on your property.
Impact on Immigration Status: Failure to file taxes can negatively impact immigration status, complicating the renewal of a green card or application for U.S. citizenship. Proof of tax compliance may be required by immigration authorities during these processes.
Loss of Benefits
Neglecting to file taxes can also result in losing eligibility for various government benefits, including Social Security, federal student aid, health insurance subsidies, and unemployment benefits.
File always, even if you don’t owe anything to avoid these problems.
DO I STILL NEED TO FILE IF MY GREEN CARD EXPIRED?
Yes, you still need to file U.S. taxes even if your green card has expired. Until you formally abandon your green card or it is revoked, you are considered a U.S. resident for tax purposes and must file all tax requirements. Contact a tax professional for specific advice on your situation.
WHAT TO KNOW ABOUT GIVING UP YOUR GREEN CARD?
If you’re giving up your green card, the process and consequences vary depending on how long you’ve had it. If you’ve been a U.S. permanent resident for less than 8 years, you simply file Form I-407 to terminate your status. If you’ve had your green card for more than 8 years, you’ll need to file Form 8854 to comply with expatriation tax rules. If you’re a long-term resident who has lived abroad for more than 8 years and want to become non-resident again, you may be able to take a treaty position to amend your last 2 years of returns and file Form I-407 to cease being a U.S. resident. This is a complex process so don’t hesitate to reach out to our team who have extensive experience with these situations.
As a green card holder, you must report worldwide income and file U.S. taxes using forms like Form 1040. Green card holders must pay tax on their worldwide income according to U.S. tax law. Non-compliance can result in penalties, loss of immigration benefits, and potential deportation. Even if your green card expires you may still have tax obligations unless you formally abandon your status. Filing taxes protects your residency status and allows you to enjoy the benefits of living and working in the U.S., including sponsoring family members, and applying for citizenship and social security benefits. Compliance means a safe and prosperous life in the U.S.
FREE TAX CONSULTATIONS FOR GREEN CARD HOLDERS
Navigating U.S. taxes can be challenging for green card holders and U.S. expats living abroad. At 1040 Abroad, we offer free email tax consultations, where our enrolled agents are ready to answer any questions you may have. Our goal is to help expats understand their tax obligations, ensuring they comply with U.S. tax laws and take advantage of available tax credits and deductions.
WRITTEN BY
Kasia Strzelczyk, EA
A certified accountant and IRS enrolled agent with over 8 years of experience working with US expats. With a deep understanding of the unique financial challenges faced by expats, Kasia is dedicated to helping clients navigate complex tax laws and regulations.
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