Tax Counseling for U.S. Foreign Nationals

Many U.S. immigrants maintain both familial and financial ties to their home country long after they have relocated to the U.S.  You might maintain bank accounts in your country of origin or hold business investments there.  Once you become a U.S. resident – whether permanent or temporary – you will immediately be charged with new reporting and tax obligations on your financial assets abroad.  It is important to take an inventory of all your assets in order to understand your reporting and tax obligations.  For example, suppose your mother has your name on a bank account in her country in case of an emergency.  Even though you aren’t the primary holder of the account, you must report the account to the U.S. government, and possibly pay tax on any money earned in the account.

Failing to understand your tax and reporting obligations as a U.S. resident can have disastrous consequences, such as losing your visa or posing problems if you apply for a change of status or for U.S. citizenship.  Naturalization requires that the applicant demonstrate “good moral character.”  Tax infractions can serve as grounds to deny your citizenship application.

It is also important to think about any ways in which your future financial situation or your immigration status may change.  If you plan to stay in the U.S. indefinitely, you may want to plan your financial affairs in a manner different than if you only intend to remain here for a few years.  Additionally, if you expect large gifts or an inheritance from family members in your home country, you should encourage those family members to speak with a tax professional about U.S. tax laws that may affect their plans.  Without proper counseling, they may take actions that inadvertently trigger U.S. taxes for themselves or for you.

U.S. Income Taxation

In most countries, you are subject to income tax only on money you earn in that country.  In contrast, if you qualify as a “U.S. Person” under the U.S. tax code, you are subject to U.S. income tax on income you earn anywhere in the world.  This may come as a surprise to U.S. citizens living abroad and to foreign nationals who have relocated to the U.S.

U.S. Citizens and Green Card Holders.  All U.S. citizens and legal permanent residents qualify as U.S. persons, regardless of whether they live in the U.S. or in another country.  If you’re a U.S. citizen or U.S. legal permanent resident living abroad, you must file a U.S. income tax return, even if all of your income was earned outside the U.S.  If you meet certain requirements, up to $97,600 of your foreign income (in 2013, indexed for inflation) may be excluded from U.S. income tax.