I wrote about C2 Lawful Permanent Resident status, otherwise known as the “commuter green card holder,” on this very blog a couple of years ago, “Commuter Green Cards“. Since then, I have received numerous inquiries about the United States taxation of commuter green card holders. You have likely found that this topic is difficult to find anywhere on the Internet. Accordingly, I have decided to address it right here.
As a green card holder, you are a U.S. tax resident. However, the definition of residency under U.S. tax laws does not override tax treaty definitions of residency. If you are a dual-resident taxpayer (a resident of both the United States and another country, such as Canada, under each country’s tax laws), you can still claim the benefits under an income tax treaty.
The income tax treaty between the two countries must contain a provision that provides for resolution of conflicting claims of residence (tie-breaker rule). If you would be treated as a resident of the other country under the tie-breaker rule and you claim treaty benefits as a resident of that country, you are treated as a nonresident alien in figuring your U.S. income tax. For purposes other than figuring your tax, you will be treated as a U.S. resident. [emphasis added]
If you are a dual-resident taxpayer and you claim treaty benefits as a resident of the other country, you must file a return by the due date (including extensions) using Form 1040NR or Form 1040NR-EZ, and compute your tax as a nonresident alien. You must also attach a fully completed Form 8833 if you determine your residency under a tax treaty. You may also have to attach other disclosure forms, including but not limited to, Forms 8938, 5471, 3520 or 8621.
Commuter green card holders are also required to comply with the Bank Secrecy Act by reporting foreign financial accounts to the Department of Treasury by electronically filing a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (commonly referred to as the “FBAR”). Even though, a commuter green card holder may claim non-residency status under a tax treaty to figure U.S. income tax, the commuter is still required to comply with the FBAR filing requirements, since tax treaties with the United States do not affect FBAR filing obligations. A commuter green card holder is still considered a “resident” for FBAR purposes, see IRC section 7701(b).
If you have any questions, please do not hesitate to contact us at 519-252-3888 or firstname.lastname@example.org.
About Ingenuity Counsel
Ingenuity Counsel, based in Windsor, Ontario, Canada, provides cross border tax & United States legal services to Canadians. Michael Kennedy and his team at Ingenuity Counsel Incorporated assist companies and entrepreneurs with immigration, business, real estate and tax matters in the U.S. With his expertise, he is able to walk clients through the process of successfully setting up their business in the United States. Additionally, Ingenuity Counsel advises clients that own property in Florida, Michigan, Arizona & California with respect to income tax, estate planning & administration matters. Michael also handles wills & trusts, powers of attorney and probate administrations. Whether you have real property, financial accounts or business assets located in the United States, Michael and his team can help.
Michael is admitted to practice law in California & Michigan and permitted by the Law Society of Upper Canada to provide U.S. legal services in Ontario as a Foreign Legal Consultant. Prior to establishing Ingenuity Counsel in 2012, he practiced law in the United States for more than 10 years in California, Michigan and Florida.
To learn more about Michael and his team at Ingenuity Counsel and how they can help you and your family, visit www.ingenuitycounsel.com.
IRS Circular 230 Disclosure
To ensure compliance with requirements imposed by the U.S. Internal Revenue Service, we inform you that any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding tax-related penalties under the U.S. Internal Revenue Code or (2) promoting, marketing or recommending to another party any tax-related matters addressed herein.
The information contained herein is for informational purposes only, and cannot be relied upon as legal advice. Every person’s needs and situation are different that must be analyzed independently. After reading this article, if you feel you have, or a client has, U.S. estate or gift tax exposure or any other U.S. tax or legal issue, you should promptly consult with an experienced U.S. lawyer in order to examine the situation. Your reliance upon any information contained in this article will not create an attorney-client relationship with the author.
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