This article is for entrepreneurs who, for valid reasons, need to have a U.S. corporation to operate their businesses. Maybe the customers are in the United States. Maybe there is an office full of employees in the United States. Maybe banking and financial transactions are simpler when there is a U.S. corporation.1
The entrepreneur, however, decides to live abroad. Let’s use the phrase “digital nomad” (the current favorite appellation). This person is going to travel from place to place, working for the U.S. business, but staying below the radar in the various foreign countries.... continue reading
A joke should always be told punchline first. Right?
Here’s the conclusion of this little essay:
If you plan to file Form I-407 to abandon your green card, do it in person. If that is impossible, do not just mail in the form. Send it by certified mail, return receipt requested.
The U.S. tax effect of holding a green card visa is that you are considered a “resident alien” until the visa status is terminated. This means you must file a resident’s income tax return every year (Form 1040). You are taxable on your worldwide income, and must satisfy all of the paperwork requirements imposed by the U.S.... continue reading
Green card holders living abroad can have a weird hybrid (tax) life. They are U.S. residents for income tax, but can be U.S. nonresidents for gift tax purposes.1
This is a useful tax planning tool. We use it for people who wish to abandon green card status because they no longer wish to live in the United States. By making large gifts, they can avoid covered expatriate status for purpose of the exit tax. But any green card holder who is permanently settled abroad can use this to solve cross-border tax problems.
A person holding a permanent resident visa (aka the green card) is a “resident alien” for income tax purposes.... continue reading
If you make a large gift before expatriation and in the same year, you will pay a large gift tax. The unified credit does not apply to you.
Make your big gifts in year 1, and expatriate in year 2.
A covered expatriate is someone who has a net worth of $2,000,000 or more when relinquishing U.S. citizenship (or giving up a long-held green card).1
If you have a net worth of more than $2,000,000 but less than $7,500,000, it is possible to give away enough assets — with no gift tax — to avoid covered expatriate status.... continue reading
This week I want to cover a real estate situation, and the perils of being a withholding agent when there is a foreign seller of U.S. real estate.
From time to time I see foreign corporations as direct owners of U.S. real estate. This can work from a U.S. tax point of view (i.e., it can block the application of estate tax on the real estate if the shareholder dies).
But it creates a host of practical problems. And solving those practical problems will sometimes beget more practical problems.
This time I am going to explore the fine points of withholding tax on the sale of U.S.... continue reading