Many people dream of an American citizenship and for that there are many good reasons. But besides the many upsides that exist for those who have citizenship to one of the most powerful countries in the entire world, there are also many requirements, one of the main important ones being the requirement to submit tax reports, and sometimes even paying, income tax. So, if you are green card holders and are not sure what your tax requirements are to the tax authorities of the United States, this article is exactly for you.
Green Card Holders – American Citizens for Tax Purposes
The United States of America is considered the land of endless possibilities, because of it being democratic and also because of it being a powerful country when it comes to international finances, giving many opportunities for profit to investors and companies. Accordingly, an American citizenship is many peoples dream, and that dream can be achieved through the green card program, that grants people different rights and the standing of a permanent citizen.
Along with the many upsides that come with being a green card holder, there are also many requirements to be followed, including the fact that green card holders are considered full American citizens for the purposes of taxation, while the United States’ system of taxation requires them to report their taxes, and sometimes even pay tax, even if they do not live in one of the states in the United States of America.
The Requirement to Report, and Sometimes Even Pay, the American Tax Authority
One of the unique components of the American taxing system, is the report requirement, and sometimes even payment, on a personal level and without discrimination between employees and independent workers, so that also green card holders, even if they do not reside in one of the states in the United States and have never visited the United States, will be required, given certain circumstances, to report on their income tax to the tax authorities.
It is important to mention here, that there is a difference between the requirement to report on taxes to the tax authorities and the payment of the taxes themselves. The requirement to report can occur privately and independently, so that even in cases where the taxpayer does not owe any taxes to the United States, they would still have to submit a tax report as required.
In What Way Would Green Card Holders Be Required to Report on Their Taxes to the Tax Authorities?
For American citizens and green card holders alike, a tax report is required to be submitted to the tax authorities once the income threshold that is set in the tax law has been passed.
In general, it could be said that the income threshold yearly for independent workers that requires them to report to the tax authorities is an income of $400, while in the case of hired employees there are different criteria, according to the personal status of the report submitter, that decide the different income thresholds.
Another criterion that requires green card holders to report on their taxes to the tax authorities, is having foreign bank accounts, where the requirement to report in this case would apply if the sum of all the financial accounts of the taxpayer is a sum of over $10,000 at any point in time during the tax year.
Did You Not Report Your Taxes? You Are Exposed to Fines and Sanctions
The American tax authority works hard in an effort to prevent unreported money going around, and they utilize a large portion of the resources and scare tactics to ensure that the taxes that are owed are being paid. One of the tools used by the American tax authority, is the ability to impose high taxes, that collect interests and even other sanctions, and could even result in the green card being nullified.
In our case, many people are not aware of the fact that green card holders are considered American citizens for tax purposes, so they are certainly exposed to these fines and sanctions mentioned above.
Therefore, it is important to consult with a professional and experienced company in this field, in order to find out if the requirement to report applies to you and if so, how can the absence of the reporting be resolved.
What Is a Voluntary Disclosure Procedure?
Because of the understanding that many green card holders choose not to fulfill the requirement to report on their taxes to the American tax authority unintentionally, and because they lack the necessary information to know about the requirement to begin with, the American tax authority put together the voluntary disclosure procedure.
The voluntary disclosure procedure was created in order to incentivize American citizens and green card holders to fulfill their reporting requirements, and in the procedure, it is possible to set the lack of tax reports right and receive protection from sanctions and other different punishments (as long as the lack of reporting was really due to misinformation and was not done intentionally) and start on a clean slate with the American tax authority.
Get to Know the Forms You Will Need to Use in Order to Report on Your Taxes to the Tax Authorities
The 1040 Form
In order to report on your income according to the tax thresholds that were decided on by the American tax authority, for independent workers and hired workers, you will be required to fill out an income tax report, named the 1040 form that is relevant for American citizens and green card holders.
In 1040 form you will be required to fill in personal details, regarding your status and your standing as well as financial details that have something to do with your income – the source of the income, where it was produced, your salary, income that is not considered salary (dividends interests trusts and more). In addition, the 1040 form includes a specific section dedicated to possible tax deductions.
The FBAR Form
In the case that you have foreign accounts, that are being handled outside the United States of America, you will be required to submit an FBAR form for those financial accounts, that includes information on checking accounts, savings plans, insurances for different services, and more.
What Should You Do in the Case That You Are No Longer Interested in Having a Green Card?
As long as you’re not interested in visiting the United States of America and you have no value in holding a green card , it stands to reason that the requirement to report on taxes to the American tax authorities, and the sanctions and harsh punishments that could possibly come with it, this could be and needless source of stress for you, a stress that you can handle by giving up your green card. But it seems this is not such a simple step to take.
Giving up a green card he’s carried out through submitting a signed I – 407 form, in which you are declaring officially that you are interested in giving up your status as permanent citizens. In addition, you will also have to fill out an 8854 form, in which you will be required to report on all of your income and your properties, in order for the tax authority to make sure that you have no unpaid taxes left.
The Different Taxation Aspects of Giving Up a Green Card
Giving up a green card could possibly include paying and exit tax as well as receiving a “foreign citizen” status at all the government authorities in the United States of America, including the tax authority.
That is why, before taking steps such as this, it is important to consult with an experienced and professional company in this field, and one that is well informed about all the aspects and repercussions, legal and financial, of giving up a green card.
