Green Card holders living in Canada

If you have a green card, that is proof that you are a “lawful permanent resident” of the US and as such you are required to report and pay tax on your worldwide income to the US, regardless of where you physically reside. This includes both federal income and estate (death) taxes.

There are two scenarios in which filing US returns may not be necessary; 1) if your income is less than the amount that requires you to file, no tax return is necessary at all, and 2) if based on the Canada-US Treaty tie-breaker rules, it is determined that you are a resident of Canada, you will not be required to report your worldwide income. However, a tax return will still be necessary to report US source income and to notify the IRS on form 8833 that you have used the Treaty tie-breaker rules and have determined that you are a resident of Canada and a nonresident of the US. In this case you will file a form 1040NR instead of the usual form 1040.

If you were a green card holder for at least 8 out of the last 15 years, you are considered a “longterm resident” and will potentially be subject to an exit tax upon leaving the US. If you were a long-term resident and you did not go through the process of determining if you were subject to an exit tax when you left the US, you should contact a cross-border tax professional to determine what should be done.

To relinquish your green card you must file form 8854 to notify the IRS and form I-407 to notify the US Citizenship and Immigration Services. You must give the form to a diplomatic or consular officer of the US or at a Port of Entry immigration officer. Form 8854 will take you through the questions that will determine if you are subject to the exit tax, and if so, it will determine the amount of tax.

For more information see IRS Publication 4588 or contact us at Cross Border Tax & Accounting.

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