Tax & Accounting Blog

Foreign Nationals: Resident Alien or Nonresident Alien and Why It Matters: Part 4 – Tax Impact of Loss of Immigration Status

ONESOURCE, Tax Information Reporting, W-8 & W-9 Foreign Reporting, Withholding Management November 15, 2012

U.S. lawful permanent residents, also called immigrants or green card holders, who are long-term residents and who have lost their U.S. green card status by revocation or abandonment (whether intentionally or inadvertently) might be subject to a departure tax and/or special tax and reporting rules depending on the date that they lost their U.S. status if they meet certain specified thresholds of average tax liability or net worth. (The tax law and related procedures related to loss of status have changed several times since 1996. See IRS Publication 519, U.S. Tax Guide for Aliens for a description of the rules.)

Green card holders are long-term residents if they have had such status in any part of eight out of 15 consecutive tax years including the tax year during which such status was lost. Such tax years do not include any tax year in which the foreign national was a nonresident alien under a tax treaty tiebreaker rule. Former green card holders must provide information about their compliance with their U.S. income tax obligations on Form 8854 immediately following their loss of green card status. The rules for claiming tax treaty exemptions from U.S. tax and for withholding on certain types of distributions vary depending on the set of rules in effect at the time their green card status was lost.