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Green Card US Tax Residency Relationship | International Tax Lawyers Miami

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The definition of a US tax resident consists of various categories.  Among them are US Permanent Residents or “green card” holders.  This article explores Green Card US tax residency relationship.

General Rule: Green Card Holders are US Tax Residents

A lawful permanent resident of the United States is a US tax resident. IRC §7701(b)(1)(A)(i). IRC §7701(b)(6) defines the lawful permanent resident as: (1) the individual who has been “lawfully accorded the privilege of residing permanently in the United States as an immigrant in according with the immigrations laws” at any time during the calendar year, and (2) “such status has not been revoked (and has not been administratively or judicially determined to have been abandoned).”

Green Card US Tax Residency: Physical Presence in the United States Does Not Matter

As you can see from the definition above, the green card test does not depend on where the US permanent resident actually resides.  In other words, even if a green card holder spent very little time (just enough to maintain his green card) in the United States, he is still a US tax resident.

Green Card US Tax Residency: Entry into the United States is Critical

Contrary to the actual physical presence after becoming a US tax resident, the entry into the United States with a green card is a highly important event.  As the regulations explain, a green card holder is not a “resident alien” for US tax purposes until he actually enters the United States while holding his green card.  “The residency starting date for an alien who meets the lawful permanent resident test (green card test), described in paragraph (b)(1) of § 301.7701(b)-1, is the first day during the calendar year in which the individual is physically present in the United States as a lawful permanent resident.” §301.7701(b)-4(a).

This means that, if an alien receives a green card but never enters the United States, he will never be a “resident alien” for US tax purposes. Of course, presumably, the green card will eventually lose its validity for failure to maintain it.

However, once the alien enters the United States with his green card, he becomes a resident alien for US tax purposes exactly on that day.  His US tax residency will last until the green card is revoked or he is considered to have abandoned his US permanent residency either judicially or administratively.

Green Card US Tax Residency: US International Tax Implications

Since obtaining a green card is pretty much equivalent to becoming a US tax resident, we must explore the implications of becoming a US tax resident especially from the US international tax perspective.  In a previous article, I already explored in detail the differences between US tax obligations of a resident alien (for US tax purposes) versus nonresident alien. Here, I will highlight the most important of these obligations from the US international tax perspective.

The first obvious US tax consequence of getting a green card and becoming a US tax resident is worldwide income taxation.  The United States government taxes its tax residents on their worldwide income, irrespective of where they earn this income. It also does not matter whether the green card holder’s foreign income is subject to taxation in a foreign country, whether it has been repatriated to the United States, whether it comes from pre-US funds, et cetera.  The obligation to report foreign income on US tax returns is absolute (of course there may be some treaty-based specific exceptions).

Second, a US tax resident may have to report deemed income based on the various anti-deferral tax regimes, such as Subpart F rules, GILTI, et cetera.

Finally, a US tax resident must also comply with all of his US information returns obligations, such as FBAR (officially FinCEN Form 114, the Report of Foreign Bank and Financial Accounts), Form 3520, Form 3520-A, Form 5471, Form 8621, Form 8865, Form 8938, Form 926, et cetera

Contact Sherayzen Law Office to Understand Your US International Tax Obligations as a Green Card Holder

If you have a green card and you wish to understand your US international tax obligations, you should contact the international tax law firm of Sherayzen Law Office.  We have extensive experience in advising green card holders concerning their US tax obligations, including compliance with US international information returns.  If you have not compliant with your US tax obligations, then we can help bring your US tax affairs into full compliance with US tax laws.

Contact Us Today to Schedule Your Confidential Consultation!

2025 Foreign Earned Income Exclusion | International Tax Lawyer & Attorney

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The Foreign Earned Income Exclusion (“FEIE”) is a valuable tax strategy available to US tax residents who live and work abroad. It allows US citizens to exclude a certain amount of foreign earned income from their US taxable income. The IRS adjusts the precise amount every year.  In this article, I will discuss the 2025 Foreign Earned Income Exclusion.

2025 Foreign Earned Income Exclusion: Background Information

FEIE was born out of the fact that the US tax system is unique and taxes its citizens and even more broadly its residents on their worldwide income irrespective of where they reside. In many countries, such taxpayers are subject to local foreign income taxes on the same income. In order to alleviate the potential burden of double taxation, the US Congress enacted Section 911 of the Internal Revenue Code. This section codified FEIE.

Section 911 allows qualifying individuals to exclude a specified amount of foreign earned income from US taxable income. The IRS adjusts this amount every single year.  A taxpayer must use Form 2555 to claim FEIE.

2025 Foreign Earned Income Exclusion: Eligibility

In order to claim FEIE, a taxpayer must meet certain requirements set forth in IRC §911. I will provide only a brief outline of these requirements in this article. They are discussed in more detail in other articles on our website.

First of all, FEIE applies only to foreign earned income, not passive income and not US-source income.

Second, the taxpayer must maintain his tax home in a foreign country. “Tax Home” is a term of art that has its specific meaning.

Third, you must pass either the physical presence test or the bona fide residence test.

2025 Foreign Earned Income Exclusion: Additional Considerations

While FEIE brings a huge benefit of income exclusion, it often is not the best option for US taxpayers who reside overseas. Let’s focus on the four most important considerations.

First, FEIE limits and in some cases completely eliminates the ability to take Foreign Tax Credit (“FTC”). If you use FEIE, you cannot use the FTC to reduce US taxes on income already excluded under the FEIE.  The problem arises when FTC is actually higher than the US tax.  In this case, you may be losing a very important tax strategy to reduce your US taxes not only in the current year, but also in the future.

Second, FEIE may result in ineligibility to take other tax credits normally available to a taxpayer.

Third, despite the income tax exclusion, your tax bracket will still be the same as if you were taxed on the whole amount (i.e. as if you had not claimed the foreign earned income exclusion).

Finally, while not a tax consideration, usage of FEIE by US permanent residents may result in the abandonment of their green card. In other words, FEIE may present a huge risk to the immigration goals of a taxpayer.

2025 Foreign Earned Income Exclusion: Adjustment for 2025

On October 22, 2024, the IRS announced that the foreign earned income exclusion amount under §911(b)(2)(D)(i) is going to be $130,000 for the tax year 2025. This is up from $126,500 in the tax year 2024.

Contact Sherayzen Law Office for Professional Help with Foreign Earned Income Exclusion

The Foreign Earned Income Exclusion is a vital tax tool for US taxpayers working abroad, but it must be used cautiously and after careful consideration of all circumstances.  Hence, if you are a US taxpayer who lives abroad or you are planning to accept a job overseas, you need to secure the help of Sherayzen Law Office, a premier firm in US international tax compliance. We can help you navigate the complexities of FEIE, determine your eligibility for it and build a tax strategy to help you maximize the advantages offered by the Internal Revenue Code.

Contact Us Today to Schedule Your Confidential Consultation!

Closer Connection Exception | International Tax Lawyer & Attorney

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The Closer Connection Exception is a very important provision in US international tax law, because it provides a potential way for individuals who meet the Substantial Presence Test to still be treated as nonresident aliens for US income tax purposes. This article explores the Closer Connection Exception, its requirements and its implications for US and foreign taxpayers.

Understanding the Closer Connection Exception

The Closer Connection Exception is found in Internal Revenue Code (IRC) §7701(b)(3)(B) and is further elaborated in Treasury Regulation §301.7701(b)-2. This exception allows an individual who would otherwise be considered a US tax resident under the Substantial Presence Test to be treated as a nonresident alien for income tax purposes if he can demonstrate a “closer connection” to a foreign country.

Key Requirements for the Closer Connection Exception

IRC § 7701(b)(3)(B) and Treas. Reg. § 301.7701(b)-2(a) lay out the Closer Connection Exception eligibility criteria that an an individual must meet:

1.The individual must be present in the United States for fewer than 183 days in the current calendar year;

2.The individual must maintain a tax home in a foreign country during the year;

3.The individual must have a closer connection to that foreign country than to the United States; and

4. An individual must be an eligible individual.

Let’s explore each of these three requirements in detail.

Closer Connection Exception: The 183-Day Rule

The first requirement of the Closer Connection Exception is fairly straightforward: the individual must be present in the United States for fewer than 183 days in the current calendar year. This is a hard limit. Even one additional day of presence will disqualify an individual from claiming this exception.

It is important to emphasize that this 183-day threshold is different from the count of days used in the Substantial Presence Test, which includes a lookback period. For the Closer Connection Exception, only days of physical presence in the United States in the current year are considered. Treas. Reg. §301.7701(b)-2(a)(1).

Closer Connection Exception: Foreign Tax Home Requirement

The second requirement for the Closer Connection Exception is that the individual must maintain a tax home in a foreign country during the year.  IRC §911(d)(3) defines the concept of “tax home” as an individual’s principal place of business.  “If the individual has no regular or principal place of business because of the nature of the business, or because the individual is not engaged in carrying on any trade or business within the meaning of section 162(a), then the individual’s tax home is the individual’s regular place of abode in a real and substantial sense.” Treas. Reg. §301.7701(b)-2(c)(1).  This is obviously a very fact-dependent definition of tax home, which requires exploration of all relevant circumstances (such as the location of the individual’s permanent home, family and even personal belongings).

The individual’s foreign tax home must be in existence for the entire current year. It must also be located in the same foreign country for which the individual is claiming to have the closer connection. Treas. Reg. §301.7701(b)-2(c)(2).

Closer Connection Exception: Closer Connection to Foreign Country

The third and often most complex requirement of the Closer Connection Exception is demonstrating a closer connection to a foreign country than to the United States.  Treasury Regulations state that this requires establishing “that the individual has maintained more significant contacts with the foreign country than with the United States”. Treas. Reg. §301.7701(b)-2(d).  

This analysis of course requires a detailed exploration of all relevant facts and circumstances. Treas. Reg. § 301.7701(b)-2(d)(1) provide the following non-exclusive list of key factors that one must consider in determining whether a closer connection to a foreign country exists:

1.The location of the individual’s permanent home;

2.The location of the individual’s family;

3.The location of personal belongings;

4.The location of social, political, cultural, or religious organizations with which the individual has a relationship;

5.The location where the individual conducts routine personal banking activities;

6.The location where the individual conducts business activities;

7.The location of the jurisdiction in which the individual holds a driver’s license;

8.The location of the jurisdiction in which the individual votes;

9.The country of residence designated by the individual on his forms and documents; and

10. The types of official forms and documents filed by the individual, such as Form 1078 (Certificate of Alien Claiming Residence in the United States), Form W-8 (Certificate of Foreign Status) or Form W-9 (Payer’s Request for Taxpayer ldentification Number).

Regarding the first factor, individual’s permanent home, it does not matter whether a permanent home is a house, an apartment or a furnished room. It also does not matter whether the individual owns or rents his home. “It is material, however, that the dwelling be available at all times, continuously, and not solely for stays of short duration.” Treas. Reg. §301.7701(b)-2(d)(1).

Closer Connection Exception: Multiple Foreign Countries

A question arises in this context: what if an individual has connections not to just one, but  two foreign countries? Can an individual have a tax home in two or more countries?

Generally, an individual can have a closer connection to only one foreign country. However, it is possible to have a closer connection to two foreign countries in a single year if the individual moved their tax home during the year. In such cases, the individual can have a closer connection to each country for the part of the year they maintained a tax home in that country.

Treas. Reg. §301.7701(b)-2(e) lays out a detailed legal test in this case of multiple foreign country connections.  In order for an individual to be able to claim the Closer Connection Exception in cases of close contacts with more than one foreign country, this individual must satisfy the following conditions:

(1) The individual maintains a tax home beginning on the first day of the current year in one foreign country;

(2) The individual changes his or her tax home during the current year to a second foreign country;

(3) The individual continues to maintain his or her tax home in the second foreign country for the remainder of the current year;

(4) The individual has a closer connection to each foreign country than to the United States for the period during which the individual maintains a tax home in that foreign country; and

(5) The individual is subject to taxation as a resident pursuant to the internal laws of either foreign country for the entire year or subject to taxation as a resident in both foreign countries for the period during which the individual maintains a tax home in each foreign country.

Closer Connection Exception: Eligible Individual

As stated above, the final condition for the Exception is that an individual must be an eligible individual. Ineligible individuals include: (a) individuals who have applied for status as a lawful permanent resident of the United States (i.e., applied for a green card), and (b) individuals who have an application pending for adjustment of status. IRC §7701(b)(3)(C). 

Treas. Reg. §301.7701(b)-2(f) specifically sets forth the following list of actions which would make an individual ineligible to claim the Closer Connection Exception:

“Affirmative steps to change status to that of a permanent resident include, but are not limited to, the following—

(1) The filing of Immigration and Naturalization Form I-508 (Waiver of Immunities) by the alien;

(2) The filing of Immigration and Naturalization Form I-485 (Application for Status as Permanent Resident) by the alien;

(3) The filing of Immigration and Naturalization Form I-130 (Petition for Alien Relative) on behalf of the alien;

(4) The filing of Immigration and Naturalization Form I-140 (Petition for Prospective Immigrant Employee) on behalf of the alien;

(5) The filing of Department of Labor Form ETA-750 (Application for Alien Employment Certification) on behalf of the alien; or

(6) The filing of Department of State Form OF-230 (Application for Immigrant Visa and Alien Registration) by the alien.”

Closer Connection Exception: Form 8840

To claim the Closer Connection Exception, eligible individuals must file Form 8840, Closer Connection Exception Statement for Aliens, with the IRS. This form must be filed by the due date of the individual’s nonresident alien income tax return (Form 1040-NR), including extensions. Form 8840 requires detailed information about the individual’s presence in the United States, tax home, and factors demonstrating a closer connection to a foreign country. Failure to timely file this form may result in the individual being unable to claim the exception. Treas. Reg. §301.7701(b)-8(c).

Closer Connection Exception: Interaction with Tax Treaties

It’s important to note that the Closer Connection Exception is separate from any residency determinations under tax treaties. An individual who does not qualify for the Closer Connection Exception may still be able to claim nonresident status under a tax treaty’s tie-breaker rules. Conversely, qualifying for the Closer Connection Exception may eliminate the need to rely on treaty provisions. See Treas. Reg. §301.7701(b)-7.

Closer Connection Exception: Implications for Other Reporting Requirements

While the Closer Connection Exception can significantly alter an individual’s US income tax obligations, it is very important to understand that it may not exempt the individual from all US reporting requirements, particularly information returns such as FBAR and Form 8938.

Contact Sherayzen Law Office for Professional Help With US International Tax Law

US international tax law is extremely complex.  The Closer Connection Exception and its potential impact on an individual’s tax status is just an example of this complexity. This is why, if you have assets in or income from foreign countries, you need to seek the professional help of Sherayzen Law Office.  We are a leading US international tax law firm which offers comprehensive support in US international tax compliance (including IRS offshore voluntary disclosures) and US international tax planning. Our deep understanding of and extensive experienced in US international tax law allows us to proffer a professional advice tailored to your specific circumstances.

Contact Us Today to Schedule Your Confidential Consultation!

Digital Currency Final Regulations: Broad Overview | Cryptocurrency Tax Attorney

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On June 28, 2024, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) have issued final regulations requiring brokers to report sales and exchanges of digital assets, including cryptocurrency. These digital currency final regulations aim to improve tax compliance and provide taxpayers with necessary information for accurate tax reporting.

Digital Currency Final Regulations: Scope and Implementation

The new regulations will apply to transactions beginning in calendar year 2025, with reports to be filed on the new Form 1099-DA. These rules primarily affect custodial brokers who take possession of digital assets being sold by their customers, including:

  • Operators of custodial digital asset trading platforms
  • Certain digital asset hosted wallet providers
  • Digital asset kiosks
  • Certain processors of digital asset payments (PDAPs)

Notably, the regulations do not currently include reporting requirements for non-custodial or decentralized brokers. The Treasury and IRS plan to address these entities in a separate set of regulations in the future.

Digital Currency Final Regulations: Key Provisions

There are six key areas addressed in the final regulations:

  1. Basis, Gain, and Loss Determination: The regulations provide rules for taxpayers to determine their basis, gain, and loss from digital asset transactions. This is very important, because we will now have a more or less clear set of rules to follow.
  2. Backup Withholding: New rules for backup withholding on certain digital asset transactions are included. This is a critical issue, especially in the context of US international tax law.
  3. Real Estate Transactions: Real estate professionals must report the fair market value of digital assets used in real estate transactions with closing dates on or after January 1, 2026. Another key provision aimed to improve tax compliance in this area.
  4. Aggregate Reporting: An optional aggregate reporting method is provided for certain sales of stablecoins and non-fungible tokens (NFTs) that exceed specified thresholds.
  5. PDAP Transactions: Reporting is required on a transactional basis only if customer sales exceed a de minimis threshold.
  6. Basis Reporting: Certain brokers must report basis for transactions occurring on or after January 1, 2026. This is a very good provision for US taxpayers, because cost-basis determination is often very cumbersome when it comes to digital asset gain reporting.

Digital Currency Final Regulations: Transitional Relief and Exceptions

Obviously, the new reporting requirements is an increased compliance burden on affected custodial brokers. In order to ease this burden, the IRS is providing the following transitional and penalty relief:

  1. Notice 2024-56 offers general transitional relief from reporting penalties and backup withholding for brokers making good faith efforts to comply during calendar year 2025.
    Limited relief from backup withholding is provided for certain digital asset sales in 2026 for brokers using the IRS TIN-matching system.
  2. Notice 2024-57 temporarily exempts six types of transactions from reporting requirements, including wrapping and unwrapping transactions, liquidity provider transactions and staking transactions, among others.
  3. Revenue Procedure 2024-28 allows taxpayers to use reasonable allocation methods for unused basis across wallets or accounts holding the same digital asset.

Digital Currency Final Regulations: IRS Rationale

IRS Commissioner Danny Werfel emphasized the importance of these regulations in addressing potential noncompliance in digital currency transactions. The new reporting requirements are expected to improve detection of noncompliance and provide taxpayers with information to simplify their reporting process.

Werfel also highlighted the need for adequate IRS funding to keep pace with the evolving complexity of the tax system, particularly in relation to new digital assets.

Digital Currency Final Regulations: Impact

These Digital Currency Final Regulations represent a major development in the taxation and reporting of digital asset transactions, in particular with respect to integration of digital assets into the existing tax framework. As the digital asset landscape continues to evolve, further refinements and additional regulations are likely to follow, particularly regarding non-custodial and decentralized brokers. While the regulations provide clarity for many custodial brokers and taxpayers, the full impact of these regulations will become clearer as implementation begins in 2025 and beyond.

Contact Sherayzen Law Office for Professional Tax Help With US International Tax Aspects of Digital Currencies

Given the complex and evolving nature of digital currency regulations, it is crucial to seek expert guidance. Sherayzen Law Office specializes in US international tax law and can provide invaluable assistance in navigating the intricate landscape of digital currency taxation across borders. Contact us today to schedule your confidential consultation!

Sherayzen Law Office Successfully Completes its 2019 Fall Tax Season

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On October 15, 2019, Sherayzen Law Office, Ltd., successfully completed its 2019 Fall Tax Season. It was a challenging and interesting tax season. Let’s discuss it in more detail.

2019 Fall Tax Season: Sherayzen Law Office’s Annual Compliance Clients

Annual tax compliance is one of the major services offered by Sherayzen Law Office to its clients. The majority of our annual compliance clients are individuals and businesses who earlier retained our firm to help them with their offshore voluntary disclosures. They liked the quality of our services so much that they preferred our firm above all others to assure that they stay in full compliance with US tax laws.

It is natural that this group of clients is the largest among all other groups, because the unique specialty of our firm is conducting offshore voluntary disclosures.

A smaller group of our annual compliance clients consists of tax planning clients who also asked Sherayzen Law Office to do their annual compliance for them.

Finally, the last group of our annual compliance clients consists of businesses and individuals who were referred to our firm specifically for help with their annual compliance. These are usually foreign businesses who just expanded to the United States and foreign executives and professionals who just arrived to the United States to start working here.

2019 Fall Tax Season: Sherayzen Law Office’s Annual Compliance Services

Virtually all of our clients have exposure to foreign assets and international transactions. Hence, in addition to their domestic US tax compliance, Sherayzen Law Office prepares the full array of US international tax compliance forms related to foreign accounts (FBAR and Form 8938), PFIC calculations (Forms 8621), foreign business ownership and Section 367 notices (Forms 926, 5471, 8858, 8865, et cetera), foreign trusts (Form 3520 and Form 3520-A), and other relevant US international tax compliance issues.

2019 Fall Tax Season: Unique Challenges and Opportunities

The 2019 Fall Tax Season was especially challenging because of the record number of deadlines that needed to be completed. During the season, Sherayzen Law Office filed hundreds of FBARs, US income tax returns and US international tax returns such as Forms 3520, 5471, 8865, 8621 and 926.

The great time pressure created opportunities for our firm to further streamline our tax preparation and scheduling processes, ultimately creating an even more efficient yet still comprehensive and detail-oriented organization.

The 2019 Fall Tax Season was unique in one more aspect – the implementation of the 2017 tax reform changes. The 2017 Tax Cuts and Jobs Act (“TCJA” or “2017 tax reform”) introduced the most radical changes to the Internal Revenue Code since 1986. Form 1040 was greatly modified and numerous other US domestic tax laws and forms were affected.

The greatest change, however, befell the US international tax law, particularly US international corporate tax law. The introduction of GILTI (Global Intangible Low-Taxed Income) tax, FDII (Foreign-Derived Intangible Income) deduction, full participation exemption and many other rules and regulations has profoundly modified this area of law.

No form felt these changes greater than Form 5471. Due to the 2017 tax reform, it has almost tripled in size and has acquired a qualitatively new level of complexity. Many new questions appeared and only some of them were definitely resolved by the IRS in the summer of 2019 when it issued new regulations.

Since Sherayzen Law Office has a lot of clients who own partially or fully foreign corporations, Forms 5471 were a constantly-present challenge during the 2019 Fall Tax Season. Nevertheless, we were able to timely complete all Forms 5471 for all of clients. We were even able to develop and incorporate important strategic and tactical tax planning techniques, such as IRC Section 962 election, helping our clients lower their tax burden.

Looking Forward to Completing Offshore Voluntary Disclosures, End-of-Year Tax Planning and 2020 Spring Tax Season

Having completed such a difficult 2019 Fall Tax Season, Sherayzen Law Office now looks forward to working on the offshore voluntary disclosures and IRS audits through the end of the year. We also have a sizeable portfolio of end-of-year tax planning cases. Finally, we look forward to the 2020 Spring Tax Season for the tax year 2019.

If you have foreign assets or foreign income, contact Sherayzen Law Office for professional help. Our firm specializes in US international tax compliance. We have helped hundreds of US taxpayers to bring themselves into full compliance with US tax laws, and We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!