Hi, I have the following problem:

I'm an Italian citizen and I have lived in the USA from the beginning of 1998 to the end of 2001. I have a green card on which it says "E-13" (I have no idea what that means). I used to file Form 1040NR because, although I was in the country longer than 6 months, my CPA was claiming a US-Italy treaty and saying that I elected to be fiscal resident of Italy because I still had my relatives and part of my business there. Since the beginning of 2002 I came back to Italy and I'm in Europe ever since.

My former CPA said that, as long as I have my green card, it doesn't matter if I'm physically present in the country or not, I still have to file some tax return (and I still did 1040NR) in the US. Then I changed CPA and the new one says that if I'm not physically in the US, I don't have to file anything. I may if I want, but I don't have to.

Can anyone tell me what I should do? Please let me know if the information I provided are not enough.

Thank you.

You can access the proper information by inquiring at the number below:

IRS - Tax Treaty and Non-Resident Alien Questions 1-215-516-2000

Your former CPA was correct.

As long as you have that green card, you have a requirement to file an annual U.S. tax return.

Foreign income exclusion and/or the Foreign Tax Credit may completely offset paying any U.S. taxes, but the filing requirement exists until you formally revoke the green card and notify the U.S. Departments of State and Homeland Security that you have permanently left the country with no intention of returning.

Thank you, AtlantaTaxExpert, you are the man!

I don't understand the "Foreign income exclusion and/or Foreign Tax Credit" part of your answer though. I have never shown any income in the US because I have always been paid in Italy and claimed I was a fiscal resident there, even during my 4 years in the US. Even less do I make any money now in the US.

Anyway, if I understand correctly, spending less than 6 months in the US, I now have to file form 1040-NR regardless where I get paid, right?

Hello

When you are a Green card holder, substantial presence test does not apply to you, just like a US citizen.

Till your Green card is legally valid, you are always considered a Resident for Tax purposes and you have to file Form 1040 on W-2 income.

Hope this helps!

VTE has it right.

When you became a Green Card holder, you are a legal U.S. resident until that Green Card is revoked.

That means you are REQUIRED to file an annual U.S. tax return and declare ALL of your world-wide income each year.

The Foreign Income Exclusion (Form 2555) allows you to exclude up to $85,000 of your foreign-based income without paying taxes on it.

The Foreign Tax Credit (Form 1116) allows you to claim a credit for incomes taxes paid to a foreign country.

It is likely that these combined exclusions/credits will result in your owning ZERO U.S. taxes.

However, neither the exclusion nor the credit are automatic. You must file the annual tax return to claim the exclusion and/or credit.

If you need help filing past year returns, contact me via email at [email protected].

AndreaFC,

VTE and ATE are correct that the "general rule" is that a person with a Green Card is treated as a tax resident for U.S. tax purposes. However, the tie-breaker rules under the U.S.-Italian treaty can override this general rule, and it sounds as though in your circumstances the tie-breaker rules would override this general rule. In order to claim the benefits of the treaty, you need to file Form 8833. You may not technically need to file Form 1040NR, but this may be a good idea to start the statute of limitations running. If you do file Form 1040NR, then the Form 8833 should be should be attached to Form 1040NR. If you decide not to file Form 1040NR, you still need to file Form 8833 by itself. If you do not file Form 8833, then you will be treated as a U.S. resident under the general rule mentioned by VTE and ATE.

Andreafc is a resident of the U.S. and still filed Form 1040NR (as non resident) for the years 1998 to 2001 evidently under the Italian U.S. tax treaty.

It appears that during those years on his nonresident return, he reported only the income in the U.S. and from the U.S. sources.

During the years 2002 to 2006, he may not have any income in the U.S. or from the U.S. sources so his income was less than the filing requirement. It appears that for this reason, he did not file the U.S.return. However, for the years 2002 to 2006, based on his world wide income, he was required to file Form 8833 to disclose the treaty position.

He must file Form 8833 for years 2002 to 2006 to claim non-resident status under tax treaty to continue in the year 2007. If Form 8833 is not filed, he will be treated as resident for 2007 and must disclose his world wide income. Yes, on his resident return, he will get credit for taxes paid in the foreign country.

AndreaFC,

VTE and ATE are correct that the "general rule" is that a person with a Green Card is treated as a tax resident for U.S. tax purposes. However, the tie-breaker rules under the U.S.-Italian treaty can override this general rule, and it sounds as though in your circumstances the tie-breaker rules would override this general rule. In order to claim the benefits of the treaty, you need to file Form 8833. You may not technically need to file Form 1040NR, but this may be a good idea to start the statute of limitations running. If you do file Form 1040NR, then the Form 8833 should be should be attached to Form 1040NR. If you decide not to file Form 1040NR, you still need to file Form 8833 by itself. If you do not file Form 8833, then you will be treated as a U.S. resident under the general rule mentioned by VTE and ATE.

In principle, I agree with IntlTax but I have a couple of points to discuss. Essentially what IntlTax is suggesting is that to claim the treaty benefit you would have to suggest that you regard yourself as residing in Italy rather than the US. (Of course, you would have to work through the tie-breaker sequence, but the ultimate conclusion is thus)

OK, but here's the complication. For immigration purposes, if you are outside the US for an extended stay, you typically forfeit the right to your green card. In fact, if you stay outside the US longer than 1 year you must have applied to USCIS in order to ensure your green card is not forfeited.

The only way you can stay outside the US for an extended stay and not forfeit your green card is to show that you intend to remain a US resident. So in order to build a case demonstrating that you meet the requisite conditions for retaining a green card, you need to make statements that would directly contradict what you are claiming under the tax treaty.

So I guess I tend toward the conclusion that a green card holder would have a hard time making a case for non-residency.

AnfreaFC:

All great points from MukatA, IntlTax and especially TTE.

With such complexity, I STRONGLY recommend that you get professional tax help from a tax professional with expertise in international taxation.

I am available at [email protected], but the Texas Tax Expert may be a better choice due to the complexity of your case. I KNOW he has the expertise needed for your case.

VTE, MukatA and IntlTax have not posted long enough on this forum for me to offer an opinion on their international tax expertise level.