I entered the US in 1993 on an L-1 visa and became a resident alien (greencard holder) in 1996. In 2003 I left the US and established residence in my home country, Germany. I continued to have income from US sources and therefore filed annual US federal tax returns using form 1040. My green card expired in 2006.

Currently I'm in the process of preparing my 2006 return using form 1040NR. I now realize that I probably should have used form 1040NR for the 2003 to 2005 tax years as well, because my US residency effectively ended with the date of my departure and not as previously thought with the expiration of my green card. If this is indeed correct, do I have to amend the 2003 to 2005 filings? Are there other consequences I need to be aware of?

Thank you very much in advance!

Actually, In my opinion, your filing for 2003 through 2005 as a resident alien was probably correct. However, you needed to report ALL of your world-wide income, not just your U.S.-based income.

So you will need to amend the returns.

Suggest you get professional tax help on this case, as there are many variables that need to be considered.

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Originally Posted by AtlantaTaxExpert

Actually, IMHO, your filing for 2003 through 2005 as a resident alien was probably correct. However, you needed to report ALL of your world-wide income, not just your U.S.-based income.

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I actually did report my world-wide income on my 2003 through 2005 returns (using form 2555 - Foreign Earned Income). I take it there is no reason then to amend these returns?

As for 2006, do I have the choice to file either 1040 or 1040NR?

Form 2555 is used for the Foreign Income Tax Exclusion, which does NOT apply in your case. I still believe amended returns are in order, but it is your decision.

As for 2006, you need to file a dual-status return (Form 1040NR with Form 1040 as a "Dual Status Attachment", unless the Green Card expired on 31 Dec 2006.

Here's the response from the IRS:

... Even though your green card has expired, unless you turn in your green card, or it is judiciously revoked, you are a lawful permanent resident of the US even if you live abroad. This means you are treated as a US resident for US income tax purposes and you are subject to US tax on your worldwide income.. .

That IS the psotion of the IRS. You basically need to file a form with the IRS to revoke your green card status.