Greencard vs. US citizenship

[CaptHaddock]

9 minutes ago, Mansell said:

One advantage to your son with U.S. passport and paying taxes in the U.S. When he is older he would qualify for Social Security and Disability if something happened to him.

 

That would only be true if he were to live and work in the US or work for a US company abroad.  If he were to live and work in Thailand for a Thai company he would never be eligible for any SS benefits on his own earnings.  The exception is self-employment abroad as I have already explained.

[Grubster]

I think citizenship is getting harder in the US every day so yes I would try to get it for him as soon as possible. I doubt it will be easy.

[humqdpf]

On 3/12/2016 at 1:01 PM, skatewash said:

 

Really?  The US has citizenship-based taxation rather than residence-based taxation.  The only country in the world to do so (except for Eritrea, which is a complicated situation).  Therefore, if he obtains and keeps US citizenship or keeps his Green Card status he will be liable for filing and paying US taxes for the rest of his life, not just when he is residing in the US.  As a US citizen he will also be responsible under FATCA for annually reporting any financial accounts located outside the US to the US government (under very Draconian penalties for failing to do so).  A Green Card holder who is a tax resident of a country outside the US would not necessarily have to report these accounts.  Finally, should he wish to do so, it is becoming more difficult to renounce US citizenship, more difficult than simply to give up Green Card status.  So there are some negative consequences of being a US citizen or green card holder.  Whether they would negatively affect the OP's son depends on what he wants or plans to do.

 

While everything you (Skatewash) say is true, it is also the case that he can relinquish his green card or US citizenship at any time in the future and therefore get rid of such tax liabilities and onerous reporting responsibilities. This choice will be his but he needs to be aware of it. In the meantime, he can take advantage of the benefits of green card and or citizenship in relation to school and scholarship options.

 

Subject to a call to a lawyer to straighten out any questions you may have and subject to a clear answer regarding whether it is more beneficial to have a green card or be a citizen when applying for schools or scholarships (there will be an organisation representing USA universities in Thailand - I am sure the embassy will be happy to put you in touch and they will answer your questions), only then will you be able to know whether citizenship will give him the edge.

 

[CaptHaddock]

7 minutes ago, humqdpf said:

While everything you (Skatewash) say is true, it is also the case that he can relinquish his green card or US citizenship at any time in the future and therefore get rid of such tax liabilities and onerous reporting responsibilities.

 

Not exactly true.  He can only renounce his US citizenship if he already holds citizenship in another country.  Were he to choose US citizenship exclusively at age 18, to avoid the Thai draft, for instance, then he would somehow have to secure Thai or some other citizenship before he could renounce US citizenship (after paying the penalty for doing so.)  The US will not allow its citizens to make themselves stateless.

[Time Traveller]

4 hours ago, Dustdevil said:

People always say Oh, he'll have to pay US taxes. NO, he WON'T for the first $96,000 he earns outside the U.S.  After that figure you start from zero . So if you make $100,000 overseas, you owe taxes on $4000. Since $4K is poverty level, you still won't pay any taxes until you start earning a bit more, like $124,000....and then only on the $28K that is in excess of $96K.

Spoken like a true American !!! You are greatly understating the tax obligations of US citizenship. Not trying to single you out, but you either haven't ever used that, or you are deliberately misleading by omitting important information about taxes because :

 

1. the Foreign Earned Income Exclusion only applies if he files a tax return. Essentially if he's earning income he will need to file US Taxes each year regardless of whether he owes any taxes. 

 

2. This only applies to Wages, not to other forms of income such as Rent, Interest, Dividends, Royalties etc (ie. Unearned Income). So any foreign investment income will be taxed normally without any exclusion.

 

3. Living outside of the US he will miss out on the personal deduction when filing.

 

4. US Taxes are complicated to say the least. More so when any of your income is foreign sourced. And he will need to ask if the countless hours of record keeping, preparation and reporting each and every year are worth it, in the cases where someone does not wish to return to the US to live.

 

US Income taxes are not high (for some bizarre reasons Americans seem to think that high taxes are the only reason why people renounce their citizenship). The problem is the way it is applied. As an example, my own personal case, I have  foreign income and accounts so with married+children and foreign income deductions . With all of these exemptions and deductions,filing jointly I end up paying zero in tax. No Problem, right? Well, the problem is I need to spend at least 30 hours a year keeping records of foreign accounts, and adding up income and gains and currency conversions and account balances and acct reporting etc etc......for what? Just to be told I owe no Tax !!!

 

Apart from that endless obligation US Citizenship has mostly only upsides. But for me Green card is good enough and I'd rather have my life back and wish they moved to either a residence based tax system or with the most simple flat rate tax.   

 

 

 

 

 

 

Edited January 7, 2017 by Time Traveller

[chilli42]

I progressed from green card to citizenship and in the end renounced US citizenship. The reason for this was to avoid the US tax on global income.  To be open, I had two other perfectly good citizenships.  I understand that income tax is the cost of living in a particular country as you "enjoy" the benefits of living there - fair enough.  I gave up my US citizenship at 50 as part of my retirement planning - I was certain I would never live in the US again.  At that time there was no exit tax but today there is (requires you pay tax on your global income and assets e.g. capital gains).  In addition you are required to file and pay US tax on your global income for a further 10 years.  My point here is that you can always convert a green card to a citizenship/passport there is no rush ... getting out of the citizenship/passport is financially punishing (by design).  I am assuming your son is a young man.  My advice would be to keep the green card alive as long as he can.  This will give him plenty of time to sort out what he will do with his life.  If he plans to make his life in the US then by all means progress to citizenship.  However, if he has any plan that sees him living life outside the US, I would be inclined to drop the green card  as if it were on fire and move on.  Sure, travel on a Thai passport can be a pain.  However, it's not a big enough pain to get into something you may regret later.

 

PS ... The multinational I worked for had hundreds of green card holders working in overseas locations for 5 years and up.  NOBODY ever had an issue with their green card.  That said I don't know what was done to protect their status.  I would consult an immigration lawyer on this matter rather than the helpful folks on TVF.

[bubba]

Permanent residents of the US (green card) who remain outside the US for more than a year, will have it lifted the next time they return as they assume you have abandoned their residency. Between six months and one year is iffy. The way to preserve residency and the green card is to obtain a re-entry permit, and the application must be lodged while in the USA.

[CaptHaddock]

51 minutes ago, Time Traveller said:

3. Living outside of the US he will miss out on the personal deduction when filing.

 

 

 

Do you have a reference for this claim?  As far as I know there is no residency requirement for the personal deduction.

[partington]

25 minutes ago, chilli42 said:

I progressed from green card to citizenship and in the end renounced US citizenship. The reason for this was to avoid the US tax on global income.  To be open, I had two other perfectly good citizenships.  I understand that income tax is the cost of living in a particular country as you "enjoy" the benefits of living there - fair enough.  I gave up my US citizenship at 50 as part of my retirement planning - I was certain I would never live in the US again.  At that time there was no exit tax but today there is (requires you pay tax on your global income and assets e.g. capital gains).  In addition you are required to file and pay US tax on your global income for a further 10 years.  My point here is that you can always convert a green card to a citizenship/passport there is no rush ... getting out of the citizenship/passport is financially punishing (by design).  I am assuming your son is a young man.  My advice would be to keep the green card alive as long as he can.  This will give him plenty of time to sort out what he will do with his life.  If he plans to make his life in the US then by all means progress to citizenship.  However, if he has any plan that sees him living life outside the US, I would be inclined to drop the green card  as if it were on fire and move on.  Sure, travel on a Thai passport can be a pain.  However, it's not a big enough pain to get into something you may regret later.

 

PS ... The multinational I worked for had hundreds of green card holders working in overseas locations for 5 years and up.  NOBODY ever had an issue with their green card.  That said I don't know what was done to protect their status.  I would consult an immigration lawyer on this matter rather than the helpful folks on TVF.

 

 

There are some errors and omissions here.

 

The "exit tax" and obligation to file and pay US tax for ten years after renunciation of citizenship only applies to "covered expatriates", that is ONLY those whose combined assets add up to more than $2million (this may have increased since I last checked) at the time of renunciation.

 

Also having a green card for an extended period does NOT protect you from this provision or any other tax obligation applying to ex-citizens. Once you have had a green card for 8 tax years (or parts of eight tax years, for example, 6 full years and one day in each tax year on either side of those) you are considered a "long term permanent resident (LPR)" and are subject in perpetuity to the same tax laws as a citizen.

 

Moreover simply moving away and so in effect losing your green card status does NOT excuse you from the tax obligations, as the tax and immigration status of LPRs are determined by two parallel systems: US Immigration and IRS.

 

You must both officially inform the USCIS (form I-407 notice of abandonment of legal permanent residence) AND the IRS (form 8854- annual and final expatriation statement) for your tax obligations to legally cease. Form 8854 requires you to confirm when and how you officially terminated legal permanent residence in the US.

 

It is quite possible to leave the US,  leave the green card unused for so long you will not be allowed back into the US as a permanent resident, but still be liable as an LPR to submit tax returns (and owe tax to the US) forever.

 

Also try selling a house as a US citizen or LPR living abroad and then see how capital gains tax to the US would affect you before making any financial decisions!

Edited January 7, 2017 by partington

[humqdpf]

9 hours ago, CaptHaddock said:

 

Not exactly true.  He can only renounce his US citizenship if he already holds citizenship in another country.  Were he to choose US citizenship exclusively at age 18, to avoid the Thai draft, for instance, then he would somehow have to secure Thai or some other citizenship before he could renounce US citizenship (after paying the penalty for doing so.)  The US will not allow its citizens to make themselves stateless.

I was working on the basis that he is currently a Green Card holder and therefore a citizen of another country. Therefore he could, were he in the meantime to adopt US citizenship in addition to his current citizenship, relinquish his US citizenship at some point in the future without making himself stateless.

[Dustdevil]

13 hours ago, CaptHaddock said:

 

Actually, it is more complicated than you realize.  It's true that the Foreign Earned Income Exclusion does exempt the first $102,100 of earned income from US income tax.  An expat working abroad for a non-US company is not liable for payroll tax, i.e. Social Security and Medicare contributions, since the employer is not paying into the SS system.  The payroll tax rate for an employee is 7.65% while the employer pays another 7.65%.  However, if the expat is working for a US company then the payroll tax does apply to both the employer and the employee.  The surprise for many expats is that if he were to be self-employed he would indeed be working for a US employer, i.e. himself.  So, as an American employer and employee, he would be liable for the entire 15.30% payroll tax.  And unlike the income tax, there is not foreign exclusion for the payroll tax.  So, he would have to pay 15.3% payroll tax on top of his Thai income tax on all his income up to the $127,000 cutoff for the payroll tax.

 

As to the OP's original question, if his son plans to stay in the US, he should avoid the Thai military draft by giving up his Thai citizenship, which would seem to have little value to him.  If he were to consider settling in Thailand, maintaining US citizenship is a mixed bag.  The US passport is an advantage, but there are tax liabilities to consider.

 

Also, income over the FEIE is taxed by the IRS not at the lowest income bracket, as you incorrectly assert, but at the appriopriate bracket if all the foreign income were taxable.

 

I worked overseas around the world from 1986 until 2015, both for foreign entities and American ones. Long story short, despite large salaries, I never paid a penny in US income taxes. Often I had free housing to added to the compensation, but if certain housing was required by the employer (such as on a Saudi military base), that was deductible. You can argue about that all day, but I used a US accounting firm do my taxes and declare my housing benefits, and despite salaries alone approaching the Foreign Earned Income Exclusion, I never had to pay US income taxes.  When I did work for American entities, such as a U.S. company and a U.S. university overseas, yes, I paid Social Security tax, which was actually not a bad deal because in the long run it allowed me to get larger S.S. checks now that I'm retired. I don't see any problems or need to complicate this matter to the CPA level. This young Thai man we're talking about, do you think he's going to make over $100,000 working in Thailand?? Possible but unlikely.

[partington]

1 hour ago, Dustdevil said:

 This young Thai man we're talking about, do you think he's going to make over $100,000 working in Thailand?? Possible but unlikely.

If he sells a house, sells shares (or wins the lottery !) or has any other capital gain this is all unearned income and all taxable by the US.

 

Many or most people nowadays will make these kinds of gains, and will want the US to keep their hands off them. Note that gains that are tax free under the laws of one particular country ( for example in the UK selling your main home or investing in an ISA) do not enjoy tax-free status in the US.

[thaivisareader]

This has nothing to do with any future SS payments for Thai wives or anything financial but just putting out there for guys who want to get their ladies a US visitor's visa.

I retired to Thailand in 2005 with my wife who then held a 10 yr. green card. She had been living with me in HI. for 6 yrs. After moving here, we continued to visit  the US regularly -she was briefly hassled only one time upon arrival at SFO ("obviously living outside the US/ green card not a visa, . we can revoke it, more than six mos. out of the country per year"

, blah blah The SFO Homeland Security agent was a bit unpleasant but just doing her job. We were not trying to get away with anything -just coming  and going for holidays. I told the officer  that we were straight up retired in Thailand. "OK, she said- next time maybe not so lucky, your wife might be refused entry." We made a few more trips without incident.

  When my wife's  green card expired we wanted to visit the US again so she applied for and succesfully got a 10 yr. tourist visa. At the visa interview,(at which which the husband or boyfriend cannot even enter the embassy let alone be at the interview)

 she was asked if she ever intended to return to the US permentently?  "not sure" she replied honestly. They let her keep the old green card ,although it had expired. She returned the next day to pick up her passport with the 10 yr visa. Max stay per visit is 6 mos. Zero  problems since then. 

 

 

[Time Traveller]

On 1/7/2017 at 9:02 AM, Dustdevil said:

I worked overseas around the world from 1986 until 2015, both for foreign entities and American ones. Long story short, despite large salaries, I never paid a penny in US income taxes. Often I had free housing to added to the compensation, but if certain housing was required by the employer (such as on a Saudi military base), that was deductible. You can argue about that all day, but I used a US accounting firm do my taxes and declare my housing benefits, and despite salaries alone approaching the Foreign Earned Income Exclusion, I never had to pay US income taxes.  When I did work for American entities, such as a U.S. company and a U.S. university overseas, yes, I paid Social Security tax, which was actually not a bad deal because in the long run it allowed me to get larger S.S. checks now that I'm retired. I don't see any problems or need to complicate this matter to the CPA level. This young Thai man we're talking about, do you think he's going to make over $100,000 working in Thailand?? Possible but unlikely.

You didn't read my post.

This is not about paying taxes. It's about having to file taxes (and the harsh penalities for errors). Because he earns less than $100k working in another country still does not exempt him from having to file a tax return with the IRS.  And besides, any foreign income from interest, dividends, capital gains, gambling wins, rental income, etc - none of that is part of the $100,000 earned income exemption you are referring to. Unearned income - it's all taxed the same from the first dollar of income.

Edited January 9, 2017 by Time Traveller

[Scott]

Inflammatory post and reply removed.