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EB5 Visa Holders – Non-Resident Tax
February 1st, 2012

Holders – Non-Resident  is part two of our series on planning for EB5 holders who become legal of the .

tax-time-eb5-visa-holdersChanging citizenship to avoid taxes: Not advisable

There is a special tax on former and long-term permanent residents whose main reason for moving to a foreign country is to avoid income tax or estate and gift taxes.  Section 877 imposes this tax regardless of your reason for changing citizenship and moving abroad.

You’re subject to this tax if you’re an expatriate with a net worth of $2,000,000 or more (adjusted for inflation), and if your average annual net income tax liability for the five years before you left the U.S. was $147,000 or more for 2011 ($151,000 for 2012). All expatriates who are subject to this tax under the code have to submit a statement of residence and citizenship and a statement of assets and liabilities.

If you fall into this category, the automatically assumes that you’ve changed your citizenship and/or moved abroad to avoid taxes in the U.S.

There is only a small class of high net worth expatriates who are not assumed to have moved or changed citizenship for tax reasons. This class is also described in Code Section 877. If you think Section 877 may affect you, it’s worth checking to see if you fall into this group.

This exempted class of expatriates consists of the following:

  • Expatriates who were dual citizens at birth and who have remained citizens of the second country;
  • Expatriates who, at the time they became expatriates, were citizens of their birth country, or of the birth country of their spouse or of either of their parents;
  • Expatriates who were in the U.S. for no more than 30 days each year during the 10 years before they became expatriates;
  • Expatriates who renounced U.S. citizenship before they reached age 18½.

The Internal Revenue Service has begun many programs to identify non-filers and to improve compliance.  In the Middle East alone the number of returns filed has increased by 51% due to compliance programs.

The IRS created Form 2555EZ to simplify filing.  It also revised Publication 593—tax highlights for U.S. citizens and residents going abroad—to encourage taxpayers to file. In addition, Publication 519—the U.S. Tax Guide for Aliens—and the instructions to Form 1040 NR (non-resident) make former citizens and long-term resident aliens aware of their potential tax liability under Section 877.

The IRS has also put a number of programs in place to identify non-filers.  If you are an expatriate and aren’t filing your U.S. taxes, keep in mind that eventually you’ll be identified as a non-filer.  And like elephants, the IRS never forgets.

For a free tax consultation, contact:

Glazer Financial Network (Maurice M. Glazer); email: mglazer@whicheb5.com
 
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Tax Responsibilities of Lawful Permanent Residents
January 31st, 2012

Today we cover part one of a two-part series on of Lawful . This is a very important subject for potential  . The following information has been provided by Maurice M. Glazer a specialist in international and accounting; we welcome him to our team. Please give us your opinion of this information and do not hesitate to contact Maurice for advice. You can read more about Mr. Glazer at our “EB5 Visa Team” page.

Tax-Responsibilities-of-Lawful-Permanent-ResidentsTax Responsibilities of Lawful Permanent Residents

If it’s January it must be tax season…. Many and lawful permanent residents of the ( holders) move to another country and forget or choose not to file a tax return in the U.S. But be warned: The U.S. requires you to file a tax return accounting for your worldwide taxable income—and the statute of limitations never runs out.

In many cases, you may have few or no U.S. taxes to pay, thanks to exclusions and deductions that you may qualify for as an expatriate. But you definitely are required to file if you are a U.S. citizen or . Not filing can create major issues. For instance, if you live abroad for 10 years and then return to the United States, the penalties and interest you’ve accrued may be more than the actual tax.

The U.S. Internal Revenue Service (IRS) is working with the State Department and with the and Naturalization Service (INS) to improve compliance with the tax return requirement.

One bit of good news: A U.S. citizen or resident alien doesn’t need to file a tax return unless gross income for the year is over a certain amount. The amount varies depending on your tax status. (See box for details.)

Even when you’re required to file a return, you may be able to cut or eliminate your U.S. taxes, thanks to the foreign earned income exclusion, the housing exclusion and deduction, and the tax credit you get for any foreign taxes you’ve paid. For 2011, you can exclude from taxes up to $92,900 of income you’ve earned abroad. The housing exclusion and deduction are living expenses above $40.72 per day for 2011.

Legal ways to zero out taxes

Fortunately, there are also deductions from gross income that you can take. See Section 911 of the tax code for these. You can also deduct foreign housing costs that you paid, or that were paid on your behalf, which are above the base amount.  You need to file these items on form 2555 or form 2555 EZ.  According to the IRS, it’s important to file these forms even if you’ve earned less than the amount you’re allowed to exclude.

U.S. citizens and long-term permanent residents can also take a credit for taxes paid to a foreign government.  This credit is explained in section 901 of the income tax code. You report the tax credit on form 1116.

Almost half of those filing non-resident tax returns show no tax liability because of these two codes, Sections 901 and 911.

Additional forms to complete

If you’re self-employed and no foreign social security is being withheld from your earnings, you must file a Schedule C with your U.S. tax return and pay U.S. self-employment tax on your net earnings (that is, after deducting your expenses).  The self-employment tax is 15.3%. It is not reduced by the foreign earned income exclusion or by foreign tax credits.

If you own more than a 10% ownership in a foreign corporation, you are required to file a special form reporting that interest.  If the corporation is making a profit, it will be a “controlled foreign corporation,” and you could owe U.S. tax on its earnings.

If you are a beneficiary or a trustee of a foreign trust (for instance, a fideicomiso), or you have a bank account with a balance over $10,000, you must also file a special form.

You can be fined up to $10,000 or more for not filing any of these forms—and since there is no statute of limitations, the fines can be levied many years from now when the IRS and Hacienda (Mexico’s tax department) finally start sharing information. You can also be liable for individual state income taxes.

Tomorrow we will cover: Changing citizenship to avoid taxes: Not advisable
 
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Is the EB-5 visa all about job creation?
May 30th, 2011

Those of you looking at the as your best option to achieve permanent residence in the may well have searched the web to try and find out the real facts behind the .

You may well have read the sales material put out by various regional centers and been given information by attorneys.

However, one of the issues that potential EB-5 applicants can fail to focus on enough is the requirement that their $500,000 investment must create ten jobs for US .

Failure to create the necessary ten jobs is likely lead to failure at the stage (the removal of conditions from the two year visa that you are initially granted). Ultimately the non-removal of these conditions could result in your deportation.

The issue of job creation can be overlooked; however, its importance is illustrated by a recent decision by the upholding the refusal of I-829 applications on EB-5 visa holders who had invested in a particular program.

“In this case, the petitioner has made the requisite investment, albeit into an enterprise that failed after the petitioner filed the Form 1-829. However, the investor appears never to have employed the requisite number of qualifying workers. On that basis alone, the petition may not be approved.”

There can be confusion on the whole question of job creation with questions such as:

  • Why is the location of the jobs so important?
  • Why do some programs stress the importance of direct jobs whereas other programs emphasize indirect jobs”?

If you would like more information behind some of the EB-5 visa claims please contact us for an in-depth telephone briefing on this or any questions you may have.
 
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EB-5 Gives New Hope and Freedom to Students and H-1B Workers
April 28th, 2010
jobs-in-the-usa

H1-B Visa path to a job in the ?

Not that life has ever been simple for H-1B workers, but with the economic downturn things have become even more difficult for them.  Many H-1B workers had resigned themselves to the fact that, due to the long quota backlogs in the EB-3 green card category, and even in the EB-2 category for workers with advanced degrees, when the workers are from or , they will be stuck for the better part of a decade in a job with a sponsoring employer who might be treating them like an indentured servant. Now, with all of the layoffs, the probability is increasing that many H-1B workers will lose their H-1B status and green card sponsorship along with their job. This can have catastrophic consequences, particularly for those who have already used up their six years of H-1B eligibility, and are not eligible now to transfer their H-1B visa to a new employer.  In such a case, if the worker is not eligible for a different type of work visa, then he or she would have to leave the U.S. for one year in order to restore H-1B eligibility.

Another problem arose for those H-1B workers working in the financial sector. Congress imposed more burdensome additional obligations and restrictions on financial institutions that received TARP funds and employ H-1B workers. Among those restrictions are the requirement to pay new U.S. employees more than they pay H-1B workers and the requirement not to make any layoffs 90 days before or 90 days after filing a petition for an H-1B worker. In the current environment in which employers are looking to lay workers off and pay them less, some employers prefer to dump H-1B workers in order to maintain more freedom of action in how they deal with the rest of their staff. Meanwhile, there are more and higher qualified and unemployed, who were previously employed elsewhere and available for hire only at a higher salary.

New college graduates are going out to try to find a job in this hostile environment. The only good news for new college graduates who need to get an H-1B visa is that there is less competition for H-1B visas, and so H-1B visas were available for over 8 months last year, as opposed to being exhausted on the first day, as they were in previous years. The unfortunate reason behind the greater availability of H-1B visas is the employers’ lack of interest in hiring H-1B workers.  Many employers see no reason to pay the expenses of the visa application process or to deal with the additional hassle, particularly when, as previously mentioned, many highly qualified U.S. citizens and permanent residents, who were previously employed elsewhere, are now available for hire.

H-1B workers and students alike have found relief from the dangers, uncertainties, and dependence of seeking permanent residence through sponsorship by an employer. They have found such relief by immigrating under the program based on investment in a , which frees them from relying on an employer and enables them to obtain conditional permanent residence in less than one year, or, in some cases, less than 6 months. As a result, these can compete for career opportunities or run their own business on equal terms with U.S. citizens and permanent residents. In other words, the immigrants have the freedom to live their life in the U.S. as they wish.
 
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