I was a long-term resident of the United States prior to surrendering my green card. What is my U.S. tax filing obligation

If you were a long-term resident of the United States prior to surrendering your green card, your U.S. tax filing obligations depend on several factors, including whether you are subject to the expatriation tax and whether you have been both a resident alien and a nonresident alien in the same tax year.

1. Expatriation Tax:
   • As a long-term resident (defined as having been a lawful permanent resident for at least 8 of the last 15 tax years), you may be subject to the expatriation tax provisions under § 877A of the Internal Revenue Code.
   • You must file Form 8854, Initial and Annual Expatriation Information Statement, to notify the IRS of your termination of residency and to certify that you have complied with all U.S. federal tax obligations for the 5 years preceding the date of your expatriation.
   • Your residency termination date for tax purposes will be the later of the date you notify the Department of Homeland Security (DHS) or the date Form 8854 is filed with the IRS.
2. Dual Status Tax Year:
   • If you have been both a resident alien and a nonresident alien in the same tax year, you will have a dual status tax year.
   • For the part of the year you are a resident alien, you are taxed on income from all sources, both inside and outside the United States.
   • For the part of the year you are a nonresident alien, you are taxed only on U.S. source income and certain foreign source income that is effectively connected with a U.S. trade or business.
3. Filing Requirements:
   • If you are a resident alien at the end of the tax year, you must file Form 1040 or 1040-SR and attach a statement (which can be Form 1040NR) showing the income for the part of the year you were a nonresident alien.
   • If you are a nonresident alien at the end of the tax year, you must file Form 1040NR and attach a statement (which can be Form 1040) showing the income for the part of the year you were a resident alien.
4. Income Reporting:
   • For the part of the year you are a resident alien, report all income from worldwide sources.
   • For the part of the year you are a nonresident alien, report only U.S. source income and effectively connected foreign source income.
5. Special Rules for Long-Term Residents:
   • If you are a long-term resident, your tax responsibilities do not end until you have filed Form 8854 and notified DHS of your termination of residency.
   • You may be subject to an alternative tax regime under § 877 if you meet certain criteria, such as having an average annual net income tax liability above a specified threshold or a net worth of $2 million or more.
6. Penalties:
   • Failure to file Form 8854 when required can result in a penalty of $10,000 for each year the form is not filed.

In summary, as a long-term resident who has surrendered your green card, you must comply with the expatriation tax provisions, file the appropriate tax returns for a dual status tax year, and ensure that you have filed Form 8854 to notify the IRS and DHS of your termination of residency.

Sources:
§ 877A. Tax responsibilities of expatriation
§ 7701. Definitions
Publication 519 (2023)
Publication 4588