Quick Summary
Most people focus on getting the visa right. Almost nobody thinks about what moving to the United States does to their taxes, until they have already moved and the damage is done. The moment you become a U.S. tax resident, the IRS gains the right to tax your worldwide income. Everything you own, earn, or receive, anywhere on the planet, becomes potentially reportable and taxable under U.S. law.
When Does U.S. Tax Residency Begin?
U.S. tax residency is not the same as immigration status. You can become a U.S. tax resident without a green card.
The Substantial Presence Test is the primary trigger for nonimmigrant visa holders. If you spend 183 days or more in the United States in a given year, counting the current year plus fractions of prior years under the formula, you are treated as a U.S. tax resident for that year. For E-2 visa holders who live and operate businesses here full-time, that threshold gets crossed in the first year.
Green card holders become tax residents from the date their card is issued, regardless of how many days they spend in the U.S. That is why the period before receiving a green card is frequently the last opportunity to restructure foreign assets under non-U.S. tax rules.
What Is The FBAR And Who Has To File It?
FBAR stands for Report of Foreign Bank and Financial Accounts. If you are a U.S. tax resident and you have financial accounts outside the United States with an aggregate value exceeding $10,000 at any point during the year, you are required to file FinCEN Form 114, the FBAR, by April 15 of the following year.
The civil penalty for failing to file is $15,625 per account per year (adjusted for inflation). The penalty for willful failure is higher: $156,259 per account or 50% of the account balance, whichever is greater. Criminal penalties also apply in willful cases.
FBAR is separate from FATCA, the Foreign Account Tax Compliance Act, which requires reporting on a different IRS form (Form 8938) with different thresholds. Many newly arrived residents find themselves with overlapping obligations they did not know existed.
What Happens To Your Foreign Business Interests?
This is the biggest risk area for entrepreneurs and investors.
If you own more than 10% of a foreign corporation, you may be required to report that corporation to the IRS on Form 5471. If the corporation is a Controlled Foreign Corporation, in most situations, one where U.S. shareholders own more than 50%, complex Subpart F and GILTI rules may cause you to owe U.S. tax on the company’s income even if you do not distribute it.
Many Latin American entrepreneurs own their business through a holding company structure in their home country. When they move to the United States, that structure can suddenly create U.S. tax exposure they did not anticipate. Restructuring before the move, or at minimum, analyzing the structure and making informed decisions, is the planning step that matters most.
What Is A “Step-Up In Basis” And Why Does Timing Matter?
When you become a U.S. tax resident, you do not automatically get a fresh start on the value of your assets. If you bought real estate in 2010 for $200,000 and it is now worth $800,000, you have $600,000 in embedded gain. The moment you become a U.S. tax resident, the IRS can tax any future sale of that property, even the gain that accrued before you arrived.
Some planning strategies can address this, but they require action before the residency date. Selling and repurchasing assets at fair market value before you arrive can “step up” the basis and reduce future U.S. capital gains exposure. This is legal, but it has to be done on the right timeline and structured correctly to be effective.
How Do You Coordinate Immigration Planning With Tax Planning?
The timing of your visa and the timing of your tax planning have to work together. Moving up your visa approval date without coordinating your tax position first can cost you the window to restructure. Delaying your arrival to complete tax planning can affect your business timeline and visa status.
The Abraham Benhayoun Immigration Law Offices coordinates with tax professionals to make sure that the immigration timeline supports the tax strategy, and vice versa. For investors coming in on an E-2 investor visa, this coordination begins at the initial planning stage, before the first dollar is invested in a U.S. business.
For entrepreneurs who are also exploring a longer-term path to residency through options like the EB-2 National Interest Waiver, the coordination needs to account for multiple milestones over several years.
What Should You Do Right Now If You Are Planning A Move?
Three things, in order.
First: get a full inventory of your foreign assets, accounts, and business interests before you take any immigration steps. You cannot plan around what you have not mapped.
Second: consult with an immigration attorney and a U.S. tax attorney or CPA who focuses on international tax. These conversations need to happen together, not separately.
Third: do not wait until you have your visa in hand. The planning window closes when your residency begins. Once you have crossed that threshold, you are working with what you have, and some strong options are gone.
If you are planning to move to the United States, the time to act is before your visa is issued, not after. Contact The Abraham Benhayoun Immigration Law Offices at (786) 636-8250 to coordinate your immigration timeline with the right tax planning strategy before that window closes.
